In the past several years, we’ve witnessed a fundamental shift in the talent management landscape. Large employers, long reliant on the temporary and contract labor provided by staffing agencies to address their ever-changing business needs, have embraced with unprecedented fervor a relatively new staffing model that dramatically mitigates employer risk by transferring responsibility for both provision of talent and completion of project objectives onto a staffing agency. The need for reducing risk, coupled with demand for specialized, skilled talent that comes in spurts and jolts, has made supplying statement of work consultants the fastest-growing segment within contingent staffing.
Statement of Work (SOW) contracts are on the rise, and are increasingly used by companies when seeking specialized contract workers. In fact, 2013 research from Staffing Industry Analysts has shown that 45 percent of buyers said they already include some level of SOW management in their program; another 46 percent said they would to do so within the next two years. And their increased adoption makes good business sense—risk avoidance and cost reduction were cited as the key reasons for their increased use, as well as increased transparency.
Typically, “process outsourcing to include application services and infrastructure management is typically the initial category of SOW-based work that is implemented within a contingent workforce solution, followed by consulting-based SOW services,” according to “Natural Tie: Why Your Program Should Include Services Spend.”
Even if SOW doesn’t seem particularly glamorous to you as a staffing agency leader, it makes a ton of sense to your clients of all sizes.
PREMIUM CONTENT: What percent of staffing firm revenue is derived from statement of work (SOW)?
Here’s a quick example. An advertising agency doesn’t have an IT person on staff but needs to roll out a major IT initiative such as a massive software deployment. A full-time hire would be a waste and quickly obsolete. A six-month contractor has the right skill but the length of time is probably overkill, and even then, there’s no guarantee of quality around a single, highly achievable deliverable. Pursuing a statement of work consultant for that project, with the financial penalties of failure on the staffing agency, is a brilliant proposition for the client.
For employers seeking help, nothing makes more sense than this. For staffing agencies, it presents some additional challenges—beyond providing the right talent, they are also assuming the risk of providing the proper talent to get the job done on time, or facing financial burdens (and likely, losing any shot at repeat work with the client).
“The Chinese use the same word for crisis and opportunity.”—Lisa Simpson
“Crisitunity!”—Homer Simpson
To quote the esteemed Homer Simpson, statements of work actually present a “crisitunity” for staffing agencies. Let’s focus on the “opportunity” half of that portmanteau. Statements of work actually provide a tremendous benefit for staffing agencies: they elevate their offerings from commodity to value-added services. Any firm can provide talent, but with an SOW in place, firms are required to provide the right talent. The SOW essentially puts some skin in the game for them — and when they complete their end of the bargain, they go from commodity to “trusted partner.”
Ultimately, the increased movement toward statements of work is beneficial for staffing agencies, but it does require them to embrace a different philosophy in talent management. While it may seem at odds with agencies’ ultimate goals—filling jobs—statements of work are important for them to move up the foodchain, from “provider of bodies” to “trusted partner offering the right employee with the right skillset.” It requires them to think like their clients—who want the right talent to meet their rapidly-changing business needs, with increasingly tight deadlines and cost controls—by providing true value, not just people.
Crisis? No. Statements of work are on the rise, and provide tremendous opportunities for the staffing industry to become trusted partners to their clients. And beyond the qualitative benefit of client diversification and relationship quality comes an undeniably quantifiable benefit as well. The quantity of statement of work/project workers as a percentage of the overall workforce will see a net increase of 38% over the next ten years. Think about what that means for your margins as a staffing agency. By de-commoditizing staffing and turning SOW into a value-added, concierge service, staffing agencies can mitigate the lower-margin necessity of competing on pure VMS business and supplement it with higher margins around SOW that factor in time-and-materials as well as any number of add-on rates you can negotiate independently.
SOW may seem complex, and it is, but delivering value that a client simply cannot find elsewhere is a no-brainer for a staffing agency. It’s a crisitunity worth taking.
MORE: Not your father’s staffing industry
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