Over the past year, companies across a range of industries have been ramping up to take advantage of the growing economy. As demand for products and services continues to increase, organizations need to develop their workforces quickly. Many companies have turned to staffing providers to support large-scale hiring needs, and naturally, saving money is high on the list of objectives. However, organizations that narrowly focus on immediate cost savings could unknowingly sacrifice true cost-effectiveness.
The Difference Between Cost Savings and Cost-Effectiveness
The terms cost savings and cost-effectiveness may seem synonymous, but they’re very different. When it comes to developing a hiring strategy, it’s important to understand those differences so you can know what to expect, especially when it comes to driving value through a staffing partnership.
Cost savings simply means saving money. In terms of staffing, it usually refers to a reduction in what an organization would typically pay a staffing provider for its services, or a price that’s less than other vendors’ bill or markup rates. However, narrowly focusing on shaving bill or markup rates can have unintended consequences. Organizations should keep in mind:
- Lower bill rates often mean lower candidate pay rates
- Lower pay rates impact the quality of interested candidates
- Lower-quality candidates usually results in extended training time, higher attrition rates and even poor performance
- Lower bill/markup rates impact a vendor’s ability to dedicate resources and services to their clients, including contractor support, retention initiatives and technology solutions
Companies that overly focus on cost savings risk quality and the long-term benefits of well-trained, well-paid workers. Meanwhile, savvy organizations focus less on cost savings and more on cost-effectiveness as a solution for driving long-term value. This involves working with your staffing partner to hold them accountable to high-performance expectations that are in line with reasonable bill/markup rates.
Knowing Whether Your Staffing Partner Is Cost-Effective
Organizations that work with a cost-effective partner often reap benefits from the first hire. With a cost-effective staffing partner, your organization should experience the following:
- Time savings. Staffing providers often handle applications, candidate vetting, interviews, background checks, drug testing, etc., which frees up your internal teams to handle other important objectives. While time savings is highly valuable, it should be balanced with quality-focused goals.
- Engagement. Your staffing partner should engage with managers and contractors to host regular employee touchpoints, collect and provide performance feedback, and troubleshoot any issues that may arise.
- Employee value proposition. Evaluate the employee benefits your staffing partner can provide, including affinity programs and retention incentives (e.g., performance-based pay raises, retention bonuses, employee appreciation events).
- Knowledge. A strong partner will consult on market trends, offer recommendations on how to attract candidates, provide competitor intel and consult on your talent strategy to maximize results.
- Quality candidates. Find out if your recruiters and account managers are specialized in hiring professionals within your specific industry and target labor categories. A knowledgeable partner will understand your business and provide qualified talent who require less training, often resulting in improved performance and cost efficiencies.
- Improved retention. When your staffing provider is effective in vetting candidates and taking care of their contractors, improved retention often follows. Reducing employee turnover is crucial in establishing a cost-effective staffing program, especially when considering the high cost of potential backlogs while you hire and train new employees.
- Workforce management options. As your business evolves, your partner should be able to scale up support. A partner that offers a range of flexible services, including managed solutions, can provide experienced teams to execute deadline-sensitive projects, while taking on the logistics of onboarding, training and managing employees.
Ultimately, working with a cost-effective staffing partner often results in greater profit margins through soft cost savings that are generated by better candidates, improved performance and enhanced productivity.
Many organizations are tempted to cut staffing costs upfront, especially when employees need to be hired rapidly. In the short term, it could seem like a good idea, but settling for less-than-qualified hires now at a lower cost upfront will not set them up for success in the long run. Organizations should therefore consider a long-term strategy for saving time and money by taking a cost-effective approach to partnering with a staffing provider.