Strategic Staffing and the Temp Agency

Temp agencies have become indispensable partners for many companies. No longer are temps (or contingent workers as they are sometimes called) a minor expense; they are a big investment and a critical aspect of keeping jobs filled. But managers ought to understand that good temp agencies do much more than find “bodies” at short notice. The best agencies can show you how to use flexible staffing to improve productivity.

The Dramatic Rise of the Temp Agency

Temp agencies have become so common that we forget that, they were a relatively recent invention. Back in the 1950s Bill Pollock and Jim Shore were both competitors selling business equipment to improve productivity. They both noticed that although demand went up and down, staff levels remained constant. It dawned on them that there was a need for temporary workers so that the level of staff could fluctuate with demand. They formed Drake Personnel (now Drake International) and brought a new industry to life.

The temp agency is an essential service because businesses need flexibility. They need to be able to fill positions at short notice, for short periods of time. The flexibility in staffing that temporary workers give a company has proven to be so valuable that the number of temps has continued to rise over the years. We used to think that temporary staffing only made sense for relatively low-skill jobs but now companies have discovered that there can be value in bringing in interim executives right up to the level of CEO. (In fact, there is even a service, Drake’s Prime50, focusing specifically on the placement of seasoned executives in interim assignments.)

In using temp agencies companies have stumbled upon some unexpected benefits. One is guaranteed performance. If you bring in a temporary employee and they are not working to your standard, a simple phone call to the temp agency is all it takes to have them replaced. The other unexpected benefit is the temp-to-perm phenomenon. Hiring workers as temporaries before making a decision about offering them a permanent job is undoubtedly the single most reliable selection method. It gives the company a chance to “test drive” the worker and the worker a chance to see what it is really like working for the company. The U.S. National Association of Temporary Services estimates that one out of three temporary assignments leads to full-time work.

Clearing Confusion About the Types of Temps

Frequently the labels “temporary help,” “contingency staffing,” and “flexible staffing,” are used interchangeably by the general business community. However, temp agencies understand that these three types of workers are used quite differently.

Temporary help is a concept whereby companies bring in someone, usually for lower skilled jobs, to cover for a vacation, maternity leave or help for some short-term project.

Contingent staffing is a much broader concept including all sorts of contractors, consultants and free agents, often for reasonably long periods of times. The driving business reason is still flexibility: companies want to be able to bring in the talent they need at the moment without making a long-term commitment.

Flexible staffing is rooted in the original insight of Pollock and Shore that big productivity gains would arise by analyzing the fluctuating levels of demand and creating a flexible workforce to match it. Of all the types of temporary staffing this is the one that is truly strategic.

The Most Important Use of Temps: Flexible Staffing

When demand dips below the water level staff is idle and the company is paying unnecessary salaries. When demand juts above the water line the staff cannot handle the workload resulting in overtime and backlogs.

Drake’s approach is to analyse the optimal level of permanent staffing then put in a plan for handling peaks in demand with qualified temporary staff. While it takes some expertise to do, this planning is a reasonably straightforward exercise–one Drake has been executing successfully for many years. The results are both significant savings on staffing costs and improved ability to deliver to customers during peaks in demand. Unlike some other temp agencies, Drake has always been in the productivity business, not just the staffing business.

Mistakes to Avoid

If there is one place where some companies have gone astray in working with their temp agency it is that they stopped seeing it as “staffing” and started seeing it as “purchasing.” As noted in this article, the rise of temporary staffing meant that temps have gone from an insignificant cost to a large annual expenditure. Furthermore, this expenditure was uncontrolled in the sense that all sorts of managers would be negotiating their own deals with different temp agencies. Organizations responded quite reasonably in trying to get control of this by bringing the purchasing or procurement function – that has expertise in cost control – into the picture.

However, this can go off the rails if the procurement department focuses only on cost, not on quality. A company would never hire someone on the basis of which applicant was willing to work for the least money; the quality of the candidate is a prime consideration. However, when a procurement department is being driven solely by targets to reduce costs the easiest way to get there is to be inattentive to quality.

The solution to this is reasonably straightforward. The mission of the procurement department must be to partner with the temp agency to get top quality temp workers at a reasonable cost. Hiring managers should be periodically surveyed to ensure the temp agency is providing the quality of staff it needs.

Return on Investment

Businesses rarely do any kind of ROI around hiring temporary help, it’s simply a matter of work needing to be done and getting help quickly. However, for flexible staffing it is possible to do a formal ROI, and the results can be impressive.

If you are able to reduce your permanent staffing in a unit from 100 to 75 then it is easy to calculate the savings. Add to this the cost of overtime caused by peaks in demand – not to mention the loss of customers due to backlogs – and you have all the information you need for an ROI calculation.

The returns are usually so large that it’s not necessary to spend time sweating over specific estimates – even the most pessimistic estimates show flexible staffing will provide a solid return.

Don’t think of your temp agency as simply someplace you call to fill a short-term vacancy. Think of it as a service provider who can regularly source top talent for you and permanently reduce your costs.

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