<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=1825486384374931&amp;ev=PageView&amp;noscript=1">

Blog

M&A Activity and Market Gyrations Force Focus on Staffing Supplier Readiness

Aug 3, 2018 2:57:05 PM

merger

How well can your existing supplier base scale with your business, particularly should your company be involved in a merger or acquisition? While your organization may not currently be an M&A target, the chances it may soon become one are increasing at precisely the same time as the staffing supply industry is experiencing a fragmentation into so many highly specialized but smaller provider organizations. If M&A action is initiated within your organization, or even simply in response to market fluctuations made more likely by the expanding trade war, we ask, “how well equipped is your supplier base to flex and ramp up to meet the challenge?”

There are two macro trends impacting the ability of organizations leveraging contingent workforce strategies to achieve their workforce efficiency and cost-savings goals. One is the increased specialization of staffing supplier options, and the other is the ongoing, high rate of merger and acquisition activity observed in numerous industry sectors. Here’s the skinny on these two trends, the consequences of each and what savvy organizations are doing to ensure they’re prepared for the effects of both.

First, let’s examine the changes that have occurred in the composition of staffing firms over the last few years. Back in April 2016, this blog wrote about the so-called “skills gap” and what staffing companies are doing to address the acute need for talent in particular areas. We wrote, “there seems to be an ongoing shortage of qualified talent in certain skill sets. You can probably guess which roles are hardest to find candidates to fill. IT roles like computer systems analysts and web developers are always in short supply and high demand, as are registered nurses and other healthcare related jobs.”

Since then, we’ve seen an increase in the utilization of contract labor in industries such as higher education and the roles specific to that industry (like adjunct faculty and others). Similarly, healthcare as an industry has also been increasing its utilization of contract labor, requiring talent in the highly specialized tasks/roles intrinsic to that field. As a result of these and other industry’s increased reliance on contract labor, highly specialized “boutique” staffing agencies have cropped up to serve these very specialized, and frequently lucrative talent needs. The net result: a proliferation of small, niche-specific staffing firms.

Next let’s look at the state of mergers and acquisitions in US markets. In a post from March of this year, Staffing Industry Analysts reported that “Last year (2017), merger and acquisition (M&A) transaction volume increased by 28% over the previous year according to reporting by the Staffing Industry Analysts.” This year’s M&A numbers show a continuation of the trend with Axios reporting, “Global and U.S. merger and acquisition activity both hit all-time highs during the first half of 2018.” So, it is not unlikely that many organizations’ workforce management strategies will be tested by some type of merger.

With this in mind, it becomes an imperative that one’s workforce management plan include a focus on accessibility and flexibility among its staffing suppliers. While it may never happen that your company is sold or merged with another, it is still worth considering what to do in the event it is. Begin by assessing the extent to which your current supplier base is specialized. If you’re dependent on niche suppliers delivering specialized talent to fill too many roles, you could be caught in a jam should a merger or acquisition require more broad skill sets across numerous functions. The other primary consideration is the available bandwidth of your base of suppliers. Overreliance on niche providers—which are typically smaller shops without extensive bandwidth and resources at their disposal—can leave you in a talent crunch should your needs suddenly change to require a much larger volume of candidates.

The nextSource recommendation to guard against this potentiality is to consider engaging an MSP to manage your staffing supplier relationships. MSPs inherently enjoy broader access to the universe of staffing suppliers than an individual organization can manage. Because they serve numerous customers across multiple industries, a good MSP has a deep bench of suppliers of all sizes and compositions at their disposal. It is worth investigating whether an MSP solution could deliver other benefits to your workforce management program in terms of cost savings, increased efficiency etc., in addition to the continuity and accessibility benefits they drive for organizations during M&A activity.

 

New Call-to-action

Topics: Blog, MSP/VMS, Workforce Management, Supplier Management

« Return to Latest Posts