Contingent Staffing Requires Serious Strategy
It was in the dark days of the recession that contingent staffing became the strategy of choice. Companies stampeded to temp services, searching for a cure-all for their HR woes. Contingent workers swelled the ranks of corporate America. Companies called for more.
Now, as the recession lifts, and the smoke clears, two things become certain. One, for many organizations, the contingent-staffing concept simply doesn't solve a thing. Two, for others, it is the solution, a strategy that works. It is truly their heralded panacea for staffing problems.
So what makes the difference between the former and the latter? Most often, those companies-and there are many-that benefit, even depend, on contingent staffing are companies that take it just as seriously as they do any other component of their staffing strategy. When they use the much-ballyhooed phrase strategic staffing, they place the emphasis on strategic. Which means they have direct business reasons for using contingent workers. Which means they demand the same characteristics of their temps that they do of their regular employees: productivity, quality, high performance. Which means, most of all, that they recognize that the relationship takes work to work well.
Contingent planning must be applied for specific-and solid-business reasons.
Just as throwing money at a problem is never a smart solution, throwing bodies at a problem also falls short in the long run. Largely in response to the crunch of downsizing, companies have been packing in contingents for the past few years in record numbers. In 1993, 21% of the total increase in employment came from temporary services, according to the U.S. Bureau of Labor Statistics. That increase translated into 1.6 million temporary employees being pumped into businesses each day in 1993, generating a $19.7 billion payroll, according to Alexandria, Virginia-based National Association of Temporary and Staffing Services (NATSS). This year the number is expected to push close to 1.8 million people.
Many of these 1.8 million will be used to their companies' great success. But Professor Stanley Nollen, of Georgetown University's School of Business Administration, worries that a large number will not. "Many companies believe that contingent workers are cheaper than regular employees, and they hire a fair number of them, thinking they will be cutting labor costs. My questions is: Is that really true? I think the answer is that many times it's not true."
Nollen, who authored a book on the contingent work force due out this fall, says that too often companies think that because they pay temps smaller hourly wages and no workers' comp or benefits, this automatically means they're going to come out on top with their budget. Not necessarily, says Nollen. "Do not assume that contingent labor is cheaper. Check it out," he says. "You have to look not just at what you're paying out, but what you're getting back."
Nollen says that despite their initial low price tag, contingent workers may end up costing more in the long run-they take longer to get up and running, and even when they're at 100%, they still won't always match the productivity of long-time workers.
In addition, those companies choosing contingents as a means of avoiding employer-of-record complications will still find themselves mired in many administrative tasks. HR needs to keep an eye on this part of the work force, just as it monitors permanent employees. Just because a temp agency manages the paperwork doesn't mean HR should strap on blinders. "If companies believe that what they gain from contingent work is that they get rid of personnel administration tasks, they are mostly wrong," says Nollen. "If they do avoid these tasks, it is at their peril that they do so."
Many temporary staffing agencies have focused on these weak links, developing partnerships with the companies they serve, so that if there is a problem they can be ready to solve it. "As these relationships are formed, both parties get comfortable with sharing planning information and looking at ways to improve the productivity and quality of the work being done by the flexible work force," says Gordon Bingham, senior vice president of marketing for Melville, New York-based Olsten Staffing Services.
Flexible is truly the key word in the contingent work-force puzzle. "There is only one very good reason for using contingent workers," says Nollen. "And that is to solve a flexibility problem that you have."
Dave Compton, director of operations for Auburn Hills, Michigan-based Automotive Products (USA) Inc., is in agreement on the flexibility issue. "There isn't a big enough cost differential that I'd say we're doing it just [to save] money," he says. "The reason we started was because of the ebb and flow of the automotive industry. We were going in and out of layoff conditions-and I didn't particularly like laying people off."
The company, which pulls in about $60 million yearly in sales of its product-clutch hydraulics for manual shift vehicles-had gotten trapped in a vicious cycle of hiring in the busy periods and laying off in slack times. Using temporaries in the manual-labor operations seemed the way to go. Compton says it gives some much-needed stability to the 300 permanent employees, and provides him with the ability to respond to his company's staffing needs without the former pangs of guilt. "The [temporaries] know that they could be laid off. I think that's the key. The temporary relationship gives us the opportunity to say 'Even though we may lay you off, you can go back to the temp agency and get reassigned.' Whereas with our work force, we'd lay them off and they'd just wait till we called them back, which was never a very palatable situation."
Carpentersville, Illinois-based Revcor Inc. had a similar struggle in meeting an erratic production schedule. As a manufacturer of fans, wheels and housings for air conditioning and heating components, the company was extremely busy in certain seasons and slow in others. "When I came here 7-1/2 years ago, we had this 'hurry up and hire them and then lay them off' mentality," says Larry Brigman, director of HR. "We had trouble getting people because we came to be known as a company you wouldn't stay with." This reputation quickly dissolved when Revcor made the move to using temporaries. Now as many as 100 contingents support the 300 permanent employees in the busy seasons. The increased use of temps allows Revcor to recruit its permanent employees without the stain of ever-looming layoffs.
