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Customers Give Staffing Higher Marks

Brought to you by Staffing Industry Analysts Inc.

April 2006
Contingent Hiring Forecast to Expand

Customers give higher marks to their staffing companies and expect to use more contingent workers in the future, according to the latest research by Staffing Industry Analysts. But they are still concerned about employee quality, especially in the industrial sector, the “2006 Staffing Buyers Survey” found.

Staffing companies received an overall “grade point average” of 2.82, or B minus, up from 1.98 in 2003 and 2.54 in 2004, the last time the survey was conducted. “Customers are still not jumping for joy, but their overall attitude toward staffing firms got better, perhaps reflecting a renewed appreciation for the industry in a tighter employment market,” said Barry Asin, Staffing Industry’s chief analyst.

Researchers surveyed 166 companies with 1,000 or more employees, and some of the most striking data concerned future plans, said Jon Osborne, research manager and one of the authors of the report. Sixty percent of companies expected their combined regular and contingent workforce to grow over the next two years, versus only 8% who projected a decline. That almost 8-to-1 ratio of growth versus decline is twice the 4-to-1 ratio seen in 2004.

The good news for staffing companies comes in future plans for contingent workers. In the 2004 survey, only 10% of companies had a contingent workforce that was more than a fifth of their head count. That number rose to 15% in the latest survey and increased to 22% when the respondents were asked about expected usage over the next two years. “And our survey found that 71% of companies project growing their contingent workforce over the next two years, while only 13% expect to shrink that number,” said Osborne.

Buyers of staffing services in finance and insurance had the highest expected contingent use, projecting a median 57% increase. “Sarbanes-Oxley is still doing things,” Osborne said. “In many cases, companies got used to hiring temporary workers with SOX, and now plan to continue.” And despite the fact that the healthcare industry is short-staffed and spending is expected to increase substantially, only 10% growth in contingent workers was projected.

Behind the forecasted growth in temporary and contract employees is a corporate sea change in the attitude of managers and executives toward contingent workers. In the 2003 survey, a net 21% of respondents said they thought their organizational cultures were negatively disposed toward contingent work. But in the 2006 survey, the direction was reversed, with a net 11% saying the corporation was positively disposed toward a temporary workforce. “Organizational culture is now actually working in favor of contingent workers,” Osborne said.

That shows up in other areas as well, the survey found. In 2003, 16% of respondents said they spent more than half their time on contingent work-related activities. In the 2006 survey, that number climbed to 36%. “Now it looks as if it’s developing into a full-time job,” said the analyst.

VMS
Vendor management systems have long been considered a bugaboo by staffing companies, but the survey found some surprising results. VMS use did increase between 2004 and 2006, but not by as much as expected, rising only 3% to 27% among those surveyed. But perhaps staffing companies shouldn’t be as worried about VMS, Osborne said. Customers using or getting ready to use VMS were a net 21% positive when asked if they would recommend their primary staffing organization to another company. Surprisingly, those not using VMS were a net 19% negative. “Companies using VMS are actually more loyal than companies that don’t,” Osborne said.

There were also differences in sector loyalty. Office/clerical, IT and finance/ accounting customers were on the net positive side for loyalty, while tech/ engineering and healthcare were net negative.

If there was one overriding key to loyalty and satisfaction, Osborne said, it was worker quality. “No matter how you cut it – by industry, by management level, by job function, by sector, by size – quality was the most important factor, except for the government sector,” the analyst said. Some 79% of companies put worker quality as their top supplier selection criterion, followed by low cost at 50%, relationship focus at 36%, speed at 29%, and skills breadth and geographic coverage tied at 28%. Candidate performance, along with bill rates, also led the list of most important metrics by which to evaluate staffing supplier performance.

Other key survey findings

• About half of companies surveyed had time limits for contingent and temporary employees, with the typical limit being a year. But since the survey found that the typical assignment is six months, those limits don’t appear to be a major factor for most staffing companies.
• The longest average assignment length by sector was in the energy/chemical and the technology/telecom industries – 46 weeks – while the shortest was a tie between business services and government/education, at 12 weeks.

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