For the average company, contingent workers make up about a third of the entire workforce, according to the Sierra-Cedar 2020 HR Systems Survey. Yet,...
[Video] - Avoiding Short-Sighted Crisis Responses with Your Contingent Workforce
Everyone and their mother has done a webinar on how to respond to COVID-19. Some of the suggested strategies for organizations with extended workforces are great, a few of the strategies are obvious, and many of the strategies are short-sighted.Crisis response and business continuity planning are essential, but it shouldn’t harm the long-term viability of major projects that you’re focusing on and key business goals.
When it comes to your contingent workforce, focus on cost reduction without any thought into the long-term viability of your program can be damaging. For example, close-fisted pricing guidelines and payment terms may end up taking your suppliers out of business. Or perhaps across-the-board cuts and price reductions may not be in the best interests of the program owner.
We chatted with Erika Novak, Head of Client Services at Utmost, on why some of the suggested strategies out there may be poor ideas or why you need to think closely about your own situation before you begin applying some of the potential tactics. Below are a few key insights from the conversation.
- Staffing suppliers are not your bank. Extending payment terms to 120 days could bankrupt your staffing supplier. They likely lack the same access to capital that a large enterprise would. Not to mention, most suppliers are small businesses so they may not have the ability to support paying their own workers without cash flow.
- Across-the-board cuts in pay rates or markups to staffing suppliers can be damaging to your organization over the long-term. Certain talent may be critical to long-term projects. Across-the-board cuts act like a sword when you need a scalpel. Work with the business to define which areas of the business need talent to complete business objectives. And understand which types of talent may be a lower priority in other parts of the business.
- Find ways for the relationship between your suppliers to be a win-win. There is going to be a reset or a rebalancing of the relationship between the enterprise and a staffing supplier during a recession. But find ways for it to be a win-win. The supplier may take cuts now, but they should be considered temporary emergency measures not permanent ways of doing business. Look for opportunities to build broader, strategic relationships with your best suppliers.
- For staffing suppliers, you can say no to cuts. Many enterprises will send a simple notification that they need the staffing suppliers to lower pay rates. If it’s an automated message, you can certainly reject the offer and ask to renegotiate separately. Leverage relationships with the business so that you can avoid some of the more damaging cuts. Also leverage relationships with your Managed Service Provider (MSP) if you have one to help support this negotiation.
Watch the recording
Read the full transcript
So, hi everyone, I'm Saad. I'm on the marketing team here at Utmost. We're hosting these roughly bi-monthly sessions to chat about things that are top of mind for us, focusing on things that are top of mind for folks who've been in the contingent workforce industry, and especially, those on the enterprise side trying to figure out what to do and some tips and best practices. And Erika, if you want to introduce yourself, as well.
Sure, hi everyone, I'm Erika Novak. I've been a CW Practitioner for over 15 years. I've helped build programs, kind of build and evolve programs at both LinkedIn and eBay, and also, consulted with Brightfield Strategies on Fortune 500 companies, on contingent. So this is kind of my life, my dream, my water. I love this topic in a nerdy way, and so, I'm kind of excited to do this, to just share information with other people who are in the realm.
Great, so I wanted to start it off. You know, the title of this webinar, this Q&A session, is about avoiding short-sighted crisis response strategies. So, what kind of spurred you to think about this, that some of these short-sighted response strategies were coming out? What kind of spurred this discussion in the first place?
Yeah, I think the idea is any type of something, like the marketing team, gets excited like how do we prove our thought leadership, you know? What can we do? Some of it is great, like how do we help, and others are, how do we get out ahead of it, as being like the leaders or so? And so, as we've all seen, there's been tons of COVID-19 webinars going on about what you're supposed to do.
And I think a lot of people are looking for a voice because no one's gone through this before. And so, I think a lot of people are joining as many webinars as they can to kind of collect something in their war chest of saying, how should I be reacting? What's the right way?
And I think what's important in that is, one, not a lot of people know, right? So, somehow, a lot of people are saying they're thought leaders but actually haven't been in the position. And that's not always, that doesn't always come across in the webinar, what's shared. So sometimes the blind leading the blind.
Other times the reasons behind it don't always match up to what you are looking for, right? What's the emotional intelligence, what's the motivation of a best practice for someone versus you? And so, for me wanting to make sure, you know, from a CW practitioner, I see something that kind of gets pushed out. This is how things should be.
