As economies worldwide falter following the pandemic lockdowns and quarantines, so, too, do many businesses. Of import to contingent workforce managers is the financial health of their staffing providers.
Recent data calls for caution among buyers — your suppliers might falter. So how can buyer organizations brace for potential challenges, and how can buyers ensure their brand doesn’t take a hit among the contingent community if their suppliers lose solvency?
First, let’s take a look at the suppliers’ fiscal landscape.
In the US alone, SIA has tracked drastic drops in profitability among staffing firms since April in the July edition of its US Staffing Industry Pulse Survey Report. The accompanying chart illustrates the sharp declines over the past several months. While there is a slight upturn occurring recently, the current environment is a strain on nearly all providers, let alone the those that were not financially strong coming into the crisis.
One tell-tale sign that your supplier is hurting is they stop investing in their rising stars within their organization. In addition, if you see key personnel leaving or being let go, this could be an indication the supplier organization is struggling. Other signs include poor leadership, signs that your suppliers are continually putting out fires instead of focusing on your program, lack of submitting invoices on time, etc.
So what should buyers do to preserve their programs?
Safeguard Your Brand
Contingent workforce programs need to scrutinize supplier solvency more intentionally during these tough times. This is because when suppliers lose solvency, the CW program and the buyer’s brand can suffer. Once the worker misses a paycheck or two, the worker will often associate this issue with the buyer organization rather than the staffing supplier. If this happens enough, word can spread very quickly and tarnish the buyer brand. Engagement managers can also lose confidence in the program. Like water, these managers tend to find the path of least resistance. Their unhappiness with the CW program could move them to disregard policies and operate outside the program, which can lead to misclassification issues within.
When the buyer organization can proactively optimize and rationalize their supplier portfolio specific to financial solvency, they can begin to achieve a competitive advantage in the marketplace.
But there are steps that a CWM office can take long before a supplier closes shop.
Stay informed. Buyers can leverage third-party organizations like Dunn & Bradstreet to gain insight into a supplier’s risk of losing solvency.
Keep talking. They should maintain open and honest communication with their staffing providers. Don’t wait for the quarterly business reviews, monthly meetings or the supplier to get in touch. Your suppliers should be reaching out regularly; if they are not, that is a warning sign.
Examine contracts. At the same time, do due diligence routinely — look at various terms and conditions within their contracts to ensure suppliers are meeting those requirements. One example: Are suppliers being current with their insurance requirements?
Street cred. Reputation is critical to the success of your and the suppliers’ businesses. A fall in reputation – especially when it comes to payment – should set off several alarms. If you hear the company is losing trust with other clients, it’s time to sit down and have that talk, however hard it may be.
Strong Supplier Partners
Through all of this turmoil, providers are looking for ways to improve their market position. You want suppliers that are thinking outside the box to differentiate themselves. Be on the lookout even now for providers that are making investments in AI, chatbots and other advanced technology, for example.
You want suppliers that can provide peace of mind as well. More than ever, CW programs are worried about contingent workforce risk. For example, some suppliers will seek to prove adherence to terms and conditions via self or third-party audits to ease programs’ apprehension regarding risk. Some might even approach you with their unsolicited financials to show their solvency.
These tough times will eventually pass. Forward-thinking CW professionals can use this crisis and opportunity to get stronger and move upward. The war for talent will still be an issue when we come out of this crisis; the best programs and providers will be prepared to deliver the best talent, on time and at the right price.