Kevin O’Brien — December 2, 2016 Over time we’ve witnessed an interesting divide growing in the IT staffing space. And at the TechServe Conference last month and the ISSA Staffing Owner Symposium earlier this year, our thoughts about the direction of this industry moving forward were validated. To put it simply, there’s a very clear division between companies that embrace change and those that are happy with the status quo. Both have seemingly valid reasons for doing so, but it is our belief that only those that embrace change are the ones who will succeed in this evolving industry.
Digital Transformation in the Staffing Industry
Things are moving at lightning speed, and all areas of the business are being impacted. Finding and securing talented sales and recruiting staff has become more than just a question of “will they produce?” The selection process now includes such factors as, “do they understand our internal technology?” “Can they work with our offshore recruiting team?” “Are they savvy enough to comprehend the importance of an integrated sales and marketing strategy?” and “Do they possess the capability to develop large accounts?”
All these questions consider the state of evolving technology in the staffing industry. In the past, most of a staffing firm’s costs consisted of the people themselves; the account managers, business development managers, and recruiters. In today’s industry, costs associated with applicant tracking systems, marketing automation, and other technologies that support fulfillment and infrastructure make up the lion’s share of the budget.
Companies that have embraced the change have automated processes in place to better manage their candidates, clients and fulfillment processes. Every day, we see tools that can help teams identify, qualify and submit faster in order to close that next requirement. Furthermore, the addition of large VMS accounts has become an effective client acquisition strategy for small to mid-sized staffing firms looking to scale their business, requiring further investment into tools or processes as part of the cost infrastructure.
The Move to Vendor Managed Purchasing
Companies large and small are streamlining their processes to acquire contingent labor. And yet staffing companies are often resistant to doing business in a VMS controlled environment. We’re seeing many firms that are deciding to bail when VMS mandates are added to their prize accounts where they’ve had free reign over the past 20 years. And these firms are automatically staying away from accounts that have these VMS programs in place.
But how much of the market with free access and contingent labor hiring freedom is left for those businesses to chase in their market? In considering VMS trends, the question of just how much change you’re willing to resist is critical to answer.
While the VMS option is not the ideal way to build relationships and it can be unfair to commoditize the people business, there’s a volume and margin balance to be considered when looking across your account base. There are positives and negatives to every relationship, and if you can secure one or two VMS programs that provide the opportunity to scale your business, you are far better off than you were without it.
Even if your batting average remains low in these types of accounts, you may be able to grow your business with an uptick in revenue that can also be supported by lower cost resources. For instance, companies like 247HeadHunting can support your VMS program and fill requirements while you keep your key recruiting resources focused on high value client relationships.
So the question remains: Can your business break through a new ceiling of revenue without these types of accounts in the mix?
Determining ROI
It’s overwhelming to consider the number of ATS options and software solutions within the staffing marketplace. Just in the past five years we’ve seen a flurry of products like resume searching and parsing, analytics, and video interviewing, just to name a few. As a business owner, I can only imagine how difficult it is to not only determine which tools to use but which ones will be the right investment for a staffing firm.
Traditionally, new investments in a staffing business have been in the form of recruiters and sales people, for which the ROI calculation is straightforward. But deciphering the return on investment across the various productivity tools now available is very difficult to capture. Critically, there’s also the consideration of what your competitors are doing and whether you are losing opportunities because you’re not keeping pace.
There are quite a few small to mid-sized companies in this space that have been in business for over 20 years but refuse to use anything other than the lowest cost tools available, and even then they’re not using anything beyond a basic ATS. If these companies continue to maintain the status quo, it’s unlikely they’ll thrive – or even survive – in the digital revolution of the staffing industry. It requires a huge mindset change to assume a higher cost structure for technology and start using tools you may not have used in the past; but this shift is no longer negotiable in the current landscape.
Leveraging Digital Marketing for Staffing Firms
This conversation about technology in the staffing industry wouldn’t be complete without mentioning the power of digital marketing. There is still an abundance of companies out there with aged websites and limited brand awareness in the digital domain. Staffing firms that do not spend time on their digital footprint are at the mercy of relying solely on the communication between recruiters/salespeople and their audiences. Those relationships are valuable, but they do not have the same exponential power as digital marketing does when looking to maximize brand awareness opportuities.
Company brand awareness through online content, social media, and email campaigns are easy ways to create a relationship through the digital domain. And as it becomes harder and harder to reach buyers and candidates, your marketing efforts must keep pace with your audience’s preferred methods of communication, or else you risk becoming obsolete.
Is Your Staffing Firm Evolving or Dying?
For small to mid-size IT staffing firms that have been operating at a stagnant growth rate, these are just a few considerations to keep in mind. If you’re looking to grow your revenue, you’ll essentially need to increase your asset base, which may or may not include the acquisition of clients with increased requirements, an investment in your technology infrastructure, and an uptick in your digital presence and reach. If done correctly, the right combination of these shifts in your business can increase overall profitability and valuation. So, you decide, are you changing with the times or are you dying?
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