But I want to tell you the other side. There's always a different side, and I think, it's important, as we look at things, to have a 360 perspective of, if I do this, then what? Or, maybe, I didn't know this from the other side. And so, I guess, I just want to throw my hat in this. There are some things that some people know and not the others, and I want to connect those dots for people.
Yeah. And so, what are some of the things that you've been hearing going around in the industry as some of these suggestions, strategies, or what's kind of popping up, recurring, and very commonly being discussed?
Yeah, it's interesting. There's kind of three different lenses that I see, right? Whether they're webinars or just people sharing. One in the CEO lens, which I love. If you guys aren't following Mark Cuban on LinkedIn, I highly recommend that you guys do. He is so pro-the overall community and how leaders can actually help this from top-down, but also, bottom-up. He's given a lot of great information on helping really small businesses, right?
He put more information out there than the government did about the small business loans, working with their bank, versus working with the government. He's got some phenomenal things. But he talks about how a company's brand is going to be affected by how people come out through COVID-19, and that it's not just about what we're looking at with shareholders and Wall Street now. It's about how you actually help the community and the decisions that you made.
And so, he's got some really, some cool insights that I recommend. Another CEO that I think is interesting, there's a GeekWire magazine article that came out with 40 CEOs talking about how they're leading through this. And one of the comments that a CEO made was that there's kind of four rings that he's looking at, right? His personal ring, his family ring, then his community ring, and his business ring.
And he, specifically, mentions that his partners are part of, both, community and business. Partners and customers. And it's not just me, as a CEO. It's how it affects the overall ecosystem. And so, I love that when CEOs are looking at the full, it's not just, in the article, they didn't say it's stock price. It was more about, no, the way business leaders are looking at how they provide that to the community is changing. It's not just driven.
And then, I see HR, and HR and procurement are the other two that are producing quite a bit of information out there. And the HR ones are talking about empathy, and experience, and transparency, and speaking about how you lead through change and through turmoil, right. It's usually a crazy amount on remote work. That's the other big one, right?
And then, business continuity. And then, on the procurement side, it did not surprise me. It's procurement, right. It's about cost savings. It's more about how to make sure everyone has money in their pockets. But it's interesting to see how procurement is, sometimes, dramatically different from what the CEO and the HRs are saying, right? Empathy, community, we're in this together. We have to balance or whatnot.
And some of the procurement recommendations are much more of how you kind of leverage yourself up, and a little bit more zero-sum. And this is where I think there's some shortsighted in zero-sum strategies, versus like that long term, how do we work together?
Yeah, I can see that there's, I really like what you mentioned about the kind of the rings that you have, your personal, the community, and the business. Everything's a lot more interconnected these days and, even when looking at a business, you kind of initially thought of just your initial workforce as the people who are getting work for you that's done.
But over, you know, the past 50-60 years, increasingly, a lot of that work is done by your contingent workforce, suppliers, third-party consultants, BPOs. So your rings are almost as core to your regular, you know, your first ring, so to speak, because that's how work is getting done these days. So wanted to kind of shift into some of those shortsighted contingent workforce strategies. Talk to me about some of the ones that you particularly disagree with.
Yes, and so, this is the one that kind of prompted this is, I've heard from multiple relationships, right? Whether it's from the suppliers themselves, from the BPOs, or in-house folks, the payment terms shift. So a lot of normal payment terms in contracts are 30 days. The best is 15. But 30 days, 45, 60. Then, you get to 90 days.
And what I've heard kind of across the board are that companies, large companies are asking smaller companies to push their payment terms out to 120 days and, to me, I just think this is not the right strategy at all. This is going to be forcing folks into bankruptcy. So the post that I put out, you know, staffing suppliers are not your banks.
You know, big players, and I think about the behavior that they are able to do, and the influence they have by making different movements, this is the major tidal wave to your small/mid-sized partners, right? You're acting like these guys can float you, a credit line of money, basically.
We'll pay you later. And not just later. 30 to 40 days later. It puts them in trouble of going into bankruptcy almost immediately. For those who don't know, staffing suppliers are usually on the hook for paying people weekly and biweekly, regardless that they get paid by their clients. Some of their companies are getting paid in 30 days, and they have to account for that or 60.
