I don’t know if it’s a cultural issue, but many companies see people (or at least the staffing companies that provide them critical talent) as a commodity. This type of procurement practice is not only dehumanizing, but it’s hopelessly unhelpful to their organizations. No one is manufacturing quality workers and – surprise! – There is a talent quantity and quality shortage. This is certainly not an economics issue unless the law of supply and demand has vaporized overnight.
What are you really paying?
If we primitively condense three factors related to what a person or organization pays for a product or service, we have:
- Price– This is the face value amount of the exchange. Examples:
- Product – the automobile’s sticker price is $40,000.
- Staffing – the markup is 40% over wages.
- Cost– This is the total cost of ownership (TCO). Examples:
- Product – the automobile costs $40,000 plus taxes, shipping and handling and annual fuel and maintenance costs of $4,000 per year.
- The markup is 40%, but it includes numerous value-adds, leading-edge recruitment strategies and a history of reduced turnover. Or the markup is 30%, but you get bare-bones service and the least appealing candidates from a shrinking labor pool.
- Value– These are the ancillary benefits of purchasing based on TCO as opposed to a commodity perspective. Examples:
- The $40,000 automobile has superior safety benefits, a longer road life, less maintenance downtime and a very high resale value.
- The 40% markup draws more top-tier workers, reduces employee attrition, and increases work-site production and morale.
Now I know it’s not as simple as this, but automobiles and people (staffing services too) are not commodities. In other words, none of these are toilet paper (even though I can tell a marked difference between some brands…Charmin being my favorite and the softest to my hindquarters). But sometimes talent acquisition organizations and contingent workers are treated like TP (draw out any analogies or images your twisted brain conjures up).
I recently had an epiphany: Most companies are in business to make a profit…even providers of contingent labor. So if a bid process (not a value proposal) produces the lowest price, you will probably get the worst of everything else that goes into creating total cost and real value.
Stop the madness!
Please know that if you continue to practice this kind of purchasing you will eventually not be competitive. For-profit companies (geez, even non-profits) won’t want to work with you when they can send their best, and scarce, talent resources down the street for a greater profit, to a company who cares more about their workers and partners. Despite the procurement perversion of supply and demand, the free market still covertly exists in America.
I conclude with a personal anecdote. A very high-profile manufacturer of a very high-end (and expensive) product released a contingent labor bid and, you guessed it, awarded the deal to the lowest priced provider. My response to losing in that reverse auction (a kind of an inverted eBay for services) was, “Aren’t you thankful that consumers don’t choose your type of product based solely on the lowest price? Otherwise, you would sell ZERO!”
Be thankful, indeed, that your product and company, or even you, are not perceived as a commodity…at least not yet.
Where does it end, my friends? Certainly, we need to start with treating companies, services, products, and, above all else, people like something more valuable than toilet paper.
Want to learn more? Please contact Linden Wolfe, PHR, CCWP at lwolfe@excelsiorstaffing.com or visit Excelsior MS3P – simple, scalable, smart