Your contractors are the lifeblood of your business, so taking care of them should be the #1 priority for every level of your company. The top-performing staffing companies in the US now have dedicated staff and operations team to support and be the voice of their contractor workforce.
Unfortunately, that’s not the case for most, with the largest effort often going into recruiting and marketing instead, resulting in higher-than-normal turnover rates.
Why? And does it matter?
According to a recent study by Chron, the average turnover rate in private companies was 44% in 2013. One study, calculating turnover based on a company with 15% contractors, each contract lasting six months, estimates turnover would be in the range of 75%.
Why does turnover matter? Under normal employment circumstances, it typically costs a company 1.5-times an employee’s first-year salary to replace them, including recruiting, onboarding and training time/resources. With contractors, however, the costs are higher, especially if you’re looking to retain your contractors longer than one six-month assignment.
Recruiting and marketing departments are important because they are where you see the most immediate impact. However, if your contractor turnover rate is high and you’re continually looking to replace positions in your contractor pool, your overall costs can outstrip what’s coming in from your recruiting and marketing efforts.
The bottom line always wins and if your contractor pool isn’t stable, if it’s continually shifting and moving through turnover, your bottom line will be deeply impacted.
How can you help your contractors be successful and promote loyalty to your company? One way is to establish a contractor-centric business model. While the idea of dedicating an entire department just to contractor success may seem cost-prohibitive or redundant at first, what company doesn’t want their contractors to be successful? Contractor success is critical to your bottom line and is often the most under-appreciated route to profitability.
Simply put, to keep revenue flowing into a company and create long-term value, contractors must continually be placed on client gigs. They must constantly be kept busy with high-quality, meaningful and high-paying work. It’s easy to convince a handful of clients to adopt a contractor-centric model and create a sense of momentum in their business or fulfill seasonal needs. But to keep clients happy over time, and keep them coming back time and again, your contractors must feel valued and supported.
Successful staffing companies have boards that promote the concept of contractor success. They also encourage CEOs and other executives to focus on a few key metrics over the long-term.
Both CEOs and their boards should focus more energy studying contractor behavior and success models, as those models will provide early-warning signs of contractor happiness or dissatisfaction. Key questions to ask include:
As clients grow, they should be increasing their use of your contractor base. If your contractor use is not growing among your client base, your recruiting and marketing efforts will be for naught; it’s far easier to get existing clients to increase their use of your contractors if your contractors are being taken care of and feel supported.
If clients don’t increase their contracts or stop being references for your company, the issue is more likely to be contractor dissatisfaction than any other single issue. Your slightly leaky bucket will begin to have a very negative impact on your bottom line when contractors are not well supported and leave before the end of their contracts.
Here are some key suggestions for ensuring success in a contractor-centric focus:
It’s impossible to maintain 0% turnover in either clients or contractors, but if board members encourage CEOs and Executives to make contractor care and success a priority, they can keep turnover rates low and build more valuable businesses for the long term.