But when you extend it out another one to two months, you're basically in danger of crippling them. And you're not the only company that's doing it. And so, this is something that I'm just, I'm adamantly against it. I don't think people recognize what they're doing, or what they're asking.
They think everyone has an influx of cash or has something that can sustain this, and they can't. I think, when we look at COVID, right, there's going to be a tail of bankruptcy for at least two years.
Everyone's saying, it's not just in the moment. If they're in a delay of payment for people who are so critical on your talent pool, it's going to possibly put your talent supply, short-term and long-term, in critical flux if they can't make their payments. That's my biggest one.
Yeah, most of these, a lot of these suppliers, there's what, 20,000 staffing suppliers out there. A lot of them are just mom and pop types of businesses. They're the ones reaching out and, you know, they have the Small Business Administration Paycheck Protection loans because that's the only access to credit that they have.
And, you're right, the credit lines that a large enterprise has are much more extensive and there are many more options for them than some of these businesses.
And, on the payment terms, is there anything else in terms of, you know, people are extending payments. Is there anything else that you think is a shortsighted crisis response strategy there?
Oh yeah, and this is a hard one, because this is, across the board, what is absolutely going to happen. Let me preface this in saying that we know that, at the moment, all companies are trying to figure out how to stay afloat, right? The goal right now is how do we stay in business?
And so, everyone's looking for, how do we cut costs, as well as how do we keep money Very typically, and this happened in 2008, but very typically, the very first thing the procurement team will do is go to the suppliers and say, "Hey, can you lower your rates. "Can you lower this? "Can you give me a deal or whatnot?" And so, one of the things that I think, for staffing suppliers, or for suppliers to recognize, knows that's coming, right?
It's almost considered a best practice. I disagree, generally, in how it's done. Because, usually, it's an email or a letter that's broadcasted out, you know, broad strokes of, give us discounts or get out of here, right? But when I think about this, with the staffing suppliers, specifically, is the numbers have gone up dramatically.
In 2008, usually, 10% to 15% was what people were asking. And now, I'm hearing it's 20% and a little bit more. Can you reduce your rates by this? And, I think, what a lot of folks don't recognize is that, usually, also, there's a cut for your worker.
And so, I think, what's important is knowing that broad strokes, even though it's easier and faster and a little lazier, let's be honest, it's easier to hit one email that goes out to hundreds of suppliers than to surgically figure out how to do this if it's generally done based on spend, the first cut that a procurement person's going to look at, and then, based on what they know, versus going to the business to say, you have 30 suppliers.
I think I know what you're spending the most on, but I actually don't know what's the most critical to your business. Show me what's going on and who can't we lose. Who's important? But doing that across the board and just saying, I hope, you know, let's hope people just agree to these terms, again, I think, it's shortsighted in the fact that it's actually going to affect your workers, and not all staffing suppliers can live through that type of reduction across the board.
Yes, and getting those types of, they're just an email, just those transactional emails that say, "Dear Sir/Madam", and then, that crosscut, just do that, and it's just like it's sent from an ERP system. There's no kind of communication that you're big on relationships. So it doesn't feel like you're thinking at all for the long-term, I mean, obviously, there is a large volume sometimes. But, yeah, I think that you're right there.
And it's the recognition of, you're not the only one, right? So it's not the only conversation or letter that these staffing suppliers have received. They're getting it from everyone. And how do they sustain their business? If this is a partner that you've had that's provided great talent for you or whatnot, they're getting hit by everyone.
There's no way they can give 20%-30% breaks to everybody. So one, I think the idea comes to, why you? What are you asking? How does it actually affect short-term versus long-term, and it's the recognition. Again, this is where I go back to the idea of relationships, and you guys have heard me shout this from the rooftops, right? It's a very different conversation when you think this is, I'm making this up, this is Joe and Cindy's business.
How can I make sure we can support each other? Versus, here's ACME Corp that I'm just going to send this and see how it works. When you put the people back into the actions of what you're doing, it completely changes the response. It completely changes how you actually act and what those strategies look like.
Because, again, it becomes less of a zero-sum. Like, accept these, or you're out. These are what I want and you're out of here, versus a, how do we actually help sustain each other so we both make it through the long haul?
