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The Temp Pool's Shrinking

April 1, 1997
Related Topics: Contingent Staffing, Featured Article
Wasn't it just yesterday when one call to your local staffing service would yield a half-dozen qualified candidates for your customer-service center and five software engineers for your new-product division on short notice? Whatever happened to all those workers who were just dying to get a foot in your door for a little temporary shelter? Was it something you said? Oh, if only it were that simple.

No, the temporary staffing shortage isn't a personal thing, it's a problem shared by companies from Boston to the Bay area and everywhere in between. The national staffing crisis, brought on by a robust economy and drastically low unemployment (5.4 percent in January, the most current figure available at press time), is dealing HR professionals a one-two staffing punch that's leaving them winded, weary and woeful—with an anemic base of candidates to fill regular positions and now a temp pool that's beginning to look pallid as well.

Adding to the national low-unemployment problem is the fact that companies are relying more heavily on temporary workers to support a flexible staffing strategy. The National Association of Temporary and Staffing Services (NATSS), based in Alexandria, Virginia, reports U.S. companies currently are spending more than $40 billion annually on temporary staffing services, supporting the industry's impressive growth rate of 13 percent to 15 percent per year, sending more than 200,000 temporary employees to work daily.

And the staffing industry itself is in a state of flux. In the '70s and '80s, staffing suppliers often were called in at the last minute to fill short-term needs for low-skilled positions. The typical scenario was that an agency filled positions for situations such as a secretary out for a week on vacation or the receptionist home sick for a day. But the staffing supplier of today has become much more integral to its clients' organizational structures, strategically positioning its services as "one-stop-shopping" business solutions and partnerships.

Companies not only look to staffing suppliers to provide traditional temporary workers, but now turn to them to meet a multitude of HR needs such as temp-to-hire, payrolling, outsourcing, vendor-on-premises, skills training and general HR consulting.

It seems companies have rolled out the welcome mat and invited the staffing industry inside for a nice, long stay. Unfortunately, many of these companies that place lots of orders for temp workers are feeling like disappointed hosts whose guests have shown up without the promised side dish—namely, the temporary workers they said they'd bring.

How to make sure that you have enough temporary workers to fill your short-term and longer-term staffing needs has reached nearly desperate proportions. It's going to take an even stronger partnership between you and your staffing vendors to get the people you need-when you need them.

Low Supply stifles high-growth companies.
Requests for temporary workers, increasingly coming in multiples of 10, 20 or 50 at a time, often are met with modest enthusiasm as staffing suppliers lament the challenges of low unemployment and the shortage of qualified help. Particularly hard hit are the high-growth industries with high-volume needs. Financial services, health care, telecommunications and software companies are growing impatient waiting for workers to become available so they can keep up with project deadlines and customer needs.

Gretchen McAuliffe, human resources manager for Lycos Inc., a start-up Internet exploration company in Marlboro, Massachusetts, says the staffing shortage has been particularly difficult for her high-growth organization. "I sometimes have to wait several weeks for workers with the right technical-skills mix. It makes it difficult for the internal staff who have to pick up the extra load. It just adds to the stress in an already intense environment."

Tim Doherty, president of NATSS, reports that finding enough qualified candidates to meet client demand is currently one of the industry's biggest challenges. But Doherty says he feels this isn't the worst problem the industry could have. "Demand is up significantly because clients feel more confident turning over entire departments and call centers to their staffing suppliers. Clients also are using their temporary workers for longer periods of time and often are hiring them for regular positions, so you don't have as much movement from one assignment to another."

Doherty admits, however, that the staffing shortage is causing real problems for many companies, particularly those like Lycos with high-skill needs in the information technology area. "Many of these companies [that rely on temporary staff] are having to delay upgrades or ask employees to put in extra hours to handle excess work, all of which can create a lot of internal stress."

