Subadhra Sriram's Blog

Koosharem Downgrade a Sign of Pricing Pressures

It’s a wake-up call up for the entire staffing industry. Vendors as well as contingent workforce managers need to rethink the pricing of temps. I admit it’s hard to do in today’s economy. But Standard and Poor’s downgrading of Koosharem Corp., which does business as Select Staffing, has gotten many strong reactions. Folks were nodding in satisfaction, saying the company deserved it for doing business at unsustainable rates that were impossible for other staffing firms to match. Some were jeering at the fact the company had lowered its prices to the extent that the company sank. It’s a company’s responsibility to manage their business in a sustainable way, said other staffing professionals.

I agree. But I offer a word of caution here. We are all guilty of shopping for the lowest price.  “If I am shopping for a sandwich,” said Jon Osborne, SIA’s VP of Research, “I will go where I get the best sandwich at the lowest price. It’s not my responsibility to worry about the sandwich shop’s business viability,” he said. True, but  in staffing, you are not shopping for a sandwich. You are looking for talent.  Yes, it was Koosharem’s responsibility to manage its business. But here, the buyer of staffing services also has an obligation to pay reasonable market rates for quality people, and to not consider it a clear-cut victory every time they shave another 2 percent off a negotiated price. Here’s why.

End users of contingent labor should welcome a playing field peopled by many different suppliers. You don’t want suppliers getting squeezed out by pricing pressures. The math has to add up for them to remain in business. The more suppliers there are that bid for your business, the better chance you have of getting quality talent at the right price.

And suppliers, that goes for you too. You want a real marketplace, not a monopolistic situation where business is conducted primarily by a few dominant players. It is in your best interest to have an evolved, efficient staffing market with multiple players, activated by the forces of demand and supply. Let the markets set the price, not your competition or the customer.

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