Have you ever lost a valued provider or failed to add one to your list? Have you wondered why? The fact is, just as staffing buyers evaluate their supplier lists periodically, staffing firms, too, need to be choosy in their client pools. Sometimes, that entails them walking away during or even before an RFP process. Others, it means severing ties when it is in their best interests. But what makes suppliers take such a step? As part of our annual survey of staffing firms, we asked respondents why they turned down prospective clients or terminated existing relationships. The responses were enlightening.
Pricing. Topping the list of reasons was pricing that is too aggressive. If a supplier believes a client’s rate structure is not sustainable to its own business needs, it will walk. We’ve covered this topic in past issues of our CWS 3.0 newsletter. Program managers have to balance the need to save their companies as much money as possible with the need to ensure they are not costing themselves more in the long run in terms of sub-par talent as a result of their savings measures. And some suppliers would rather walk away from a client than provide talent that is of lesser quality than it wants to be associated with supplying. So if you find you are unable to attract suppliers to your program — or retain them — perhaps your pricing structure needs reviewing.
Communication. We hear anecdotally from talent quite often their frustrations over poor communication: Their resumes get sucked into a black hole, they never hear back after interviews. Staffing firms cite the same frustrations as reasons for dropping their clients. If a staffing firm does not receive feedback from its clients, it loses the faith of its own talent. And with talent at such a premium in this employment market, no one can afford the dings to their reputations. Talent talks. And talent and suppliers can walk. So take a look at your procedures to ensure your suppliers are getting the feedback they require in a timely manner to serve you better.
Aside from the report’s, there are other reasons we hear from suppliers for why they walk. A couple I’ve heard of frequently:
Indemnification agreements. Suppliers talk about how they walk from certain contracts they often are asked to sign because of indemnification agreements. Put simply, many buyers of staffing services are asking suppliers to indemnify them for things over which the suppliers have little or no control. Would you agree to such requests? The fact is, many of these types of overbroad agreements may not even be enforceable under various state’s laws. If the staffing provider has to pay for harm that happens outside its sphere of control, it’s probable that if such a loss does occur, the courts will not enforce the agreement. And you might find that you have lost a valued partner. And what about that supplier that is willing to sign such an “unfair” agreement? Think about it: Why are they are so desperate for your business that they are willing to risk losing theirs?
Payment terms. In the staffing business, your providers are effectively floating you a loan, as they are paying for the workers in advance of getting payment from you. The longer it takes you to pay your invoices, the more of a burden on the supplier. So for small staffing firms/niche providers, payment terms of 60 to 90 days or even longer can be a deal breaker. If it requires funding to cover these costs, and smaller firms are not set up to afford this, they may walk away. So take a look at those payment terms and your processes. Do you really need 90 days to clear and pay an invoice? Maybe so, but maybe not. And if you can shorten it, your niche providers may be able to stay.
The full report covers how common it is for suppliers to quit their clients and other reasons for doing so as well. SIA corporate and CWS Council members can access it here. Take a look.
