According to a report by Bullhorn, 56% of staffing agencies ranked increasing profitability as their biggest challenge for the years to come, closely followed by finding the right ambitious profiles. But, how do you increase your profitability? Intuo has been working closely with staffing agencies and were able to gather some insight. We’ve listed our top findings below.
There are a few things you can do to increase your profitability margins. Generally, four elements determine a staffing company’s margin: the fee you charge your customers, the wage of your staff people, the ratio of overhead versus staffed people and the chargeability rate. These are all obvious variables but there are a few other important things you can actively do to increase your profitability. How do you keep your people engaged, how do you gain their trust and retain them? This might be less focused on the financial aspect but will have a considerable impact on your bottom line.
Transparency pays. A label insight study of SmartLabel transparency technology showed that 40% of surveyed consumers would switch brands if the brand would be more transparent, while 73% is even willing to pay more.
While this study was conducted in the food industry, the takeaways are universal: people pay more for knowing what is going on. Staffing firms can embed transparency easily in the candidate selection process. For example, you can inform your client how you go about finding the perfect candidate for their project, keep them up to date about whom you are interviewing and why, and inform them why you have decided to select this particular candidate or not. The result: the perceived value of your service has increased, you can now add a few percentages to your bill.
However, intuitively, there is quite a threshold to transparency. Committing to transparency also opens your organization for questioning and criticism. Not only will the things you do right be shown, but also the things you do wrong. And how do you react to that?
While you will encounter these times where you wish you had concealed certain information, transparency pays off in the end, because it is the critical step toward trust. A trustworthy relationship is a long relationship.
This is one of the most important characteristics to keep in mind. A third of staffing firms do not measure their employee satisfaction, according to Bullhorn. If you are more focused on satisfying your end-customer and pay little attention to your employee, the latter will feel neglected and you risk them walking away in the middle of a project. A report by EBN states that replacing an employee in candidate-led markets can cost you up to 33% of its salary. It would be financially disadvantageous to lose a driven consultant and having to look for and train a new one. Moreover, this will do your agency’s image a lot of damage towards your end-customer.
Listening and closely paying attention to your employees’ needs and happiness is thus crucial for your profitability.
Make people stay longer. It’s not enough to offer your consultants a competitive salary and interesting projects. That won’t make them stay faithful to your agency. Coaching, feedback and constant learning are key to keeping them happy and fulfilled.
A 2011 Staffing Industry report has showed that that treating employees well, pays off. Even more so, firms indicating that developing their talent and building a great culture to engage and retain people were actually more profitable than their competitors who focussed on growing revenue, improving margins and acquiring other firms.
Therefore, in the competitive and fast-paced staffing industry, defining a clear career path for your consultants to keep their personal and professional growth as the main focus is crucial. Together, you have to define the best way for them to attain their objectives.
Investing time and effort in all these elements combined with clear recurring feedback will make sure you detect, prevent and solve issues more rapidly. Today, technological advancements make it possible to do this at scale. Intuitive platforms such as Intuo help you clearly define individual growth paths, track evolution and form a solid relationship based on trust and transparency between you and your consultants. Planet Talent, a consultancy firm that employs 91 consultants, was able to cut employee churn from 18% to 7% by focussing on coaching and personal development.
Move away from the commodity space. Early 2000, the German car manufacturer Volkswagen found itself in a ‘red ocean’. too many manufacturers were competing for the mid-market. Cars had become a commodity, where price was the only differentiator. Volkswagen Chairman Piëch then set a move that would proof to be essential in moving away from the commoditized market: the launch of the VW Phaeton, a luxury sedan meant to compete with high-end manufacturers Audi, BMW and Mercedes-Benz. The sales were awful, but it remained in production for 14 years. Why? Because offering a luxury car to the market, elevated the perceived brand image and justified a higher price for their other models.
The same tactic can be applied in the staffing industry, where a lot of agencies are competing for the same market space. Showcasing high-end consultancy projects enables these organizations to leave the competition behind and justifies charging higher fees for any other project.
There are several good ways to showcase your ‘Phaeton’ projects in bulk: leaflets, white papers, case studies, you name it. One way to do this in a more personal way is organizing workshops where you share key insights of successful projects. Webinars are another proven way to generate engagement with potential customers. While you’re at it, these kind of interactions are perfect to scan your target audience and for your people to discover new opportunities.
Among the many ways to showcase, there is only one best showcaser: your people. In the end, they are the ones who end up at the negotiating table. Allowing them to focus on educating your target audience puts them in the market as thought leaders, eventually elevating the organization’s brand image.
Software startups are known to be very agile. Generally, they first consist of small teams who take the time to listen to their customers. This is crucial since they need to be able to find the right solution for their potential customers. They build new features based on those talks and look at the data to see whether or not it’s actually valuable for their customers. While we know startups are not the same as staffing agencies, their approach can teach us a valuable lesson.
Staffing companies can, together with their consultants, think about what they can learn from their existing customers. Think about their bottlenecks, what are their most common problems? How can you solve them while reinforcing their trust in you? These are all questions you should ask yourself both from a sales and marketing perspective.
Answering these questions will not only increase profitability because of renewal and upsell but you will also be able to use this information to win new customers by listening and learning from your current customer base.
If you do this right, your consultants will also be extra motivated, feel involved and invest more time and effort in their assigned company.
Make everyone a salesperson. Traditionally, sales experts are the ones that have a direct impact on your company’s revenue. They are the ones that find and close deals. But, your company’s sales does not only depend on matching the right candidate with the right client anymore. It also depends on defining opportunities with existing clients. When you succeed in implementing the advice mentioned in this article, consultants will start identifying certain opportunities in their assigned companies. They will offer their help or the help from other consultants from your agency. (The result: you don’t have to employ salespeople anymore, because everyone is one. Easy incentivize.) This will generate incentive programs for consultants without having to actively look for new businesses.
In essence, your profitability greatly depends on the involvement of the people you staff. They are your single greatest asset. Your task as a staffing agency is to coach them, make them feel valued and offer them the best personal development. Invest in these characteristics and you will see a clear increase in profitability.
