Outsourcing Trends - 5 Ways to Breakthrough the Latest Barriers

Companies have strategically implemented outsourcing into hiring plans to provide an expertise for a specific time period or project to augment or replace missing skill sets of full-time employees. Outsourcing has also proven to be a mechanism to cushion operations expenses during budget crunches. Both of these reasons have spawned revenue growth of 7.7% in 2007 and aggregate revenue of $65.7 billion for the 10 largest staffing companies(1).

The demand for quality consultants has increased while the supply has plummeted due to the latest surge of staffing companies pushing low-paying consultants with little to no experience onto assignments that require the savvy to understand business logic, comprehend requirements, and have a common sense approach to solving problems based on the standard ways of conducting business in America.

Companies and independent consultants must safeguard their executive decisions and professional reputations in the wake of the new outsourced community. Based on our research in the marketing, public relations, software, and professional services industries, the following identifies the five most glaring outsourcing trends that are affecting these professionals:

1) Just-In-Case Phishing

Most staffing companies do not have job requirements (aka reqs) for open positions. Instead, the recruiting managers post jobs and send emails to previous candidates to send updated resumes in Word format to increase the value of their candidate pool. This is a sales approach to convince potential or existing clients they have qualified candidates to meet all hiring needs but with one caveat - the qualified consultant does not know that his name is being considered for a contract. In addition, this does not help a consultant who is really in search of a valid contract, desires to review options in confidentiality, or has an offer that can be negotiated directly or through another staffing company for a better rate.

Companies: Be leery of the used-car salesman staffing person that always claims to have resources available to meet all needs. Chances are they have the job requirement posted on all the employment boards based on any prior conversation.

Consultants: Don't send resumes unless you know the name of the client, actual pay rate, project duration, and timeframe for interview. If it can not be provided, waste no more time.

2) When In Rome, Look Like the Romans

Even in 21st century America, the staffing manager usually presenting and negotiating the contract or staffing arrangement is normally of the same descent as the client's hiring manager. Approved vendor status usually means there are a certain set of qualifications a staffing company must meet. For example, financial statements, recommendations, proof of insurance, MBE Certifications, and proof of W-2 employment are some examples that are required to be an approved vendor for many Fortune 500 companies. However, unless the contract is with a well-known staffing company like KForce or Teksystems, chances are you need to do research from a network of colleagues or companies that have hired resources for similar job requirements.

Most MBEs still have the exact opposite demographic negotiate contracts, play golf with the decision makers and entertain clients. Once the negotiation is done, these "front men" are either barely accessible until there is another commissionable deal or if there is a problem. Keep in mind the loyalty is to the "front men", not the consultants performing services because the former keeps business engaged.

Companies: Call colleagues for a discovery of their best experiences and the names of specific recruiters at staffing companies. Request company financials and references from leadership at other equivalent sized companies.

Consultants: Email friends in the business to get a better perspective for each staffing company. Ask for documented payment procedures and company financials and references. After all, your services are not free.

3) The Weakest Link

Most quality staffing companies do not advertise they are additionally outsourcing when they are on an approved vendors' list. Instead they send job reqs to "fly-by-night" staffing companies to find resources in secret for them. This prevents a client from seeing the job requirement is posted and they do not readily have someone on staff to fulfill the need (as was most likely promised). It additionally allows another easy-out for payment obligation to the consultant providing the service because the contract is between the "indirect" vendor and the consultant. Financially, this also determines how many entities are taking a cut of the consultant's rate. In the long run, you may ask, "who is responsible for payment"? Not the client, not the direct vendor, but the "indirect vendor" that probably does not have money to sustain weeks of payroll. For example, many additional staffing companies and independent consultants were not paid for November and December of last year if they had any link to Chimes or Axium - the largest temporary staffing company - after they filed bankruptcy in January 2008 with no remedy to pay vendors. (2) This left the smaller insolvent outsourced staffing company with the financial burden to pay consultants that had already provided services to major corporations.

Companies/Consultants: Check several job boards for the same requirements that were provided to the direct outsourcing company. This will dictate the lack of quality consultants that will be presented to you.

Consultants: Compare the rates, payment procedures, and direct client longevity. Note: A direct client relationship is not staffing company to staffing company. A direct client is the company that will issue a badge, parking space, network id, computer, and daily office space.

4) Rename After Defame

Thorough research is mandatory to understand who is being trusted to locate resources. Oftentimes there are quite a few lawsuits or pending judgments for monies owed to other vendors or individuals that can be hidden when a company files bankruptcy and changes its name to both eliminate financial responsibility and avoid professional defamation. Additionally, some of these companies form corporations in the state of Delaware to avoid paying taxes and being researched in the state they are really doing business.

Companies/Consultants: Review D&B listings and ratings, Lexis-Nexis information that can be acquired through an attorney or general counsel or through colleges and universities, and public Supreme Court and Civil Court filings across both Delaware and the state in which the business is being conducted. Taking extra steps and extra hours for research upfront can save money and time in the future.

5) Float Until You Sink

Even in non-tumultuous economic times, payment has become a problem for consultants. While most Fortune 500 companies often pay within 30-45 days of being invoiced, the new staffing company floats until they eventually sink if they are not paid in a timely manner from their clients. Additonally, the more "front-men" these staffing companies use, the more commission they must pay from overhead they don't have or have not collected. For example, an insolvent one-consultant staffing company can not afford to add more consultants because if its client does not pay on time, there are no backup funds to pay the consultants. The underlying problem is two-fold: consultants are out-of-money and therefore forced to live off savings to maintain payment obligations like mortgage and car payments and companies needing the consultants' services may lose an expert at an inopportune time because consultants don't work for free.

Companies: Due diligence in research of financial statements is mandatory. If there is a warning sign (i.e. emails from consultants regarding late pay, NSF checks provided to consultants, untimely invoicing, etc.) of a staffing company not paying a resource on time, discuss with management to expedite payment and work to remove the staffing company from being a preferred vendor.

Consultants: Needless to say, be extremely careful if you are not dealing with the true direct staffing company. Review financial statements and have an attorney review any contracts and append payment clauses that include adding a late fee, paying legal fees, and decreasing the payment turnaround time from 30 days to a more manageable time frame. Another option is the removal of any exclusivity clause if payment arrangements are not satisfactorily met. This allows allow either a direct relationship with the client or another direct staffing company.

Indeed, the world of consulting has been compromised for both companies that want to outsource and consultants that really have the expertise to help create and develop powerful solutions to make a difference. Outsourcing can, however, prove to be a positive experience for both sides if thorough research and scrutiny is incorporated into decision-making. By understanding the most recent trends of the outsourcing community, the most qualified consultants can eventually be connected to great projects across small-to-medium-sized businesses - a cooperative trend for a win-win team.

(1) http://www.examiner.com/p-168029~Largest_Staffing_Companies_Grow_Revenue_an_Average_of_7_7__in_2007.html

(2) http://hotgigs.typepad.com/hiringexchange/2008/01/axium-chimes-fi.html

Temeko Richardson leads the strategy business intelligence team at EnsyncTrends, which has compiled national statistics and full analyses on the outsourcing phenomenon in America. You may email trend.consult@ensynctrends.com to subscribe to the findings.