December 21, 2018

The Pros and Cons of Niche vs General Staffing Providers

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When constructing a contingent labour supplier list, one of the most common questions is, “What is the right mixture of vendors?” While there is no golden rule, there are some general truths, specifically as it relates to the utilization of big body shops (aka General Staffing providers) and specialty vendors (aka niche providers).  As with most things in life, extremes are generally bad. Drinking water is good for you, but too much can kill you. Likewise, complete reliance on either end of the staffing spectrum can spell trouble for your program.

What are the Pros and Cons of Each?

General staffing companies have all the benefits that come with size. They can cover a large geographic area, offer low mark-ups and generally low bill rates, simplify contract management, provide a wide pool of candidates and maintain a quick time-to-fill for “standard” positions. Their mantra is volume, volume, volume. This leads to a relatively homogeneous mixture of generalized talent which is perfect for categories like: administrative/clerical, light industrial, business professional and finance/accounting. For skills that are common in the marketplace where buyers want low cost and speed, general providers are the way to go.

Niche providers are very different. They typically pick an area of expertise and attempt to nurture a candidate pool with both active and passive jobseekers. They can help you determine what you really need for a project, especially in areas like IT or marketing. Often, especially outside the US, niche providers keep full-time resources on the bench and provide employee benefits like training, retirement plans and good healthcare.

In my early days in this business, I worked for a niche firm that specialized in project management. To that end, we would pay for resources to take classes, maintain certifications and improve their skills. More frequently, niche firms focus on a single ERP system, like PeopleSoft, SAP or Workday.

So When do You Use One Over the Other?

I’m sure if you listen to either the big staffing companies or the little ones, they will both say the same thing: “You should always use us.” But if you’re reading this blog, you are savvy enough to not listen to them. If you stick with just general providers, you’ll find that they do a great job filling 80% of your roles across the enterprise. The other 20% will be the niche skills. Their time-to-fill stats will be horrible and they will blame it on “the difficulty in finding these resources at such low rates.”

On the other hand, you don’t want to risk the “long tail syndrome” where you are dealing with too many providers. This is a nightmare to manage from a contracting perspective and not a prudent financial maneuver. Without the ability to leverage volume, you won’t see good rates.

The Right Balance

As you build your strategic continent workforce management program, you should be evaluating your job category and skill requirements on an ongoing and proactive basis. Some categories will have a higher percentage of specialized  requirements, such as IT, while others will be all general, such as administrative. Upon evaluation of your needs, you need to structure your preferred supplier list (PSL) by category and level of specialization. To this end, you should be able to limit the overall number of suppliers (both general and niche), providing maximum buying leverage within each grouping.

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