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Staffing Industry Report - Retention

March 30, 2007

Forum shows CEOs optimistic

But retention, image still plague many

Retention was a big buzzword at the Staffing Industry Executive Forum, one of the industry’s largest meetings of owners, CEOs and other top-level managers March 12-16 in Miami. With the median internal staff turnover at 35% (higher for larger companies), it is important that staffing agencies work on keeping their recruiters and other workers. “Keeping the A players is critical to success,” said Barry Asin, executive VP at Staffing Industry Analysts, which produced the event (and publishes this newsletter). With 5,000 new U.S. branches added since 2002, the industry “has a big opportunity to make careers more palatable,” Asin said.

At a panel featuring CEOs of three large staffing companies, Corporate Services Group Chairman Tony Martin said the industry has to become more sophisticated in how it hires people. “We’re in the recruitment business but we can’t find our own people,” he said.

Asin presented data from the Staffing Industry Benchmarking Consortium that showed the median internal staff turnover rate at 35% last year. It was 54% for larger players.

Some staffing companies are giving their internal employees bonuses for bringing in new hires. Yoh Group pays out $3,000 and it’s money well spent, said CEO Bill Yoh. “There’s no greater challenge than filling the seats. A bigger problem is making the wrong hire.”

To that end, keynote speaker Randy Street, a principal at consulting firm ghSmart & Co., talked about how to hire, develop and keep A players. “All the strategy in the world doesn’t matter if you don’t have the people to execute it,” he said. To find the best employees, it helps to hire like a pilot, Street said.

Street referred to several styles of interviewing: the art critic, who makes a snap decision to hire someone based on few details; the sponge, who soaks up time with a candidate; the prosecutor, who asks “what if” questions; and the pilot, who goes over a checklist before making a decision. The last method is the most successful for picking top candidates – using a specific checklist of what identifies a person as an A player.

Buyers’ perceptions
Image was another topic addressed in a couple of sessions. The attempt to raise the industry’s profile in clients’ eyes seems to have stalled, at least as measured by buyers. Staffing Industry Analysts’ fourth annual buyers’ survey (which will be covered in detail in the April 13 issue) showed a grade point average of 2.73 in the 2007 survey, versus 2.82 in 2006.

Underlying the grade was the 47% of buyers who said quality of contract workers was the top reason they ended a staffing relationship. Yet, quality was the most important criterion clients expressed regarding their selection process.

“We have a major say/do problem,” said Ron Mester, CEO of Staffing Industry Analysts. He said that while most staffing agencies prefer to establish a partnership relationship with their clients, it’s easier said than done. The majority of people making a staffing decision, at least according to the survey, are procurement professionals – and they’re more often using vendor management systems to do so.

“You guys feel like you’re treated like a commodity,” Mester said. Case in point: Panelist Bryan Peña carries the title “senior commodity manager” with Avery Dennison.

Customers said they care deeply about creating a successful relationship with their supplier. “My job is about delivery of services. If I have a contract with a vendor and he doesn’t succeed at sending the right people, it reflects on me personally,” Peña said.

Added Charles Ritter, director of IT resource management for Nationwide Insurance: “If they’re not successful, I’m not successful. We’re on the same side.”

However, they had concerns as well, such as consistency in delivery, not receiving data they requested and turnover of their account reps. Panelists were asked what they consider a fair profit margin for staffing firms. “It really depends on the volume and the partnership,” Peña said.

IT, finance strong
Among those attendees with big smiles were managers at finance and accounting staffing firms. That market remains one the fastest-growing. Information technology staffing firms, as well, were having a good year, with the majority seeing 7% to 13% growth.

Light industrial staffing business has moderated, many said, while office/clerical trends were mixed. In the latter segment, temp-to-perm and direct hire were playing a part, even in lower-paying positions.

In the session “The View from Wall Street,” analysts told attendees they view today’s staffing business climate as more like the boom days of 1996 than 2001, when business slid. Analysts James Janesky, Jeff Silber and Jaime Brandwood talked about the challenges facing the industry, but also said they see much hope in the rise of skilled and professional staffing.

“Underperformers are skewed to the lower-skilled, but [even they] are outperforming the regular market,” noted Silber, with BMO Capital Markets.

The Philadelphia Fed’s survey of professional forecasters projects U.S. gross domestic product growth of 2.8% this year, with the unemployment rate a relatively low 4.7%.

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