In a recent issue of SI Review, procurement professional Beatrice Walker urged suppliers to embrace the e-auction process as the way of the future (July 2011, “Straight Talk”). My initial reaction was as she predicted it might be: anxiety and distrust, although I would prefer the terms passion and great concern. I definitely have a strong opinion on the topic, but it’s not because I am confused or skeptical about the process; rather, it’s because of my actual experience with them.
In my opinion, they don’t work well in the contingent workforce space and don’t really benefit either the buyer or the supplier. I’ve participated in some reverse auctions only to see bids quickly drop to levels that left me wondering how staffing firms could possibly keep those promises. What it costs to hire a top-notch software engineer today may not be the same six months from now.
Unsustainable. Locked into unsustainable pricing structures, staffing firms may not be able to deliver the talent you need or will attract only less-suitable candidates. Even in today’s challenging job market, there are workers with highly desirable skills and experience that command top salaries. I believe that this will be the case even more so as the economic recovery takes hold, particularly in the technology sector.
Further, while the argument that e-auctions commoditize people is often scoffed at, it has real merit. No matter how much you respect and value people, if you try to price them like a commodity, you will run into problems. People are unpredictable. They have personalities and negotiating power and in-demand skills that staples do not.
Contingent labor costs are only part of the equation; the time and effort required to find the right candidate increases when talent is scarce, and all other associated costs rise as well. Ms. Walker rightly cautions firms not to retract pricing after participation, but it seems to me that the process makes it all too easy for this to happen. My concern is that smart, reputable firms drop out early or don’t participate at all because they know the true costs of their services and are quickly outbid. What are the results in the long term? Are clients getting the same quality? How often do retractions and renegotiations take place?
It’s natural that there’s tension between buyers and sellers over price. But the idea that staffing firms enjoy significant profit margins is misguided. My firm’s goal is to provide quality workforce solutions at a fair price, and I do my firm, our contractors and our clients a disservice if I compromise on price to win the e-auction to a point that doesn’t allow me to operate successfully.
Impersonal. I also find the way the process removes human interaction a little unsettling. One of the keys to success in getting the best contingent workers at the best possible prices is working with suppliers that understand your business and your unique requirements and preferences. Anything that devalues and precludes the relationship is a concern to me.
Perhaps not surprising, in an Internet search on reverse auctions I found service providers and suppliers, both in staffing and other industries, who echoed my concerns and shared some of my experiences with e-auctions. While some were quite vehement in their call to “avoid reverse auctions at all costs,” and others offered advice on how to participate successfully, I was hard-pressed to find any who saw much benefit for anyone in the process.
I’ve been in the staffing business for more than 25 years and I pride myself on being open to new trends and committed to business process improvements, implemented internally or in conjunction with my clients. I’m simply not convinced that this is a good one for any of us. I’m concerned that in the rush to save money, quality will be brushed aside. I would love to hear from others in the industry, and not just other suppliers, on their experiences with reverse auctions, perhaps especially if they’ve been positive. I’m open to changing my mind; I just haven’t been convinced yet.
Jerry Brenholz, President and CEO
ATR International Inc.
This letter was a response to a column published in the July issue of SI Review. Both the column and the letter are the opinions of the writers and are not endorsed by Staffing Industry Analysts. Our hope is to promote dialogue and a better understanding of the staffing marketplace.