Technology-driven organizations aren't alone in their frustration, however. Two more of the hardest-hit areas by the staffing shortage are customer-service departments and call centers, both of which can serve as a company's mainline to customer satisfaction. Sandra Buford, customer-service supervisor for Blue Cross Blue Shield in Denver feels the "temp crunch" has a definite impact on business. "We have regular staff we want to move to other departments, but we can't release them until we can get more temp help in the door; waiting for these workers slows down our systems, brings down our service levels and forces us to spend more money on overtime," says Buford.

Applicant quality drops.
Nancy Watts, vice president of national recruiting for Office Specialists Inc., a temporary staffing company based in Peabody, Massachusetts, says meeting the increased demand for many of the new-age skills will only get more difficult. "You can't turn on the TV without seeing a flashing 800 number. Someone's got to be on the other end of the line taking those calls, and it's often a temporary worker," she says. Watts, who has worked in the staffing industry for 15 years, says the staffing shortage is reminiscent of the '80s, but this time, it's even more challenging because of industry and business trends. "Orders for temporary workers are coming in multiples of 10 to 50 for skills that didn't even exist in the '80s. We have to work a lot harder today to meet the demand for both the skill [level] and the volume [needed]," she says.

The quality of candidates applying for temporary work also has surfaced as an issue, Watts says. "With a tighter market we're seeing a significant drop in overall usability," which refers to the applicant meeting the required standards to be considered "qualified" for temporary work through the agency. Qualifications could refer to skill level, work experience or satisfactory references. "A high percentage of applicants don't even make it through the initial screening process because they don't meet our requirements." In addition, Watts says customers are experiencing the same challenges in recruiting their regular staffs and therefore understand that sometimes a partial solution is better than no solution at all. "The honesty factor is what's important. Maybe we can't fill all 20 orders with the exact skill mix [the client] desires, but if we're up front about what we can do, there aren't any surprises, and our clients are willing to be a little more flexible and that helps."

Flexibility may be one way for companies to manage their way through the staffing crisis. HR departments should be flexible, not only with the skills their companies require, but also with level of experience, work schedules and sometimes the most sensitive of all, the hourly bill rate paid for staffing services, which will be an increasingly negotiable point.

Bill rates are rising because of the shortage.
HR managers shouldn't be surprised to receive a call from their staffing service that brings them back to the negotiation table. Demand is up, supply is down, and the backlash effect is likely to kick in, sending bill rates on the increase, say industry experts. In fact, if HR has done a great job of negotiating low hourly bill rates with the staffing service, then the company could be headed for trouble.

"The staffing industry has experienced an erosion of profit margins over the last few years," NATSS' Doherty says. "Now that the economy has recovered, and supply and demand issues are at work, we have to go through an educational process with our customers so they understand the need for bill rate increases." Doherty expressed concern for customers who have held their staffing suppliers to below-market rates, indicating they may become "second-choice clients" who won't have access to the volume or quality of workers they desire.

Companies should also beware of staffing services that are offering unrealistically low bill rates and everything under the sun. Over-promising on capacity and under-delivering on commitment aren't uncommon strategies for temp suppliers in a highly competitive market. "Don't be too quick to drop your current supplier," Doherty cautions. "But, if someone is offering something that looks too good to be true, it probably is." Communicate with the agency and let the principals know where the performance gaps are before moving on too quickly, advise many experts in the staffing field.

Do rate increases and quality issues mean the temp strategy is losing its appeal? Definitely not, says Doherty. "Companies recognize the value of a flexible workforce. Although rates may increase, companies still come out ahead because their internal costs are lowered." Doherty's referring to the overtime costs brought on by having regular staff increase their workload, and training and benefit costs incurred when adding new staff. Many agree the appeal of building temps into the workforce is the ability this strategy creates to increase or decrease staffing levels to match fluctuations in business activity.

Temp firms are using creative solutions to fill staffing needs.
Although competition within the staffing industry is high, particularly in a tight recruiting market, most staffing companies will be up-front about the availability of candidates. In fact, it's not unusual for staffing companies to form strategic alliances with their competitors, something that rarely occurred in past years. These cooperative relationships, for which one service will give a difficult-to-fill order to a competitor, may not provide revenue to the service outsourcing the order, but will prevent the customer from being left without the temporary help he or she needs, something everyone in the staffing loop tries to avoid.

