When It Comes To Purchasing Staffing Solutions – Words Matter
We see this “truth” every day in the work we do to help clients manage short or long term projects that require a variety of interim employees. The words these clients use to describe their needs have come to represent very different views of value and cost in the eyes of those who purchase staffing services. Do they hire “temps”, “contractors” ” consultants”? Which words they use will drive them to talk to different vendors, to look for different service models, and yes, to spend very different amounts of money to achieve their project goals.
As consumers, we all know that the labels that get applied to different products or services can make a big difference in what we are willing to pay for them. For example, we are willing to pay more to eat at a bistro than we are at a diner. We pay more for a piece of designer apparel from Nordstrom, than we do for the same garment at Target. Call it great “marketing” or “consumer naiveté,” it’s just the way the world has been made to work by some very skillful marketers.
For all the same reasons, the words a staffing provider uses to describe who they are and what they do, can make a big difference in the purchasers of staffing services perceive the value delivered and received. When the words match the reality, our customers get exactly what they pay for. On the other hand, when the words imply differences that aren’t really there, our customers can end up paying considerably more for the exact same product or service depending on who they buy it from and what words are used to describe what they buy. Our goal is to help our customers go beyond the marketing hype to get and pay for what they actually need.
Here’s the deal. At its core, the business of staffing is about delivering workers who do work on a customer’s behalf, eliminating the need for a customer to hire the worker directly. Successful staffing firms are good at recruiting, evaluating and placing talent that matches their client’s needs.
This bare bones service description applies just as much to a day laborer provided by ABC Staffing Agency as it does to a Business Strategist provided by XYZ Consulting. While the base transaction stays the same, the customary pricing or mark-up practices for the different types of service delivery firms can vary considerably, with customary mark-ups of pay-rate to bill-rate ranging anywhere from 30-300% depending on who is selling what. We realize that most service providers don’t or won’t discuss mark-up, but outside of client ear shot, mark-up is the vocabulary du jour.
The staffing industry has evolved to a place where it now encompasses a broad range of service delivery models—from “temp agency” to “consulting firm.” While in reality, there are fundamental similarities between all service models, the differences these models represent have been successfully marketed so that users have come to expect something substantively different depending on the label they have attached to the service provider they use.
- Temporary service providers, for example, have historically provided workers who do lower level jobs, at low level costs, producing minimal value, and are referred to as “agencies.” They charge time and materials for their services.
- Contractors and specialty contracting companies have done a great job of positioning themselves to earn premium earnings by specializing in what is called Statement of Work (SOW) engagements that add additional levels of accountability and risks by contracting to produce results, not just delivering time and material.
- Consultants are at the highest end of the value spectrum and have earned the right to bill rates double, if not triple the amounts allowable in the contractor marketplace. Their work is fully at the consultative or architectural level, more about providing direction, than achieving a specific goal, or contributing time and material.
You may have heard it said before that in the real world “we’re all temps” and for a variety of reasons over the last decade the differences between employees categorized as temps, contractors, and consultants have become increasingly blurred. This is particularly true for the types of staffing solutions typically purchased and used by managers working in the IT, Finance, Accounting, and Creative arenas.
The reality we see is that:
- Temp agencies have moved up the value chain to now provide very high level time and material IT and professional staff at all levels of skills and expertise.
- IT contracting firms typically deliver time and material workers who do not fit the traditional SOW contract model.
- Consulting firms have moved out of the “thought” field into “doing work”, offering supplemental labor at high mark-ups to do the specialized work the consultants have recommended.
The long and short of it, purchasers of staffing solutions have many more places they can go to get the “just right solution” for their business needs. Where they go and the words they use to describe what they want or need can make a difference in how much they pay for the workers delivered.
Unfortunately, customer perception has not yet caught up with these changes in who does what in the staffing solutions marketplace. Many purchasers of high level professional and technical staffing services have well entrenched business relationships with existing suppliers, and either do not recognize the opportunities to purchase elsewhere, or just won’t take the time to find and obtain new suppliers—we get that, you’re busy.
What we see all too often are assumptions that make the cost companies money. When busy purchasers go to primarily SOW contracting firms to find employees that a good temporary agency could provide at half the cost, the result can be costly. Or, if a frequently used consulting company is asked to provide time and material contractors (or even temps for that matter) at double the cost it would take to get the same employees elsewhere, the cost differentials even on one small project, can be sizeable. Employees are also impacted by the words that get used to describe who they are and what they do.
We see it all the time—a highly skilled technical or professional employee can work on assignment for a temp agency at a certain pay rate, but then do a contract assignment for a contracting company at a different rate. Their pay rates for that very same or similar work may vary by 50%; the bill rate to the customer may vary by as much as 100-300%. In reality, the worker is doing the same work for each client; it’s only the words that changed.
Within the staffing solutions marketplace, PACE is not just a staffing company but also a “managed services provider.” We see our job as helping clients become smart purchasers of all types of staffing solutions, making it easy to get the right solution from the right resource. To do that, we help them define the work that needs to be done to make sure they know what type of service provider they need to go to for whichever type of service delivery they need. If they need a true SOW solution, where the work they need done needs to be defined in terms of outcomes, not time and material, we encourage them to pay the premium it costs to use a contractor who specializes in a deliverable or results focused services. In comparison, if what our client needs is simply a time and material worker who will work as part of their expanded internal team, they should purchase that service from a more staffing-focused provider who knows how to quickly and efficiently deliver the type of employee needed in a cost effective manner.
Bottom line, if our client needs work done that can be done by a temp; we make sure they are not charged rates or mark-ups that are more customary in the SOW/contractor marketplace. If they need a contractor, we help them avoid being charged rates and mark-ups that are normal in the consulting marketplace. In the end, our mission is to help our client’s make decisions that deliver the services they actually need—quickly, simply, and cost effectively, and represent a range of suppliers and solutions under our network umbrella.
This article was prepared by Jeanne Knutzen, Founder and CEO of the PACE Staffing Network using information from a variety of sources.
For more information on how your company can better navigate the complexities of the staffing marketplace, and/or to learn more about how to differentiate between jobs that should be serviced by different types of third party employers, contact us via firstname.lastname@example.org.