Temp Staffing proves resilient to significant disruptions in businesses due to demand volatility
While COVID and its effects were in a state of decline and 2022 was anticipated to be the first normal year for the staffing industry yet the macroeconomic disruptions due to the Ukraine war and persistent inflation have resulted in huge industry disruptions on both the demand and supply side. On one end US Federal Reserve and all the other central banks went on aggressive efforts to curb inflation by increasing interest rates and on the other side businesses were starting to create additional capacity to meet post-COVID demand growth in almost every segment of the economy. This paradigm continues to put excessive pressure on businesses in calibrating the right staffing levels to meet this demand volatility.
The lingering and residual effects of the Global supply chain continue this year and contributed to the economic difficulties that the world is facing. However, amidst all the financial issues, industries like global staffing shared a positive side and hold stabilizing influence for 2023.
However, before getting into the key staffing trends for 2023, let us first understand what staffing means and why it is important for most industries.
The staffing industry is the enabler that helps in the establishment of the gig economy by bringing the right talent at the right price for the right duration to impact a certain business function at a certain point in time. The staffing industry comprises a set of players who help enterprises big and small with sourcing, qualification, deployment, and engagement of the right talent to impact a business function for the most favorable outcomes. The staffing industry is the lifeblood of the transition of the workforce to a pay-by-the-drink or gig economy. This vast industry is entering almost every sphere of the workforce eco-system thus making itself eternal to any function.
The staffing industry helps in making cost structures variable for Govt and private enterprises alike and gives the enterprises the flexibility to align to varying business cycles.
While staffing builds a more efficient and highly productive workforce for a company, it contributes to human capital development. It provides a well-trained and high-performance staff that aids control facilitation and deviation reduction to ensure a smooth flow of business functioning. Moreover, it reduces the overall costs associated with recruiting and hiring and helps the company minimize its expenditures. Indeed, the most crucial benefit!
Multiple industry events have transformed the staffing industry in the last decade and that pace of change is continuing unabated due to the impact of AI and Digitization. The world-over fight for talent has made the staffing industry handle a crisis that didn’t exist before thus putting their business models to the test as margins erode and attrition reaches sky-high. Companies had to become leaner and meaner to adjust to the new brutal market realities where talent goes to the best payer and clients reeling from the effects of inflation want to cap the bill rates. Causing a major margin crunch for staffing industry operators.
What is the condition of the US Staffing Industry today?
The global staffing industry was enjoying the fruits of a prolonged spell of success during the previous decade until Covid-19 hit us all and impacted almost everything in our lives and businesses. The pandemic changed the game for almost all active industries and forced the world to adjust to the new normal. Business operations and communications migrated to digital platforms, hybrid working became a norm, and health emerged as the top priority for all employees as well as employers.
In the history of mankind, periods of distress have always been the precursor to major disruptions in industry or corporate function. The pandemic pushed us all to accelerate technology integration, leverage AI, and put people at the center of focus. SAAS solutions gained traction to ensure every function was backed by a best-in-class solution.
Now, with the pandemic behind us, businesses are getting back on track to recover from the sharp decline and losses incurred in the past 2-3 years. However, the aftermath of the pandemic is still making the recovery process challenging, especially for businesses that are reluctant to change and adjust to the evolved environment. The drumbeat of recession and high inflation rates have played their part in making the road to recovery harder. And as for the competitive staffing industry, the road is equally harder, but there is still a silver lining!
As per the industry reports, the global staffing industry revenue has been on a steady rise since 2009. However, the pandemic impacted the industry adversely and dropped the revenue rates by almost 11% from 2019 to 2020. For instance, the U.S., being home to one of the largest staffing industries in the world, was subject to continued growth until 2020 – when it reported an estimated loss of 32 billion dollars.
Another report cited by the Staffing Industry Analysts (SIA) suggests that the recent economic headwind is affecting the career decisions of 80% of the U.S. workforce. But things are getting better from a broader perspective.
Out of those surveyed, 73% of the respondents confirmed that though recession concern is impacting their career choices, it is to a lesser extent than inflationary pressures. Hiring is still a sought-after activity, significantly prevalent even during times of economic uncertainty. Moreover, the global staffing market is seemingly back on track with the revenue rates growing more than 30% from 2020 to 2021.
Though things look better, the market is still susceptible to various ongoing challenges.
