As talks of a recession continue to capture headlines, a reminder that we have been here before brings us knowledge, experience and peace of mind. Digging through Staffing Industry Analysts’ archives from the Great Recession of 2008 to the “dot-bomb” recession of 2001, I came across multiple research articles documenting contingent workforce trends and developments from those turbulent times. And good news: The contingent workforce solutions industry not only survived those tough economic times but is more robust now than ever before!
Many key strategies deployed by companies to survive past downturns are still applicable and relevant today. Here are some examples for managing a CW program during a recession period.
Conduct partner risk assessments. Risk assessments can include partner financial stability, insurance requirements and overdue compliance and technology audits. This is applicable to all CW program partners including staffing suppliers, VMS, MSP, independent contractors, payroll partners, etc. Having a risk assessment process — and a regular cadence for conducting one — can help mitigate significant emerging and potential financial and reputational damage to the program.
Establish and maintain a well-managed supply chain. Having strategic suppliers you can trust and count on is invaluable. These are true partners to your organization that will be key contributors to the innovation and execution of your program’s delivery capability and cost-saving strategies.
Leverage technology to weather the recession. Look for areas to leverage technology to automate and accelerate processes, reducing administrative burdens or functional layers to getting work done. Technology initatives can help cut costs and increase efficiency and deliver higher levels of productivity.
Have a plan. Think through alternative scenarios that may arise and develop creative solutions to address them. Graph scenarios on a risk assessment matrix and ensure you have a business continuity plan for those high-impact/high-probability risk items.
Cheap can be expensive. Understand that pinching pennies isn’t always best. Think beyond the initial cost savings to the potential impact in six months, one year and beyond. For example, reducing bill rates will result in immediate cost savings but could also increase attrition, which comes at a hefty price tag. Calculate the true cost of turnover to your organization and weigh the risk/rewards of rate reduction. Balance cost savings that can be achieved from a competitive bill rate environment that a recession can create, with the total cost of ownership (TCO). This will help ensure short term tactical cost savings don’t drive up strategic TCO in the long run.
Review your contract language. Have a thorough understanding of your contract language and obligations. This includes termination clauses, payment terms, insurance requirements, SLAs and value adds such as rebates, conversion terms, admin fees, etc. Overly excessive and stringent contract requirements can result in unnecessary rate inflation with minimal risk mitigation based on the services being performed. Often partners bake in the cost to meet your organization’s T&Cs into their rates. Evaluate where a “one-size-fits-all” contracting approach might be costing your program and where you can adjust supplier-specific T&Cs to reduce rates.
Rightsizing/rightsourcing. Conduct a rightsizing analysis to ensure contingent workers are engaged at an appropriate level and bill rate for the duties performed. Where are you “oversizing,” paying senior/expert-level resources and bill rates to perform mid-level tasks? Are you engaging Big 4 consulting firms to staff common temporary worker skill sets?
When rightsourcing, assess if there are opportunities in cost-sensitive categories to shift to alternative resource sourcing models such as nearshore or offshore to generate cost savings.
Prepare for boomerang. Staffing is historically one of the first areas to feel the impact of a recession — but also the first to bounce back. Remain forward-thinking on how you want your program positioned post-recession. For example, be strategic on messaging if making reductions to your contingent workforce and staffing partners; this can have a significant and long-lasting brand impact. Also, consider conducting a passive recruiting initiative in preparation for the recession exit.
By preparing for the future, you can make your program a priority destination for top talent and supplier focus post-recession.
Find the silver lining. Take this downtime to celebrate how far your program has come, dig into areas you’ve always wanted to improve or analyze but haven’t had time to, create efficiencies, boost your program’s brand and explore new talent sourcing channels and activities. Revisit projects that always seem to end up on the back burner and get ready — you will be back in hyper-drive before you know it!
Document lessons learned — this will happen again! The saying continues to ring true: History repeats itself again and again. There will be future recessions. Document your lessons learned, which strategies worked, what when wrong and what would you do differently next time while it is still fresh in your mind. This will be a great resource reference in the future!
This is not an all-inclusive list. There are countless creative and innovative strategies and methods contingent workforce programs have used to prepare for the possibility of recession. And while “recession” can certainly be a scary word, with the right preparation and forward-thinking mindset, CW leaders can position their programs manage the turmoil and to come out stronger than ever before.