Yeah, and can you talk to me a little bit about, oh, this is a great question that just came up in the Q&A but, actually, I'll leave that for later. I was going to touch upon this, as well.
But can you talk to me about some of the policies that you think would be beneficial, actually? Some of the, maybe, non-short-term-sighted crisis response strategies and what you would recommend to folks out there?
Yeah, so I'll hit one of them quickly because I think it's important. There's a term and condition around force majeure, and the long and short of it is, basically, the idea of, if an act of God happens, or a war, or riot, or something that no one could see, we can term these contracts immediately.
Generally, they're meant, and we see this a lot in events, right? You have a conference, you have a wedding or so. We're not going to put this on anymore so let's cut terms. But what I have heard is that those, actually, maybe, people are utilizing those to get out of paying for things or shutting down contracts or whatnot, and again, I just overarchingly disagree with that, that philosophy. It's a very short-term thing.
And so, I think, to me, not leveraging that but having actually a person to person relationship on, what makes sense is the first one. Second of all, in some of the procurement, in some of the procurement webinars, they talked about updating your policies.
I think, what's important for all people to know is, when they're talking about that, they're talking about, usually, in times of crisis, you're processed and your policies, what's not working falls out really immediately, and you're able to actually see, oh, that's not being cared for. Let's update it. Let's figure this out and update it. It's not codifying your emergency response into your long-term policy.
I think that's incredibly important that companies understand what we're doing in the short-term, mid-term, and long-term, and calling that out, right, and putting deadlines on when to go back and look at renegotiating and, in those policies, saying, it's because of these following situations that we follow this, not, here becomes our procurement with you in which this is what we're following for the next five years, or it's not going to be touched again.
So I think, making sure, calling out assumptions around a policy when they're supposed to go into effect, and when we should be re-looking at this is incredibly important. The other part, I think, is about kind of the equation. So some of the things that are good that I see is when the relationship between an enterprise and their supplier, really, it's their support supplier. It's like that marriage.
So I remember getting married and my sister taking me aside and saying, "Listen", especially, when I had kids, you know, "It's never going to be 50/50. "Don't even expect it. "You won't even get 60/40. "Some days in the week, it's going to be 90/10 "and you're going to feel like you're doing it. "Guess what? "He's going to feel the exact same way. "And, if you keep it on, "if it feels like it's this imbalance or so, "you're going to break."
At some point, there needs to be a righting of the relationship, a renegotiation, a rebalance. And so, I say that to say, when I think about the right policies, I think about one that figures out how to rebalance it over time. So it's a potential that there's going to be something that, maybe, the supplier takes a hit in the short-term to keep the relationship, to keep the business.
Procurement's happy because they're able to show they saved X amount or whatnot. But there should be a timeline in that wherein it rebalances. So as we come through it, and I truly believe that we are going to come through it. Not go back to normal. There's no normal anymore. It's going to be the future normal. But the rebalancing and what that looks like, okay, we did this.
You know, maybe, I took a 15% haircut. Now, as we come out of it, now, let's figure out how to write me back up to that 15%, or reward me for that partnership because we were able to do this together. So I think, the idea of rebalancing is key.
The other, I think is big is transparency. So, usually, in enterprises, they have policies they adhere to and whatnot and the supplier has no idea, right? They have their contract, but they have no idea what's coming for what reason or whatnot. And so, the idea of transparency in time, time expectations to your supplier, I think, is key.
So I'm rambling, but I'll do one more story. So yesterday, I had a crazy hard day at work. It was great. I opened my door because I'm in my home office. And my two kids are inside with their scooters just riding in circles on the hardwood floor, which is usually a no-no. I look at my husband. He's got music on. He's like, "I've lost control."
Okay, no problem. You know what? Let's be cool parents. That's what we're doing. So we changed the rule, and then, this morning, my kids, lo and behold, get up super-excited, new rule, gone. Bring the scooters back in. We're going to do it again. And my husband and I, after some sleep, we're like, no, that's ridiculous. What a terrible thing to tell our kids to do.
Let's change it. And, of course, that went over like lead balloons. They said, no, you said yes here. Why not here? And what we had forgotten to do is talk about the time length specifications, that this is an exception, not the rule.
