Here ye, here ye: You can’t ignore your staffing resources anymore

Posted by: Matt Rivera

I’m officially sounding the bell on this one. In the past year, we’ve talked to many companies about workforce management and planning, and to be honest, much of the response was lukewarm at best. “We don’t have that many orders, why talk about adding or changing suppliers? Why do I need to look at my strategy when we have very little activity?”

They have been understandably concerned with other pressing issues like full-time staff who are unhappy and ready to leave. They are content to wait it out. They have no resources to do anything, and there is little motivation or executive support to dedicate time or resources to contingent labor.

Contrary to conventional wisdom, I would suggest that now is the time to look for opportunities to reposition your staffing supply chain, and possibly your overall workforce strategy. Chances are your organization is not the same as it was 12-18 months ago. More to the point of my bell-ringing, suppliers, managed services providers (MSP), and vendor management systems (VMS) are not the same as they were in 2008.

Why now? Because if we continue this crawl into a potentially jobless recovery (at least for the foreseeable future), we’re going to see more stories like the one I read Friday morning. Staffing Industry Analysts has reported that the Albany Group in the U.K. had its funding unexpectedly withdrawn. As a result, for the past three weeks, they have not been able to pay “many” contractors or staffing agencies. How many? Who knows? But I don’t know many staffing companies or workers who can go almost a month without getting paid.

We’ve begun to see signs that employment in some areas may be picking up.While there are several theories about how quickly this will happen and how many jobs may or may not be created, one prediction is that about half of the jobs will be contract, or temporary positions. For companies that rely on staffing suppliers for talent, this could prove to be a challenge, especially in the early stages of the recovery.

Any service company is driven in some way by the number of transactions they have with customers. Fewer transactions results in less income, which in turn, means that a company must reduce staff and/or services. Likely, the staffing suppliers you had 12-18 months ago have quietly gone through significant changes to stay alive. Some have been bought by others, or have re-focused or sold parts of their business. And others have simply scaled back. They won’t tell you this directly, but they, too, have been forced to lay off recruiters.

On the MSP, VMS or payrolling side, these companies rely heavily on funding on almost a weekly basis to enable them to pay staffing companies in their programs, or contractors on their payroll. Because of payment terms with customers, they may end up paying contractors or suppliers well before getting paid by the customer. And believe me, anyone who negotiated a contract this year knows the payment terms were increased, not decreased. The days of “net 10″ or even “net 30″ are over. This results in extended credit lines and situations like the one the Albany Group finds itself in.

So, now is the time to start asking questions. Talk about what types of skills and services you will  need in the coming year and beyond. Reaffirm, realign, and reassess the confidence you have in your staffing suppliers today. Look into the financial and business changes in your MSP or VMS. If you don’t have the resources to do it yourself, find a workforce management partner who can do it for you.

For those who remember the Chimes meltdown, this is probably not on the same scale. However, there is a domino effect when the MSP or VMS can’t pay suppliers. Suppliers can’t pay contractors, and then the smaller supplier (the one you relied on for a niche skill, for example) can’t stay in business. This can also result in suppliers quietly trying to raise their rates in order to increase their margins, or paying contractors much less than they tell their customers.

As we’ve talked about before, when things start to pick up, you need to be poised to take advantage. I believe many companies who do not undertake some form of talent supply chain review will be surprised to find long cycle times and suppliers who can no longer fill their jobs. I hope I’m wrong, and as they say, you can’t “un-ring” the bell, but the world has changed, and anyone who thinks it will be business as usual is in for a big surprise. I know I’m right about that. Ring. Ring.