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Some Consequences of a Failed Staffing Strategy

My latest blog entries have focused on our industry ... a couple of days ago I talked about its value, some time ago I laid out a staffing industry value proposition, yesterday I talked about the finances of an agency and not long ago I talked about the various stakeholders at play.

Today I want to focus on some of complications that arise when our clients get errant advice from the so called industry experts. The following are just some of the reactions ...

1. Many agencies will bid "whatever is needed" just to "get on the supplier list". This gives them access to orders which that may choose to work on them ... or not! One executive at a competitor, talking about one of their largest clients told me, "When I get an email from XXX I just hit the delete button! The margins just aren't worth it, but "other city" needs the business".
2. Many agencies will work on the orders where they get the best return on their investment. If a client has low margins then the commission based employees of their staffing agency will focus elsewhere first ... unless its an easy close.
3. The best candidates are likely to be presented where they will bring the agency the best return, so a low margin client may get lucky ... IF no-one else is looking for that particular skill right now!
4. The rates paid to the contractors go up, because there is no incentive for the agencies to negotiate hard. The client does not save any money and the market rates go up generically.
5. Hiring managers get fed up dealing with non-performing agencies and find ways around the process. Rogue suppliers find their way back in to the account and they have (a) no restriction on their margins and (b) no mandated contract terms (which increases risk). This results in higher costs, as opposed to savings plus increased contractual risk.
6. Prime suppliers "farm out" tough orders to non-approved suppliers who get their regular (unregulated) margins and the prime supplier payrolls them, thus costing the client more than if they just paid regular margins to start.

It is a reality that staffing companies, like any company, will do what they need to survive and that does not always translate into what is good for the client. A win-win approach WILL result in best value for all concerned.

At the end of the day a client needs to strike the best balance between cost containment, risk containment and access to the resources they need. There are great solutions to achieve those goals but they involve a cooperative approach between agencies and clients ... not a win-lose environment where clients dictate a perceived "best solution" to their agencies.