Organizations often respond to flexibility issues by using contingents. In the Career Horizons 1995 Salary and Employment Survey of more than 500 companies, special projects and peak periods accounted for more than half of all temp usage.
"Use contingent workers as a buffer to the core work force for sure," says Nollen. "That's a good and proper use, and it works." But even when companies choose to use contingent workers for the right reasons, they'll still fumble if the contingents can't deliver the necessary services. Getting temps on their feet and working on their own is critical to success.
Contingents need to be up and running quickly.
KLA Instruments knows what it needs. It needs a contingent work force of highly trained engineers to assist on special projects when necessary. Although the San Jose, California-based yield management company uses temps on every level, it is this group of high-level contingents who play an integral part in the business's success.
KLA, which makes inspection equipment for the semiconductor industry, has integrated its contingents so thoroughly into its staffing strategy that it maintains a commitment to have temp workers comprise 10% of its work force. So crucial are the contingent engineers that they have to get in the swing of things as quickly as possible. So what's one of KLA's biggest hurdles? "Each person coming in has to be trained," says Ginny DeMars, vice president of HR. "So you spend some time in the training mode, and that's always a challenge, because when you have a need for someone, you have an immediate need."
Most temporary agencies have addressed this as well as they can-providing training to their workers before they ever set foot on a customer's doorstep. For instance, for its major clients, Atlanta-based Norrell Corp. examines their business's primary training needs and drills its temps accordingly. The temp service will even customize its training to cover a specific area. For example, when UPS signed on with Norrell as its temp provider of choice for its data-entry operations, Norrell designed a screen simulated to be just like those used at UPS. "We'll test them and get them to a certain key-stroke level before they ever go out there," says Betty Vanstrom, director for Norrell's major accounts programs. The goal is to get them as familiar as possible with their UPS job duties before they ever clock on with the company.
Some temp agencies, such as Sunnyvale, California-based Advanced Technical Resources, focus on a certain type of contingent worker-in this case, technical engineers and programmers. By developing a niche in a specific field, they form a group of specialized employees in need of little training. Other agencies create specific branches-for instance, Management Recruiters' InterExec branch, which places interim professional-level employees in various managerial and technical capacities, or Express Personnel Services' health-care placement division.
Terry Petra, a consultant to the staffing services industry and president of Professional Services Consultants, says temporary agencies definitely feel the push from companies to provide ready-to-work contingents: "I know our industry is looking very heavily at how we train them." Statistics bear him out. In a 1994 survey of 2,189 temporary workers conducted by the National Association of Temporary and Staffing Services, 36% of respondents said they received between six and 20 hours of training from temp services in a year; 29% received more than 20 hours.
Even so, contingents still need an extra hand once they get onsite. Revcor is so dedicated to breaking in its temps that several Revcor trainers have the responsibility of working with new contingents the first few days. The idea came up because most of the manufacturing positions are pay-for-performance, so permanent employees often don't want to slow down to explain the processes to contingents. Official trainers can give new temps the information they need to know.
"Our people wear red aprons that say TRAINER," says Brigman. "When we hire people we tell them that if they have a question, look for somebody in a red apron. That's been very successful."
Nollen says that although providing training helps speed up the contingent's productivity, it can become a catch-22 of sorts. "The only way you can recover your training costs is by having the trained contingent workers produce output for a period of time afterwards. But by definition, contingent workers don't stay long-they're temporary." That's the delicate balance: keeping temps around long enough to get a return on the investment while ensuring they don't become unnecessary permanent employees.
The first challenge is curbing premature turnover. The temporary business is by its very nature a constantly shifting creature. The lack of an employment relationship-one of a temporary arrangement's biggest strengths-can also be its greatest weakness. If contingents don't feel good about their work environment or job duties, they aren't likely to remain out of any sense of loyalty.
"When we first started, our turn-over was unacceptable," says Revcor's Brigman. "We wanted to see what we were doing wrong in the process." The company began conducting exit interviews with its contingent workers. Doing so highlighted several problems-one of which was the fact that contingents found it difficult to learn their jobs because no one wanted to take time off to help them. This discovery led to Revcor's assigning the red-aproned trainers to new contingents' work units.
Another way of keeping temps around for a decent length of time is by giving a raise if the contingent is a high performer. "You can try to make them turnover less frequently by giving them equitable pay and benefits," says Nollen. "You can try to lengthen their service by raising their pay for service up to a cut-off point-maybe a year or so."