Attrition Related Challenges and its impact on the Global Staffing Industry
The unprecedented levels of employee attrition are an unprecedented economic event and possibly the best example of how things have changed in the wake of the pandemic. The trend started during the spring of 2021 when a record number of employees voluntarily resigned from their jobs – citing job insecurity, lack of support, insufficient recognition, lack of career development, higher pay, and poor covid-19 response as some of the reasons. As per the U.S. Bureau of Labor Statistics, over 47 million American citizens quit their job in 2021. The trend continued and spurred in 2022, with the Bureau reporting almost 6.3 million resignations and 10 million open positions in April 2023.
Despite the din of louder recession drumbeats about the coming recession, Data reveals that while a sizable number of people have already resigned, many plan to quit their respective companies in the coming months. The trend has forced companies to take immediate measures to retain their workforce. The event has and will surely play its part in shaping the trends for next year! For staffing companies, this has a profound impact on their ability to source and retain talent.
Not enough employees to fill the available jobs
It is a universally known fact that the ability to hire and retain talent is the most crucial factor to achieve growth. Most businesses are struggling to find the right employees for the job. The talent shortage is prevailing as one of the biggest concerns for companies worldwide in 2023.
Be it Technology companies, financial services, the semiconductor industry, or trade, employers are unable to find the right people with a good blend of technical skills and human strengths. As per the industry source, the global talent shortage is at a 16-year high as 70%+ of employers worldwide report difficulties with finding the right talent in 2022. The figures stand at 74% in the United States of America.
The talent shortage is another factor that has forced companies to modify their recruiting procedures and policies to reduce their dependency on talent. Some include providing permanent migration facilities, outsourcing, and technology integrations like artificial intelligence and automation.
High inflation and its impact
A soaring rate of inflation above 9% during 2022 had a profound impact across all industries and business sectors. The reported figure was the highest-ever increase in the country since 1981. Moreover, the decline of GDP by 1.6% and 0.6 % in the first two quarters of 2022 played its part in creating a stir among the people. It fueled the already hovering predictions of a global recession.
To make matters worse, many big multinational companies have either frozen hiring or have conducted employee layoffs. For instance, tech giants like Google, Amazon, Microsoft, Meta, Twitter, and Netflix all announced employee layoffs in their charter to cutting costs and cope with a disrupted supply chain. A report suggests that more than 100 thousand employees have been laid off as of late February 2023.
The Roadmap for Staffing Industry – Opportunities and Challenges
These are strange times where on one side, the nation is dealing with issues like Great Resignation and talent shortages while on the other, technology workers are being forced out of jobs amid the fears of recession. We also have the impact of AI that has not been fully realized and will become a big factor in the years to come as businesses and Governments take on more aggressive automation goals. Fortunately, the role of the staffing industry has become even more crucial as it serves as the bridge between employees and employers.
Let us look at some trends that will dominate the coming few years
For Employers
The shift in employee preferences and demand for favorable work cultures have forced companies to evolve and reimagine every aspect of their workforce strategy. From maximizing the integration of technology and data utilization to shifting focus on candidate relationship management, here are some of the key trends that employers should look forward to in 2023 and beyond.
1. Hybrid work culture shift is irreversible
While the hybrid work culture has been in practice for some time, it experienced a massive acceptability following the Covid-19 pandemic. While it was initially difficult for all parties to adjust to the hybrid work styles, the employees have found their rhythm now such that flexible working (working from home) has become one of their primary requirements for jobseekers. About 85% of the recruiters believe that hybrid work culture is here to stay. In fact, many organizations have lined up remote working as a strategy to attract top talents in 2023. We have also noticed this change among our state and local government clients who were resisting this change and have now started to come on board since they are unable to source the best talent for their various initiatives.
2. ESG and D&I to gain more prominence
Recent unfortunate events concerning racism, inequality, discrimination, and injustice have fueled society as it demands change. To support the cause, companies have made D&I a prominent aspect of their recruiting strategies as they look forward to acquiring talents from all communities. Numerous studies back that a diverse, equitable, and inclusive workforce performs better on financial as well as productivity fronts. ESG goals of the businesses are carefully reviewed by the prospective employees to find an alignment between their personal values and that of their employer.
3. Reputation and Social Media profile of the employer matters to the Job seeker
Your company’s reputation will precede the salary you offer. About 86% of job seekers conduct comprehensive research on the brand and reputation, even before they think about applying for a job in the organization. It will not matter if you offer a higher salary than your counterparts. Almost all the applicants review the ratings of the employer from myriad sources such as Glassdoor, Indeed, Muse etc. Employers need to be careful about their social profiles on Facebook, Linkedin, Twitter and also the comments and feedback they are generating. It is not uncommon for employers of scale to monitor the sites adn moderate the content concerning their reputation in an aggressive manner.
