For Whom the Chimes Toll
Let's face it; many staffing firm executives never liked Chimes very much. Maybe loathed is the better word. So don't be surprised if some execs and owners are humming "Ding Dong the Witch is Dead" for the next few days.
We suspect that the reverberations from this week's surprise announcement of the Chapter 7 bankruptcy and liquidation of Axium and Ensemble Chimes Global are only beginning to be felt in the staffing marketplace. And soon enough, the shockwave from Chimes is not likely to have many staffing firms involved singing or dancing with joy.
Our phones have been ringing off the hook with tales of woe from large corporations and their staffing suppliers. In the short term, there are over 40 large Chimes client organizations that are now in crisis mode as they attempt to sort out who is working on their site, how to get them paid this week and how to make sure they come back next week. Chimes had an estimated $1.6 billion in staffing spend rolling through its system each year, and that suggests somewhere north of 20,000 temps and contractors each week wondering if their next paycheck will be good.
In the short term, many of Chimes clients are understandably feeling quite blindsided. They are naturally just starting the process of assessing how this happened and what they could have done to prevent it. And the response from staffing firms seems to be a mixture of panic and a feeding frenzy, depending on how much money Chimes owed them and whether they have a shot at picking up a big chunk of the business formerly managed by Chimes.
Over the medium term the biggest impact could be on those staffing firms with less than deep pockets who are owed big dollars by Chimes. Rumor has it that most staffing suppliers have not been paid since the end of November. If that's true, our rough estimates suggest between $100 million and $200 million could be at risk to staffing suppliers. They've already paid their temps and contractors, but could be looking at huge write-offs on collecting their receivables, not to mention an immediate cash flow crunch for some. From the clients point of view of course, they may have already paid Chimes for those temps. The question now is, will they have to pay again to keep their key suppliers afloat? Next step, look for the circling of the lawyers!
In the long term, this meltdown will call into question the financial stability of all staffing firms, and companies will be looking with much more focus at both the financial status of their partners and their disaster recovery plans. That will likely be good for solid performing, financially stable staffing firms, but it might make the world more challenging for smaller firms attempting to play middleman between organizations and their staffing suppliers.
While there may be short term gains for some staffing suppliers, don't look for many bells ringing in celebration. Instead, I suspect we will see a good deal more introspection as organizations and their suppliers contemplate the future of how they source contingent labor. To paraphrase the poet John Donne, "Ask not for whom the Chimes toll. It tolls for thee."