For the last several years there has been a tremendous pressure on the margins that staffing companies charge. It is an interesting thing upon which to focus because cthe result for many clients was that they found themselves paying the same or more for resources … because the candidates were getting more! So … then clients started to try to control margins and pay rates! This of course meant a huge increase in overhead, managing multiple vendors at various levels. For many suppliers it was the catalyst to say … I think I will go and sell somewhere else, because other clients will pay market rates.
Over this time large organisations used strategic sourcing methodologies, vendor management tools and any other number of ways in which to manage their staff augmentation spend. Many organizations have seen cost savings in this manner … but as supply tightens they are starting to see the real costs of this strategy.
If I save a dollar on my staff augmentation spend but it costs me in getting my product to market, or in getting my critical systems implemented or perhaps the cheaper contract employee takes longer to get the work done … how have I really saved?
If I have increased my employee headcount but my productivity has gone down because they need to be trained, they are off on stress leave, they are burning manager time in HR issues, they want a promotion or are on a perfformance improvement plan … then where have I gained?
Lately I am seeing clients begin to understand that they are turning themselves inside out to try and “manage” their suppliers, when really market forces will provide the right answer. They are recognising that squeezing rates and margins just creates an artificial micro economy that is not sustainable. Let the market forces prevail and let the suppliers compete … the best companies will rise to the top, the rates will be competitive and the candidates will be of the right quality.
If you measure your suppliers on the basis of a standard bill rate card and quality measures then it becomes very evident who is doing good work. They will be the guys with have the people you want, who cause you the least issues and who are consistently under or at the rate card!
The market is changing rapidly, skills shortages are here, labour shortages are here in various geographies … a free market approach to getting resources will ensure our clients that they get the service and quality that they need. Artificial constraints will not be sustainable in the long haul if companies want the best talent at decent rates!