When it comes to the commercial side of the staffing services industry, companies face challenges in three areas – calculating optimal bill rates, scaling rate decisions and turning around quotes fast enough.
Traditional manual processes are now proving unequal to the task at hand. An abundance of factors, such as pay rate, geographic differences, skill level, state burdens and more, must be considered for each markup decision. The longer it takes to reconcile each factor and manually calculate rates via spreadsheets, the more human error is introduced into the process, and, in turn, close rates suffer. Inevitably, under pressure to quote as quickly as possible, sales reps will default to gutfeel pricing to get bill rates into the hands of their customers. This often leads to under- or over-pricing that squeezes margins and plummets revenue.
In the best of times, this manual rate-setting and quoting process is a challenge. As we all know, these haven’t been the best of times.
Assessing the 2020 Pandemic Crisis
Industries across the board took a huge hit after COVID-19 became a globe-spanning pandemic. Staffing employment, often a close to real-time indicator of GDP health, was not spared.
“Historically, gross domestic product and staffing employment have been coincident economic indicators. In other words, staffing employment rises and falls along with the overall economy as measured by quarterly changes in GDP,” according to the American Staffing Association (ASA)1.
For comparison’s sake, consider that “during the Great Recession, average quarterly gross domestic product dropped 1.9%. GDP plummeted 32.9% during the second quarter of 2020—the greatest decline since World War II,” per the ASA2.
Unsurprisingly, staffing employment hit an all-time low in 2020, while shutdowns and social distancing mandates forced companies to adopt digital technologies in order to survive. While conditions are likely to improve, it’s not unreasonable to assume another unpredictable macroeconomic factor looms in the future. The pace at which market-disrupting events take place seem to only be increasing, and as such, staffing companies must continue to invest in digital tools across their business, from candidate engagement to pricing optimization software.
Signs of Recovery in 2021
With the increased proliferation of vaccinations in the U.S. and gradual lifting of restrictions, there is optimism that staffing employment will rebound to near 2019 levels. A 44% rise in year-over-year staffing and contract hires for the April 2021 reporting period certainly bodes well.
“Staffing jobs are holding steady and are comparable with 2019 levels—strong evidence of the continued demand for staffing services following the pandemic, when employment plunged to historic lows,” said Cynthia Davidson, senior director of research for the ASA3.
While the unemployment rate is rebounding, companies remain cautious in their long-term outlooks. This could create an environment rich in opportunity for staffing services providers, who can help employers crawl-before-they-walk into full-blown hiring mode. As with any recovery, the temptation to post sales and drive revenue back up must be balanced with a markup-preserving strategy to hold the line on profitability. The same old manual rate-setting and quoting processes will continue to buckle under the strain of increased demand and a more chaotic market. Late adopters to modern pricing tools will be vulnerable to irrational markup decisions that shrink margins.
“We’re seeing companies use lessons learned over the past 12 months to move out of ‘the dark ages’—away from manual, in-person tasks—toward transformative digital technologies,” said Katie Russell, customer success director within the staffing vertical at First Advantage4.
Here’s a look at why that trend toward digital must include the process of calculating bill rates.
Make Pricing a Key Pillar of Your Digital Transformation
It is possible for companies within the staffing services industry to meet increasing customer demands while growing revenue and margin by embracing digital systems. With a unique combination of data science, cloud-native software and leading Customer Success services, Zilliant helps our staffing services customers remove error-prone and deal-threatening manual processes from their repertoire. By digitally transforming their commercial processes, staffing providers see the following benefits:
Zilliant’s market-leading price optimization software, Price IQ®, is able to account for all the factors that drive bill rates for each unique staffing request. Precise micro-segmentation of candidate, transaction and customer attributes, which users have full transparency into and can dynamically adjust, is the first step to producing a range of acceptable bill rates built with an optimized markup.
Price IQ then measures price elasticity across these microsegments to predict the profit and revenue maximizing price points. Price IQ’s Strategy Interface empowers staffing companies to model the impacts of changes to their bill rate strategy, predicting the expected change in volume, margin and revenue from a change in rates before publishing new rates in-market. Successful price elasticity measurement transforms the markup process from a best-guess effort to a scientific one, preventing gutfeel pricing and its attendant inaccuracies.
Rate Decisions at Scale
Most pricing teams can sit down with pad and pencil to come up with a rate that makes sense for any given temp position on a quote. It may take an hour to compile the relevant cost variables and customer-specific rate thresholds, but a seasoned pricing analyst can do it. Trouble is, analysts don’t have an hour to spend on each rate decision. Considering the volume of quote requests coming in for large staffing companies, they likely don’t have time to dedicate a thorough analysis to every quote.
Data science-driven price optimization clones the abilities of the best pricing analyst at a speed and scale that can drive millions of rate decisions simultaneously. This frees up the corporate pricing team to focus on high-value strategic tasks, rather than reactive rate administration.
Faster, more accurate rate decisions simplify the role of the salesperson. Price IQ delivers a range of acceptable rates directly into CRM, CPQ or any other tool for rapid and intelligent quote creation. With Zilliant Deal Manager™, sales reps receive rate guidance immediately upon creating new customer agreements and get alerted when existing rate agreements need to be changed.
One large staffing services firm saw its quote turnaround time for net-new prospects improve to 11 minutes on average, down from 60-90 minutes pre-Zilliant. The combination of Price IQ and Deal Manager acts as a force multiplier for this company. Not only are quotes getting out the door faster, but with rates attached that are market-aligned and include an acceptable markup.
The Time to Act is Now
As staffing employment comes back to pre-pandemic levels, competition will continue to ramp up. Many companies who try to claim a piece of the growing pie with outdated, manual processes will inevitably put irrational rates into market. Don’t follow their lead. Instead, invest in data science and digitize your commercial processes to stay above the fray and win more profitable business.