Staffing firms continue to adapt to challenges caused by the pandemic, becoming more agile and tapping into new revenue streams while finding ways to increase employee productivity. Firms are benefiting from wage inflation, strong mergers and acquisitions activity, and previous investments, according to third-quarter earnings calls for a handful of companies in this space.
Executives in the staffing sector discussed successes, challenges and the broader industry landscape in these calls, transcripts of which Bloomberg published. Here are five trends that emerged:
1. Resilience in the face of the labor shortage
Although terms such as “The Great Resignation” are being thrown around and “Help Wanted” signs seem to hang in every other storefront window, many staffing firms do not appear to be overly concerned about the shortage of workers. Others are using more creative ways to combat the challenge.
Many firms view the labor shortage as transitory—specifically, a function of the coronavirus delta variant and the shortage of child care and elder care for dependents.
Manpower Group, for example, is investing heavily in recruiters and sales talent, specifically in the United States, France, Italy, the United Kingdom and Japan. Chairman and CEO Jonas Prising said Oct. 19 that the strategy is based on optimism about the global recovery. “Our investments in recruiters and salespeople (are) pretty broad-based because most of the markets still have opportunity to grow, and we know demand is going to continue to be strong into 2022,” he said.
Other firms such as ASGN are using remote work efforts to source candidates and maintain pre-pandemic fill ratios. “With using labor across the country or even nearshore, we found that we have more avenues now to address the need,” said Rand Blazer, president of Apex Systems, a subsidiary of ASGN.
2. Passing the wage inflation bucks
As demand for products and services remains and the shortage of skilled talent persists, it is creating increased wages for candidates in the job market. It is also requiring many companies to be proactive in providing their current employees with a wage increase in order to retain them.
Staffing firms have historically been able to pass on wage inflation to their customers, and the same has been true during this pandemic, executives from multiple companies said.
“Wage inflation generally for us is a good thing because we are able to price that in and to pass it to our customers,” Prising said.
Many staffing firms do not appear to be overly concerned about the labor market. Some view the labor shortage as transitory, while others are using more creative ways to combat the shortage.
3. Prioritizing enhanced productivity
Enhancing the productivity of employees is increasingly important as the pandemic and labor shortage continue. There are many avenues to enhancing productivity, including investing in new technologies and decreasing placement times.
Kforce reported a 28% increase in consultants on assignment from the prior year. Company executives partly attributed their overall employee productivity surge to investments in remote collaboration technology enhancements.
Heidrick and Struggles has reached an all-time high of $2.4 million per consultant, beating their previous high of $1.9 million in 2018. While celebrating the feat, company executives also underscored the importance of investing in their talent, developing employees’ skills, and preventing employee burnout.
“While this achievement is extraordinary and appears to be industry-leading, it’s important to remember that this isn’t likely to be sustainable given the promotions, new hires and work-life balance we expect to achieve in 2022,” the company’s chief financial officer Mark Harris said. “Therefore, we would expect this to modulate around $2 million per consultant in the near future, which is still better than our previous historical levels and shows what the new normal is shaping up to be.”
4. Agility and creativity in finding solutions
Being agile is vital to the success of companies facing the variety of economic pressures that we see today. Staffing firms are increasing revenue in areas that may not have been their primary focus prior to the pandemic.
Robert Half has reported approximately $100 million in revenue in each of the past two quarters in consulting project work in the public sector, stemming from various recent federal and state stimulus programs.
Kforce has become increasingly focused on high-margin services, such as its managed teams as a service offering, which provides greater business productivity to clients.
5. Reaping the rewards of previous acquisitions
Mergers and acquisitions have been a strategic priority for some firms this calendar year as they try to maintain a competitive advantage. Many firms are already reaping the rewards from second-quarter acquisitions.
For example, Heidrick and Struggles acquired Business Talent Group (BTG), making it the first and only global leadership advisory firm to offer on-demand talent solutions at scale, alongside its search and consulting service offerings. Heidrick and Struggles reported BTG revenue as a 30% increase from the previous quarter, showing great promise in growing the business in such a short period of time.
Elsewhere, ASGN executive vice president and CFO Ed Pierce said Oct. 27 that of the company’s 18.7% year-over-year increase in third-quarter revenue, 4.6% was due to acquisitions made within the last year. That represents approximately 25% of the total year-over-year growth.
“Consulting offerings in our commercial segment remain an important source of the value we provide our clients,” said ASGN President and CEO Ted Hanson. “So we continue to identify acquisition opportunities that expand our capabilities in areas in high demand.”
While some things remain unknown in today’s market, making strategic acquisitions to maintain a competitive advantage appears to be paying off in the short term.
Many firms said they expect a 5 to 10% decline in top-line revenue for certain lines of business in the fourth quarter. This is standard in the industry, given the U.S. holiday season and the increase in paid time off, which results in fewer billable days. However, expectations and projections for the first quarter of 2022 appear to be in line with what we’ve seen in the third quarter of this year, provided that firms make sound, advantageous business decisions while remaining agile and adjusting to economic conditions.
For more information, read RSM’s most recent workforce solutions sector outlook.