And so, I bring that back to procurement policy as far as saying, talk about what's emergency, versus what's expecting, and making sure your suppliers understand, even though it's a checkpoint. In 30 days, we're going to come back and we're going to have a conversation again.
Awesome. Now, I'll leave you alone. I know what to expect, and I know that's too long. If I'm going out of business, if I need more cash and 30 days is too long, now I can say, I can't. I need it within 15 days, and the internal person understands, no, this is not a fire drill. This is actually something that's really important. Because, otherwise, they would've known the 30 days.
Got it. It's great marriage advice, great parenting advice, but, I think, really interesting just knowing to rebalance the relationship when you're working with these outside, your third parties, your suppliers, your partners, really, and making sure that you're giving and getting as partners.
And then, of course, in some ways, like sunsetting these provisions. There are crisis term policies, and then, there are policies for, you know, normal times. So thinking about that, when the rates are cut lower, or if you have these restrictions, that that doesn't need to be the way forever and you need to really think about it for the long-term, the long-term viability of your program.
So I'm going to jump to this question that, I think, really aligns well with something that I was going to ask. An anonymous attendee asked, "In general, how can staffing suppliers gain leverage "and compete against commodification "by the large enterprise and the BMS?"
Oh, I love you for asking that question, anonymous, because I think, that's on, literally, everyone's mind. So a couple of ideas. So let's talk about just the, you know, the email, either, the email or the note that you get that says, "I need you to take 20% off." So, I think, the first thing for you guys to recognize is that you do have a contract in place.
That email coming does not force you to say yes. And, I think, that's important for you guys to know in the balance or the power shift. This is a request to change a contract, not something that you actually have to take in. In general, somewhat of a mind game, a little passive-aggressive way that procurement's doing, and again, I love my procurement folks who are on the phone. This is not against you guys.
But that is the broad stroke to say, let's see who just takes this. Because if enough people say yes and I'm able to show enough savings, whatever goal I have, I'm done. They know that they are going to get some pushback and they're going to get people who just say yes immediately. So my advice to you on that is, no if the ask is reasonable.
Now again, if you've been fat and happy, 300%, 150%, some different things like that, recognize that is an area that you can take. But if you're in a spot where what they're asking for puts you in critical damage, let's bring it back. You're able to say no. You're able to say no and put it back in their corner, or what I'd actually recommend, and kind of like the second point is, you're able to say no, and then, provide a unique different pricing plan.
So there's been some really cool unique pricing that I've seen in leasing cars and different things. People are figuring out how to better price for short-term and long-term. So the idea of, hey, your payment terms is going to be longer. Okay, then I'm going to up the price. Or, your payment terms are going to be shorter. Okay, I can do it.
But come with a recommendation. Your procurement team has hundreds of suppliers that they're working with, right? So they're not going to figure out something specific for you. They're going to do something standard and see how much it actually works for everybody. It's up to you to say, here's what we can actually do to keep my business afloat and propose it back to them.
So again, I would say, know that you have the ability to say no. Come with something that actually works better for you, and talk about the relationship that you guys have. And then, the third point is, use the business to help you.
Now again, this comes down to emotional intelligence and recognizing what relationships you actually have in place. Do you have a business team that loves working with you? You're giving them great talent. Leverage them.
Procurement does not want to be yelled at by the business. They're hoping to serve the business in the broader sense of the business. But, in general, they don't want the business to be mad at them because they have a relationship.
So if the procurement team has only and they haven't gone to the business to say, you know, who's the most critical right now, who's the most important to the relationship or whatnot? Then that's to say, you know, hey, these are the businesses I'm supporting. Can they speak on your behalf? And again, it should be respectful. It should be something that's gracious.
And it should be the idea, everyone is trying to make sure their business stays afloat. The motivation for everyone is exactly the same. I think that's important for us to know, as people. But it shouldn't be one company stays in business because others did not. And then, the fourth I'm going to bring out there because I know a lot of MSPs, there are different programs that have no communication versus communication, and they're in a program that has no communication that really has debilitated staffing suppliers to have that relationship. And to that,
I say, "MSP, this is your chance "to be an advocate, not a messenger. "You have a voice. "You understand the supply chain better than almost anyone." Most companies like myself, we want the MSP to play a larger role. We want them to be able to show their subject of expertise and help teach us and be an influencer or whatnot, and where we're generally let down is that they're not.
