2. Introduction
Tom Landry
30 years in Staffing Industry
24 years owner specializing in Logistics and
Manufacturing
Active member of: ASA Safety and Worker Comp
Committee, IWLA, CPA, WERC, Reverse Logistics
Assc.
Awarded “Top 100 Influential People in Staffing” by
Staffing Industry Analysts
3. Why is service so bad?
Current status of client
satisfaction/loyalty
How did the Staffing
Industry respond?
How did you respond?
What was the outcome?
4. Current Status Of Client Satisfaction/Loyalty
Proof: Staffing Industry NPS Survey
40%
33%
30%
17%
8% 8%
-3%
-10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2010 2011 2012 2013 2014 2015 2016
Net
Promoter
Score
(NPS)
Industry Average
Apple iPad
66
SW Airlines
62
Netflix
68
5. Most Frequent Complaints
Poor quality
High turnover
Poor work ethic
Poor communication
Inability to convert
6. How did the Staffing Industry Respond?
On-site programs
VMS
MSP
Web based recruiting
Requesting higher wages
7. How Did The Client Respond?
Commodity
Remove stakeholders from selection process
More suppliers
Lower expectations
Performance allowances
8. Summary
Promised result Delivered result Ultimate Effect
Rogue spending
reduction
Gate keeper Blocking innovation
Price spread reduction Less supplier choice Less quality and
increased overall spend
Better data and reporting Lots of data No actionable insights to
actually optimize labor
Less admin cost Poor supplier vetting Price over fully-loaded
cost
Quicker response No service improvement High vendor turnover
Higher quality Headcount creep Lower quality leading to
more errors and lost
customers
Lower cost Lower price, higher cost
per unit
Inefficient labor cost
ratios
9. How Can We Reverse The Trend?
Focus on TCO
Think strategically
Share data
Establish accountability
process
10. Performance Gap Calculation
10 Employees per day
Pay Rate Markup Bill Rate
$10.00 30% $13.00
Employee
Type
Production
Level
Value Distribution
Exceptional + 20% $15.60 10%
Acceptable -- $13.00 50%
Marginal - 20% $10.40 40%
11. Performance Gap cont.’d
No. of
Employees
Value Total Value
1 $15.60 $15.60
5 $13.00 $65.00
4 $10.00 $41.60
Value Received $122.20/hour
Price Paid $130.00/hour
Performance
Gap
Hours per
Day
Daily Loss Annual Lost
Value
$7.80 8 $62.40 $15,600
6% Loss of Performance Value
12. Compensation Tactics
Drive down the mark-up
Theoretically reduce cost
Headcount creep
Add more people to make up the production
Unscheduled overtime
Work more hours to meet number
13. Effective Bill Rate Calculation
Assume same scenario same quality ratios.
Performance compensation tactic
2 hours OT per person per week
1 extra person to make up the performance of the
marginals
No. of
Employees
Bill Rate Hours Total
11 $13.00 40 $5,720
11 $19.50 (OT) 2 $429
Actual Weekly Cost $6,149
Effective Bill Rate: $6,149/400 (10 x 40) = $15.37/hr
Effective Markup: 53.7%
14. Case Study
Major international electronics manufacturer
Actual numbers supplied by Plant Operations and
HR
310 temporaries
50 over staffed
10 hours of OT week
25% turnover month
2 suppliers
90% of HR time spent dealing with temps and temp
admin
Genuine fear of employee eligibility (ICE) compliance
15. Financial Impact
Current Staff Evaluation
Employee Type Number of Type Value
Exceptional 10 +30%
Acceptable 204
Marginal 96 .75%
Performance Gap Value Loss Impact
Employee Type Number Hourly
Rate
Markup Value Total/hr
Exceptional 10 $8.00 1.20 30% $124.80
Acceptable 204 $8.00 1.20 $1,958.40
Marginal 96 $8.00 1.20 .75% $691.20
$2,774.40
Amount Paid 301 $8.00 1.20 $2,996.00
Performance Gap of $201.60
$403,200.00 Annually
17. Additional TCO factors
75 new hires month training cost
Scrap out of control
Time spent managing turnover and admin
Concern for the ability to do new products
Potential exposure to government compliance fines
18. What Went Wrong?
Commodity strategy
Drove down the pay $8.00/hr (in 2015?)
