By Leslie Stevens-Huffman
Like a major earthquake, a recession often strikes without warning and delivers a powerful blow that permanently alters the business terrain. As revenues recede, most companies initiate proven defensive tactics, like shedding contingent workers to reduce expenses. In fact, 67 percent of companies lay off contingents first during a recession, according to Staffing Industry Analysts (SIA), publisher of this CWS 30.
But historical research from the Corporate Executive Board (CEB) suggests that cost-cutting alone won't guarantee survival: "In past recessions, large numbers of companies stopped growing permanently. They never recovered. The fact is 81 percent of the factors that cause growth stalls are preventable errors in judgment or strategy -- even in a recession."
Offensive-minded companies don't limit their contributions to slashing expenses; they confer with business managers to collaborate on a strategy to pull market share from staid competitors and drive their company out of the recession. They view contingent workers as a secret weapon and find innovative ways to harness their economical talents and control costs. Most of all, they aren't afraid to try new ideas or take risks, because waiting for a return to business as usual is a proven recipe for failure.
"It's great to have a service ethic, but sometimes it can get in the way," says Todd Safferstone, managing director of the Recruiting Roundtable, a program of the Corporate Executive Board. "People from service organizations like HR and strategic sourcing have been clamoring for a seat at the strategy table for years, but now that they have one, are they offering value? Are they bringing ideas to the table or are they just taking orders?"
Bring Ideas and Take a Seat
The transition from defensive reactor to offensive guru begins when companies observe the broad economic and labor market trends for recessionary obstacles and opportunities -- before evaluating internal data and devising solutions.
It was this precise methodology that helped Tim Keefe turn looming financial adversity into revenue at CH2M Hill. Keefe, director of enterprise talent acquisition and deployment for the $6 billion engineering giant, studied the pending retirement of U.S. baby boomers and realized that a mass exodus of aging engineers would severely curtail his company's ability to compete for new projects. Customers evaluate the firm's engineering roster before awarding contracts, and many are swayed if they see familiar names on the list.
Keefe is a regular attendee at firm retreats and governing council meetings, where he proposed the idea of creating an alumni association and utilizing retiring engineers on a contingent basis. The strategy will boost the firm's contingent usage to 20 percent from 11 percent of total headcount over the next few years, and prevent a knowledge drain that could buoy competitors during the recovery. The part-time engineers offer an additional advantage -- they are less expensive than full-time employees -- giving the company an edge as it vies for new deals.
"I started by understanding our firm's demographics and the potential business ramifications before setting the stage for my ideas and presenting them to senior staff," Keefe says. "I would never even consider bringing up a problem to senior management without offering a potential solution."
At Chevron Corp., the shift toward a collaborative culture is underway, according to Ryan Busby, global category lead for staff augmentation. Busby travels the halls and knocks on doors to tell managers about his department's pending evolution from service provider to strategic consultant, before hashing over possible solutions to pressing business challenges involving contingent workers.
"We want to rebrand the staff augmentation function as a proactive business partner and earn a seat at the strategy table," Busby says. "Quarterly staffing reviews are now conducted by cross-functional teams and the format is no longer limited to a retroactive data dump focused on past temporary transactions. The meetings have become business planning sessions focused on growth and how contingent labor can play a role."
Attendance at Chevron's quarterly meetings has grown from an average of five attendees to 25 under the new agenda and Busby often touts his department's initiative by posting success stories on the company intranet. The tactic generates interest toward the change process and fosters synergy between buyers and managers.
Focus on Cost Containment and Revenue Growth
Companies frequently focus on existing revenue-generating activities during a downturn, but it's the opinions of consulting firms like Accenture that are causing elite companies to inject themselves into the hunt for new revenue sources and long-term cost containment strategies.
Accenture contends that the Great Recession has permanently shifted customer buying habits and ushered in a new era of frugality that will continue beyond the recovery: "Customers continue to demand greater value at ever-lower prices. The solution: Combine cost-cutting measures with design and development activities to create new streams of profitable growth."
Pharmaceutical companies and automobile manufacturers pioneered the practice of engaging contingent scientists, technicians and engineers in the R&D cycle, because they add velocity to the process, bring fresh ideas, spark innovation and suggest new procedures. Now several industries have followed suit and are using contingents to push new products out of development and into production. For example, labs frequently add contingents to vault developing products toward commercialization without increasing fixed overhead.
Revenue-hungry service companies are using contingents to explore and identify emerging markets or expose exploitable competitor weaknesses through secret shopping excursions.
And when it's time to consummate the first critical contract to enter a new market, companies are turning to contingents to help seal the deal.
A major bank proved its ability to execute an innovative lock box service through a contingent-staffed pilot. The beta test not only succeeded in convincing the wavering prospect, it allowed the bank to assess the actual profitability of the proposed T's and C's and evaluate a variety of productivity-enhancing employee incentive plans under low-risk conditions.