Furthermore, forward-thinking staffing companies also maximize every opportunity to upgrade the skills of their temporary workforces. Most are stepping up training efforts, offering the latest in software and technology-based training. Many are going one step further and setting up dedicated training facilities and conducting workshops on interviewing skills, customer service, telemarketing and basic communication skills.

Staffing companies also are boosting their recruiting campaigns. They're casting a wider net to capture a larger and more diverse applicant pool. Standard recruiting techniques now include temp-referral programs with financial incentives, and Web page advertising and newsgroup postings on the Internet. Innovative marketing programs also are being used to attract nontraditional "niche" employees such as college students, retired workers and part-time temps.

As an added feature to benefit their clients, staffing companies are setting up camp at the clients' work sites in record numbers, establishing full-service offices so the temporary staffing function can be completely outsourced, leaving HR departments free to focus on other core duties.

Steffanie Sasano, HR director for Ross Stores in Newark, California is one employer who has said yes to this creative approach to temporary staffing. Sasano brought her temp service onsite in December 1994 to fully manage the temporary staffing function. "We've found the onsite program really works: The temps have someone available to them at all times who can answer questions and resolve issues, and the department managers have someone close by they can turn to." She says having a strong service under her roof significantly shortens the turnaround time on orders and leaves her department free to work on other essential functions.

The onsite coordinator becomes intimately familiar with the organization and its core values and requirements, something Jim Collins, author of the book "Successful Habits of Visionary Companies," (Harper Business, 1994) says he feels is vitally important. Collins says companies should always look for the right fit for the organization, even in "noncore" employees. The goal, he says, should be to attract and retain the noncore employee for a long period of time and to train him or her to handle multiple responsibilities, emphasizing that "one well-trained person is better than five new people."

HR may have to get more involved in finding temps.
But what about the companies who've really come to rely on temporary workers to keep their business going? Is there anything they can do to improve their chances of getting the first shot at top temporary talent? Experienced users and suppliers of temp staffing think so.

Take Jeff Hinkle, team consultant for First Union Bank in Charlotte, North Carolina. Hinkle often has more than 100 temporary employees working in his firm's call center answering customer inquiries. He says he has reduced the number of problems he had in the past with temp quality and availability. Hinkle attributes overall improvements to better communication with his staffing services and a supportive environment for temporary workers. "We were having the same quality problems everyone else was having—services were rushing to fill our orders and skipping important steps in the screening process, like background checks and references," he says.

Hinkle says he has eliminated many of his problems by reducing the number of temp services firms he was using. "We went from [using more than] six services to three. We spelled out our requirements to all of them and agreed to wait a little longer for quality applicants. And it has paid off." Hinkle says he conducts a 30-day evaluation at the start of every new assignment regardless of whether or not he has used the service before, and provides regular feedback to the temp services he works with. "We also try to be more flexible. I try to put myself in the position of the temporary employee—for the case in which someone is lacking slightly [in a skill], we'll provide coaching to bring him or her along." Hinkle says he makes a point of providing plenty of positive feedback for good performance and high productivity and he uses "huddle sessions," (employees and managers get together for quick, impromptu coaching and performance briefings) and frequent communication to create the kind of environment workers will want to return to.

Unfortunately, for Hinkle and others like him, the staffing shortage isn't just a flash-in-the-pan problem expected to disappear any time soon. However, staffing companies and their customers agree that overall, client/vendor communication has improved, allowing the two parties to work together more effectively than ever before in true partnership fashion. New and interesting staffing approaches are definitely the outcome of these increased efforts, and although they probably won't provide the ultimate staffing solution everyone's searching for, they seem to be helping. And that's a step in the right direction.

Workforce, April 1997, Vol. 76, No. 4, pp. 72-80.

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