Drove down the markup 20%
Add another vendor
No performance standards
No KPI’s
No regular reporting of performance
No management of temp staff
No accountability
No reality between what was purchased and what was
needed
19. How Can We Fix It?
Determine true TCO
Identify opportunities for saving and improvement
Establish performance standards
Establish improvement timeline and measurement
process
Involve all stake holders in the selection process
Provide access to data and stakeholders for
potential partners
Evaluate new partners based solely on the ability to
meet the performance standards
20. TCO Questions To Ask
Evaluate current temp staff (each location)
How many would you hire today? (exceptionals)
How many would you replace today? (marginal)
How many are okay? (acceptables)
Establish performance gap (what you’re paying for
vs. what you’re getting)
How much more productive are the exceptionals_____%
How much less productive are the marginals _____%
21. TCO cont.’d
If you had better people do you need as many?
How many less?
How much unscheduled OT is there a week?
How much is directly attributed to labor?
How much waste per week?
How much directly attributed to labor?
How much rework?
How much directly related to labor?
How many client penalties and charge backs?
How many attributed to labor?
22. TCO cont.’d
All these things add up to true Cost of Ownership of
your labor strategy.
Not just Contract Labor on the P+L
This is where the big money is available not markup
Overtime
Headcount
Scrap
Rework
Penalties
24. Proof Of Concept
Case study Reality
Labor is $2.00/hr under market
Markup is below realistic cost (vs. service expectations)
Current strategy is costing $3,192,000 more than
projected
25. Alternative Solution
Pay market $10/hr
Start at $9.00 training wage until base KPI’s met
Give increases as additional skill sets are met
Goal $10 within 90 days
Eliminate 50% overtime
Eliminate headcount creep (50)
Pay quality supplier realistic markup
Establish KPI’s
Establish reporting methods and schedule
Establish management responsibilities
26. Alternative Solution Cost
No. of
Employees
Pay Rate Markup Total
260 $9.00 1.35 $3,159/hr
260 $13.50 (OT) 1.35 $4,738/hr
$3,159 x 40 hrs $126,360/wk
$4,738 x 5 hrs $23,690/wk
Total Cost $150,050/wk
Current Cost $163,680/wk
Potential Savings $13,630/wk
$681,500/yr
27. Results
$681,500 savings (8.327%)
Additional OT savings pay for the raise to $10
Add an additional net $482,500 saving/yr
Total savings $1,164,000 (14.22%)
“Employer of choice” instead of “Employer of last
resort”
Established methods of performance measurement
Soft benefits
HR freedom
Compliance peace of mind
Confident of expansion capabilities
28. Strategic Thinking
Supplier partner or necessary evil
Partner
Recruiting trends
Compliance
Planning
Management
Innovation
Necessary evil
What’s your markup
Type of Relationship
Collaborative
“Win/Win as One”
Cooperative
“Give and Take”
Competitive
“I Win,
You Lose”
Role of Supplier
Strategic Partner
Trusted Advisor
Subordinate
Vendor
You
Supplier
You Supplier
You Supplier
29. Stakeholder Involvement
Operations, Admin, HR, Safety and Procurement
Each has their own needs to be met to be successful
program
Each can break a program
All have issues related to TCO
30. Limiting Supplier Access
Holding back access to stakeholders and sharing
data produces solutions based on guess work and
decisions based on price not cost.
Each location may have different issues based on
that locations client and their requirements.
Innovation is stifled
31. Selection Process
Select and collaborate vs. bid and select
Find suppliers that can prove their ability
Determine outcome objective
Headcount reduction
Overtime
Scrap
Penalties and charge backs
Safety
Admin cost
Collaborate on an agreement that will bring the
desired results
32. Agreement Structure
Responsibilities based on reality, don’t drive away
the suppliers you want!
OSHA
Indemnity clauses
Penalties
Innovative pricing
Gain share
Pay for performance
33. Summary
Conduct honest review
Calculate real TCO
Establish improvement goals and accountability plan
Vet suppliers strategically
Open up the data
Collaborate on a plan
Measure, review…
34.
35.
36. More Information
List other training sessions
List books, articles, and electronic sources
List consulting services, other sources