Nollen suggests keeping a temp's tour of duty to about a year because, although too much turnover is harmful, too long a stay shouldn't necessarily be encouraged either. All good things must come to an end. If a company hired a contingent to work on a specific project or swell the work force for a busy period, there will come a time to let that person go. "You can't keep temporaries doing the same job for two or three years," says Nollen. "Make it attractive for them to stay 10 months or one year or a year and a half, but not three years. It's wrong and it won't work." Nollen says these long-staying temps aren't a good idea because in effect the company will become a co-employer, running into similar legal obligations, employee-rights and industrial-relations issues as those of permanent employees. "You will have an employment relationship with this person, and once that's established, you lose the whole reason to have these people off the payroll in the first place."
Also at issue is the fact that if a temp is doing the same job for more than a year, the position has probably become a necessary one. So stop and evaluate the relationship occasionally. "We have a checks-and-balances system that requires us to look at a contingency work person every six months to see what they're doing and if they're still needed," says KLA Instruments' DeMars. "Then we make the decision if this should become a regular position or if it's time [for the temp] to move on."
Atlanta-based WorldSpan, a computer reservations system owned by a consortium of airlines including Delta, Northwest and TWA, has a similar timetable for its contingent workers, who may number as many as 100 at any given time. "We only allow temporaries to be here for one year," says Paul Sundberg, director of HR. "So either that manager has to justify getting another temp in or they have to justify that this is indeed a position that needs to be on a regular basis." It's not uncommon for a temp to become indispensable. Thirty-eight percent of respondents to the NATSS survey say they've been offered a full-time job at their assigned company.
How to incent high performance in a non-employee?
Permanent employees have a built-in reason to perform well-they want to move ahead. But temporary workers don't have this need. They're not booking for the next promotion. So how do you get them to give you their best work? For starters, you hire the best temp you can get. If you were looking for a new vice president, you wouldn't just call up Dial-A-Body and have them send one over-no questions asked. But many companies take this approach to their contingents.
KLA Instruments is an exception. They want to know exactly what their temps can do. "We interview all our temporary help," says DeMars. "We don't just take whoever shows up at the door. We interview them for their skills and their knowledge, making sure that we believe that they can do what we're asking them to do." DeMars says the company also has a full-time HR person who is responsible for measuring contingents' performance.
Having a relationship with just one or two temporary agencies also helps-they'll know more quickly the company's staffing needs and be better able to fit the bill. For instance, Norrell uses a tool developed by the Princeton, New Jersey-based Gallup Organization to help match a temporary's personality with a company's environment. By probing the applicant with certain questions, it provides an idea of whether the person would work better in a quiet environment, whether they work well on their own or desire more interaction.
Once they're on the job, temporaries should be monitored just like regular employees. For instance, Revcor's temporary agency, Western, uses a weekly evaluation sheet, at the suggestion of several temps who wanted more feedback on their work. "The performance form is a communication tool to inform these people of their attendance, efficiency and safety," says Brigman.
Communication is an often-overlooked component of successful contingent work. DeMars knows that contingents aren't mind readers-they need to be told what's expected of them. "They all need to know what the goal is. We have to make sure that the contingent understands where the vision is, where we're going and what needs to be done. It's important for each manager to impart that upon these individuals."
Many companies incent high performance in their temps by dangling the possibility of a permanent position. Last year, Revcor hired 52% of its temps. Similarly, Automotive Products actually instituted a policy for hiring only temporaries in the direct-labor operations. "If I've got 60 temps and I need 10 more direct labor employees, we'll take that 10 from the temporary work force and bring them on full time," says Compton. "It gives them an interest in [the work], and I believe that if someone's been here 12 months then they deserve the recognition." World-Span's Sundberg finds the temp-to-perm approach has many benefits for the employer. "It's a good chance for a manager to really take a look at a person and know that the person is a good performer."
While some temps go the extra mile in hopes of being hired, others excel because temping is their actual occupation. Olsten's Bingham sees this happening quite a bit now. "Traditionally people took a job with a temporary service with the objective to find a permanent job," he says. "But you're starting to see more people now saying that they'd like to have greater control over when and where they work and in essence becoming a temporary as a career." Steinberg agrees: "In today's ever-changing work environment, temporary work has become a way of empowering yourself." In fact, 38% of respondents to the NATSS survey said they'd been offered a full-time job and declined because they wanted to remain a temporary.
So, after all is said and done, is the contingent work force worth all the effort? When contingent relationships work, they can truly be a strategic solution to a company's staffing challenges. A group of qualified, talented temps can be just as valuable as permanent employees. "There's a lot of advantage to contingent labor," says Nollen. "I'm all in favor of it, when it's done right." The companies that do it right will tell you that it's worth the work.
Personnel Journal, April 1995, Vol. 74, No. 4, pp. 50-58.