4. New methods to increase employee retention and engagement
The Great Resignation made it clear to the world that employees leave if they do not perceive a high degree of employee engagement. Various studies point to a direct correlation between employee engagement and retention. Offering various training programs to acquire new skills, mentorship to guide the employee for higher responsibility, career growth, and a pathway to higher compensation are some of the levers to impact employee engagement and retention.
5. Data driven decision making
The staffing industry is gradually embracing data and technology to evolve processes and ease operations. Firms now access, process, and convert data into quantifiable information to make informed decisions that align with their goals and objectives. Many staffing firms are already using the applicant tracking system (ATS) and other software to ease their recruiting processes and automate manual processes to reduce costs and make various hiring processes seamless. Various SAAS platforms for time reporting and billing are bringing the benefits of automation to clients and employees. Various platform based MSP’s are further accelerating this drive in automation.
6. Role of AI across the recruiting value chain
Artificial intelligence (AI) is a growing technology that has paved the way in the staffing industry and will continue to do so next year. A survey by Gartner claims that while only 17% of the companies used AI tools in 2019, the number will increase to 30% by the end of 2022. Moreover, there is a high chance of automation becoming a key in the human resources field.
2023 will also experience an increased utilization of AI tools like chatbots in staffing and other recruitment processes. For instance, chatbots have become integral to modern organizations as they improve operations and increase reach. They are becoming increasingly intelligent and facilitate business processes to surge the efficiency quotient on all major fronts.
Besides, chatbot acceptance will continue to accelerate in the coming years, especially with the end-user getting accustomed to this AI-powered tech.
7. CRM Impact
Candidate relationship management or CRM is an HR practice and cadence that goes a long way in building and sustaining healthy relationships with employees in a manner that is repeatable. Over the past few years, CRM has become one of the top trends in the recruitment industry as it solves many modern-day talent-related issues. With the next year becoming focused on employee satisfaction and retention, CRM will play a crucial role.
For Employees
The shifts in the staffing and recruiting landscapes not only change things for the employers but also for the employees. After all, staffing is a two-way process that caters to the needs of two parties i.e., the clients (employers) and the consultants (employees). While employers will be making employee-centric plans, employees will be playing a crucial role in improving the existing workforce. Moreover, it is a total skill game from now onwards.
Let us have a look at some of the major trends concerning employees.
1. Referral-based hiring continues to remain the most attractive
Hiring through referrals is not only a great way to limit cost per hire, but the referred employees tend to stay longer in your organization. Thus, most companies hire 20 to 40% of their employee workforce through referrals. Given the unpredictable economic situation, hiring through employee referral programs may increase next year. A thing of mutual benefit – the practice will provide rewards for the referring employees and cost savings for the organization.
2. Power skills will drive performance
The boom of remote working in the current times has increased the need for employees with Power Skills. Power skills refer to the set of skills that are crucial for a dynamic or ever-changing working environment. These include communication, innovation, creativity, leadership, work ethic, collaboration, adaptability, emotional intelligence, etc.
While some may argue these skills to be soft skills, it is to be noted that things are changing rapidly when it concerns valuing skill sets. Today’s work environment is fast and dynamic and demands that employees work in a state of constant adjustments and change.
3. Candidate Experience
Last but not the least, candidate experience will govern hiring in 2023 and beyond. Evaluating candidate experience allows the recruiters to understand more about job seekers’ attitudes and behaviors during the process. Moreover, it motivates the candidate to refer other potential candidates, too. For instance, a positive recruitment experience can motivate about 97% of new hires to provide referrals, while an adverse experience can lead to unfavorable outcomes for a company – including, obviously, a steep drop in employee and external referrals, which have long been the top performing source of hire at employers of all sizes, irrespective of industry or geography.
Bottom Line
While the challenges of 2021 and 2022 will surely be reflected in the outcomes of 2023, the next year may mark the beginning of many new initiatives. Staffing firms will continue to play their role of easing the burden on employers as well as on employees in uncertain times by connecting the right talent to the right opportunity at the right place and right price.
Just like we always have.
By Ram Sharma, (Sr. Talen Acquisition Manager) TalenTech Digital