By Maria Ray, Aston Carter Director of Strategic Sales
What should you expect from your staffing partner when it comes to delivering cost savings or cost-effective solutions? The answer might surprise you.
Over the past year, companies across a wide range of industries have been ramping up to take advantage of the growing economy. As demand for products and services continues to increase, organizations need to develop their workforces quickly. Many companies have turned to staffing providers to support large-scale hiring needs, and naturally, saving money is high on the list of what they’re looking for. However, organizations that narrowly focus on immediate cost savings could unknowingly sacrifice true cost-effectiveness.
The Difference Between Cost Savings and Cost-Effectiveness
The terms cost savings and cost-effectiveness may seem synonymous, but they're very different. When it comes to developing a hiring and workforce management strategy, it’s important to understand those differences so you know what to expect, especially when it comes to driving value through a staffing partnership.
Cost savings simply means saving money — whether it's buying office supplies in bulk or bundling vendor services at a discounted rate. In terms of staffing, cost savings usually refers to a reduction in what an organization would typically pay a staffing provider for their services, or a price that’s less than other vendors' bill or markup rates.
Every company wants to save money, so cost savings is often what organizations strive for when establishing a new staffing partnership. However, narrowly focusing on shaving bill or markup rates can result in unintended consequences. Organizations should keep in mind:
- A lower bill rate often directly impacts candidate pay rates
- A lower pay rate impacts the quality of interested candidates
- Lower-quality candidates usually results in extended training time, higher rates of attrition and sometimes even poor performance
- A lower bill/markup rate impacts a vendor’s ability to dedicate resources and services to their clients, including contractor support, retention initiatives and technology solutions
In other words, when companies overly focus on cost savings, they risk quality and the long-term benefits of well-trained, well-paid employees. They also risk cutting short available networks of qualified candidates. Savvy organizations should therefore focus less on cost savings and more on cost-effectiveness as a solution for driving long-term value. This involves working with your staffing partner to hold them accountable to high-performance expectations that are in line with reasonable bill/markup rates.
How Do You Know if Your Staffing Partner is Cost-Effective?
Organizations that work with a cost-effective partner oftentimes reap benefits from the very first hire. Here's what you should look for to make sure you're getting the most for your money when partnering with a staffing provider:
- Time savings. A fundamental benefit of partnering with a staffing agency is the amount of time you'll save. Staffing providers often handle applications, candidate vetting, interviews, background checks, drug testing, etc., which will free up your internal teams to handle other important objectives. While time savings is highly valuable, it should be balanced with quality-focused goals.
- Engagement. Your staffing partner should engage with managers and contractors to host regular employee touchpoints, collect and provide performance feedback, and troubleshoot any issues that may arise.
- Employee value proposition. Evaluate the employee benefits your staffing partner can provide, including affinity programs and retention incentives (e.g., performance-based pay raises, retention bonuses, employee appreciation events).
- Knowledge. A strong partner will consult on market trends, offer recommendations on how to attract candidates, provide competitor intel and consult on your talent strategy to maximize results.
- Well-qualified candidates. The right staffing provider will have significant expertise in finding the best people to work in your industry and will likely have well-established candidate networks. Be sure to find out if your recruiters and account managers are specialized in hiring professionals within your specific industry and target labor categories. That way you’ll receive qualified professionals and specialized service from a partner that understands your requirements and business needs.
- Better performance. Well-qualified candidates tend to make for stronger employees. A strategic staffing partner will provide capable professionals who can help take your company to the next level, and who often require less training before they’re able to hit the ground running.
- Improved retention. When your staffing provider is effective in vetting candidates through a strategic and robust process, and delivering service through the value drivers listed above, improved retention often follows. Reducing employee turnover is crucial in establishing a cost-effective staffing program, especially when considering the high cost of potential backlogs while you hire and train new employees.
Ultimately, working with a cost-effective staffing partner often results in greater profit margins through soft cost savings that are generated by better candidates, improved performance and enhanced productivity.
Workforce Management Options
When you're looking to get the most out of a cost-effective staffing strategy, you should also consider working with a partner that provides workforce management solutions (e.g., managed solutions) in addition to staffing support. A managed solutions provider offers experienced teams (including qualified talent, consultants and project managers) to execute deadline-sensitive projects. They can also take on the logistics of hiring, onboarding, training and managing employees.
This integrated layer of support can be a cost-effective alternative to working with a business process outsourcing (BPO) company, which is often costly and greatly reduces an organization’s visibility into workforce operations. As an alternative, a managed solutions provider typically offers in-depth reporting and data analysis, giving you the visibility and insights necessary to keep your projects moving toward business objectives. They can additionally drive enhanced workforce productivity and time savings that helps free up your internal teams to focus on other critical business initiatives, resulting in improved cost-effectiveness.
Many organizations are tempted to cut staffing costs upfront, especially when employees need to be hired rapidly. In the short term, it could seem like a good idea, but companies should consider if settling for less-than-qualified hires now at a lower cost upfront will set them up for success in the long run. Organizations should therefore consider a long-term strategy for saving time and money by taking a cost-effective approach to partnering with a staffing provider.
This article was originally featured in Staffing Industry Analyst’s The Staffing Stream.