Although the idea of utilizing contingents to control costs or cultivate new markets isn't revolutionary, many companies fail to cash in after enduring painful layoffs because they lack an appropriate post-recessionary restaffing strategy. A recovery is the perfect time to conduct an analysis and adjust the mix of regular and contingent workers.
According to SIA, 92 percent of companies say contingents are roughly 9 percent cheaper than their traditional, FTE counterparts but only 50 percent of companies have a plan to hire contingents first as the economy recovers; worse yet, 30 percent of large employers don't distinguish between temp and regular employees when hiring for any reason.
"Companies should not rely on pre-recessionary staffing plans or return to old habits, because they'll fail in the new economy," says Safferstone. "Remember that a decision to simply do nothing might be the worst decision of all."
An innovative staffing plan authored by Marty Holtzman was integral to Power-One's quest to develop profitable new revenue streams. While many of Power-One's customers rely on the company's overseas plants for low-cost power supply products, some prefer domestic manufacturing locations which afford greater control over intellectual property and product quality. After conducting a cost and workflow analysis, Holtzman successfully guided his company into the customer-driven manufacturing space by interspersing contingents along the production line.
"Thirty percent to 40 percent of our customer-driven manufacturing workforce is staffed by contingent workers, giving us the flexibility to execute our demand flow technology (DFT) process," explains Holtzman, human resources vice president. "The DFT process requires workers to move with the product as it progresses down the line and the system would be cost-prohibitive if not for the strategic integration of contingents."
Battle for Customers
Most companies worry about customer attrition during a recession, but companies that succeed in gaining market share not only retain current customers, they hire contingents to win new ones.
At the headquarters of a major grocery chain, contingent workers are executing an incentive program that is luring shoppers from competitors, while at an apparel retailer's marketing command center, contingents are surveying prospective customers and holding focus groups to elicit their unmet needs. The company uses the information to develop marketing campaigns and creative messaging targeting vulnerable customers.
A desire to improve the customer experience was the impetus behind a new IT project staffed by contingent workers at Edward Jones, according to Karen Johnston, contingent workforce HR manager. The company's new suite of online tools will reduce administrative costs by offering customers a self-service array of reports and monthly statements. The Web site enhancements not only fulfill the desires of current customers, they are part of the company's rebranding initiative to attract new clients.
A study by advertising research firm Millward Brown suggests the Edward Jones' strategy will succeed in pulling market share from competitors. According to the study, companies with the most valued and recognized brands are emerging from the recession faster than the entire Standard & Poor's 500.
Recognition for the relationship between brand dominance and customer allegiance has many CIOs requesting contract e-commerce experts, Web designers and search engine optimization analysts to enhance their companyies' online presence and brand awareness. But leading-edge companies are tapping nouveau resources to nurture fledgling brands, harnessing the creativity of temporary social networkers to catapult past competitors.
The trend caught fire when Pepsi announced it would forgo an expensive Super Bowl ad in favor of a more cost-effective social media campaign. The news rocked the advertising world, where a departure from the elite marketing venue featuring rival Coke was considered risky. Nevertheless, the soft drink giant declared that, using Twitter and Facebook, it could successfully drive customers to its Web site, where it intended to interact with them.
Now companies are hiring contract communications experts to moderate discussion boards, hold online chats, blog about company events, update Facebook and attract followers on Twitter, while ghost bloggers are helping busy execs interact with customers and employees to promote the company brand.
CH2M Hill's Keefe employs a blended approach to get the best social media strategy at the right price.
"We plan to stay connected to our alumni engineering group through an interactive network," says Keefe. "I'll hire an advertising agency to create the strategy, but I plan to bring in contract Web designers to execute the plan, because their hourly bill rate will be roughly one third of what an advertising agency charges."
Mine the Knowledge of Executive Contingents
Buyers opined that a lack of time, resources or functional knowledge is an obstacle to developing recession-busting strategies. But wily veterans rely on the contingent pool for business managers, strategists and analysts, who have the time and expertise to delve into difficult challenges and design solutions. Best of all, these highly experienced professionals cross-pollinate ideas from other industries yielding long-term financial improvements without incurring additional fixed costs.
Leslie Stevens-Huffman is a freelance writer in Southern California who has 20 years' experience in the staffing industry. She can be reached at email@example.com.
Rise to the Challenge
Here's a compendium of recession-induced challenges confronting companies, along with potential solutions utilizing executive contingents.
Challenge: Post-recession turnover may impede recovery.
Challenge: Employees are burdened by heavy workloads following layoffs.
Challenge: Increase worker productivity without new IT investments.
Challenge: Eroding sales and marketing effectiveness due to changing customer needs.
Challenge: Tight credit markets curtail new product development and acquisitions.