I like Subadhra Sriram’s article at Staffing Industry Analysts entitled “You Get What You Pay For”. The article provides analysis and commentary from a recent SIA survey and comes to a common, yet always sage, conclusion: “the downside of pruning prices when acquiring talent is that you will get what you pay for.” I agree with Subadhra, cutting prices is not an infinite endeavor.
However, having come from the buy side where I had to face this market fact on more than one occasion, I know that when it comes to managing contingent talent bill rates — there is more to the story than meets the eye.
Decomposing the Bill Rate
As SIA suggests, companies don’t want to cut bill rates so much that it impacts the take home pay of the underlying talent or cause the supplier to lose money on the deal. Experienced VMS/MSP/procurement professionals know that such a strategy is not sustainable for the talent or the staffing firm in the long run- not to mention the potential negative impact on a program’s success.
On the other hand you don’t want to pay unnecessary bill rate premiums, above market or at even above the expected rate range for a company your size, in your market, etc. Particularly frustrating is when you discover you allowed an above rate card premium for a very special talent only to find the excess money went to the staffing firm’s margin and not to the talent.
What Are You Paying For?
The message here is that companies are not just buying contingent labor; they are also buying a service from the staffing firm. Those services include activities such as finding the right talent, account management, early termination without penalty, vetting submissions, adhering to on/off boarding procedures, and sometimes responsibility for training and unproductive bench time until engagements start, and so on.
In this context, let’s return to Subadhra’s SIA article and restate with affirming conviction: you get what you pay for. You get the talent you pay for with the pay rate and you get the staffing service you pay for with the margin.
But now the question is, how does one control the talent pricing risk and the staffing firm pricing risk, at the same time?