They're either afraid to voice their opinion or they don't have one. So to that, I say, "MSP, you have a chance "to sit with your CW program team and say, "They can't absorb this. "'We work with small/mid-tier suppliers. "'We're not this large, the larger supplier firm "'who largely have more cashflow. "'This doesn't make sense. "'Can we propose something different? "'Or, here's how this could work. "'Could we do something for folks who are $100 an hour "'and above versus below?'"
So be an advocate. And I say this because I really do feel that the industry where we are today are getting upset with MSPs, because no one feels like they're doing exactly what they hope they would, and your staffing suppliers are in a way that they can say, great, we're going to help you support this thing, or we're not.
And, if you leave your staffing suppliers out to dry on different clients, they'll stop wanting to work with you. And again, I think, there's been a power balance of, no one's going to be afraid to work with you because, of course, they're always going to want LinkedIn. So they'll all go after the brands, folks accept whatever terms.
And I really believe, with COVID right now, what we're going to see is, how do I survive as a business, and then, who are my clients of choice? As we come through this, what am I going to spend my time, my resources, my emotional energy, and the people?
And, if we have a CW programm, an MSP, that doesn't speak on behalf of the people who actually give us talent, I think, that's going to break fully. And I actually encourage that. I encourage that with suppliers to revolt because I think this is something that we need to do better in.
We'll spend the last five minutes by taking on another question. "How can a supplier manage through an MSP "that isn't a strong service provider?" And even, just to kind of add onto that a little bit, is I know, in previous episodes, if you want to call it, you've advocated that the buyer, the enterprise, should try to build these strategic relationships and partnerships with third parties rather than just, you know, sending it out to a million vendors and see what happens.
So, yeah, on the supplier side, how do they, either, manage through an MSP that isn't a strong service provider, or how do they even build that relationship so they, from their perspective, how do they become that kind of strategic partner? What can they do?
Awesome, okay. So again, I'm going to go back with some very basic information. I apologize. But be a human first, especially, now. The MSP doesn't know who you are as an account manager, a business development manager, or, if they know you too well because you just send emails and you annoy them, right? There's a balance between how you reach out and how you share.
And what I say on the supplier's side is, generally, it's mass emails that are asking, "Can I get more reqs? "Can I get more reqs? "Can I get more reqs?" That's just, it's noise and it's annoying everyone And so, what I would say to a staffing supplier with an MSP is, one is is this the right partner program for you?
Take a real gut check. Brand logos matter and I get that. But is the amount of time that you're spending trying to build a relationship with nothing to reciprocate it worth your time on the rec volume that you have and that's been going through?
And let's say that it is, let's say that it is. But I go back to, do you know these people? Who are the people on the ground? Not the high, senior people, but who are the people who are helping you fulfill recs? Do they have your cellphone numbers? Do you call? Do they call? Are you guys out of email? Will they meet you for lunch? Don't waste your time.
There's a good thing about personalized, hey, let's have coffee. But it's also, we're at a time where time matters more than anything right now. And so, it's understanding, how do you add value to their job? How are you making their job easier, faster, better? Are you making them look good? Do they understand that they can reach out to you? Can they text you? Can they Slack you or whatnot? Usually, those points that are broken.
Everything's done in the VMS and it's very shifty. Or, you have business development just doing everything, and emailing, knocking, or whatnot. But it doesn't feel, actually, very true. So I go back to, it's not rocket science. It's very hard because you have to get the other person to open up to it.
But I go back, use the resource managers, the program professionals, the program managers, and share how you can actually make their job better. Show how, why you're a better supplier and why you're actually a partner and what you're doing, and understand the business. If you don't understand the business that you're supplying or the MSP, it's very easy to shut you out.
It's a little vague, so whoever asked that question, let's talk separately because I need to know a lot more components in how to answer that and to better prep. But again, I got back to, when they see you as a person, not a supplier, when they know your name and what you're doing over the weekend, how that program thrives is incredibly different than, you're one of 25, you're one of nine. They don't remember what your name is and whatnot. But it's the people aspect that makes it successful.
Great. Well, we only have two minutes left. Unless anyone wants to drop in a question, I think, it's time to wrap. So really appreciate you all joining us today. We'll be back again in two weeks to discuss another topic.