06/26/2007
Identifying Rich Staffing and Recruiting Markets: Where Do You Stand?
By Bruce Steinberg
Just where do those monthly temporary help employment numbers come from?
Maybe you get it every month directly from the horse's mouth – the federal agency that produces it – the Bureau of Labor Statistics (BLS), which is an agency of the U.S. Department of Labor. Maybe you get them from another source such as a podcast, newsletter, or association; it really doesn't matter since we all get it from the same source. But, where does the BLS get the data from?
Actually, the monthly employment data from BLS, which is normally released the first Friday of the month although calendar quirks move it to the second Friday a couple of times a year, is actually only an estimate based upon a survey of a scientifically derived sample. About 400,000 business units ("establishments" in government-speak) make up that sample of a total of about 9 million establishments. That works out to less than 5 percent of the total number of business units are used to create the official employment statistics released by the government every month. Despite this apparently small sample, those monthly figures are quite accurate since they are benchmarked and adjusted annually against actual total counts. One reason that the employment data are watched closely every month is because employment is considered an indicator of the overall health of the economy.
About Bruce Steinberg
Bruce Steinberg has been active in the staffing industry for nearly 20 years. He has developed localized benchmarking and strategic planning tools for temporary help services and currently provides strategic planning, research and consulting services to the temporary help services, staffing, staffing software vendors, and IT staffing and solutions sectors. Bruce can be reached at (703) 799-8918, or by e-mail at bruce@brucesteinberg.net (website: www.brucesteinberg.net).
Another way to take the nation's economic heartbeat is to measure the entire economy. The total value of all the goods and services produced, which is commonly known as the gross domestic product, or GDP. When the economy, as measured by GDP, is healthy and pumping out more product and services, it needs more workers. Conventional thinking says that more workers means more activity for temporary help services.
Although staffing executives should be concerned with changes in GDP, changes in employment levels have a more immediate effect on the staffing business. But what is the relationship between changes in employment – and more specifically, temporary help employment, overall employment, and GDP? Although it is widely quoted axiom that temporary help employment is a leading economic indicator – while it may have been true at one time – is simply no longer true.
Changes in GDP are often coincident, or even leading, to changes in temporary help employment. A regression analysis of the data (right, sources: Bruce Steinberg based on U.S. federal data) confirms that changes in temporary help employment are not an acceptable predictor to GDP performance.
However, a very clear trend emerges when comparing changes in total employment to temporary help employment (below right, sources: Bruce Steinberg based on U.S. federal data). The trend lines clearly show, and a regression analysis confirms, that changes in temporary help employment occurred prior to similar changes overall employment.
Although an “eyeball analysis” (simply looking at the shape of the graphs) would lead to a conclusion that temporary help employment changes only precede overall employment change by a single three-month period, that would not be entirely correct or incorrect. A regression analysis found that there is a strong relationship between temporary help employment growth and overall employment growth for the three advancing quarters, with the relationship the strongest the immediate following quarter and getting weaker as time progresses.
But benchmarking your staffing service's performance against national trends can provide little guidance regarding marketing strategies on a go-forward basis. A sophisticated and easy-to-use tool is available to benchmark local staffing offices performance against local staffing sector trends and can be very useful to ensure you are getting your 'piece of the pie.' And there are several methods for increasing the size of that piece.
Identifying new and rich markets
The term "new market" really has a dual meaning. On one hand it can be an expansion to a different geographical location for a staffing service – either an adjacent or neighboring locale that cannot be serviced from an existing location or one in a distant market. On the other, it can be providing staffing services in a current geographical market but to a sector that you've previous not serviced.
There are several tried and true methods – although success for each technique can often be an exercise proving the theory of "hit or miss." Some of those techniques include:
- Joining the local chamber of commerce and/or similar organization, get their list of members, and start cold calling either in person or via telephone (aka "dialing for dollars").
- Locating a big office building with a lot of different companies and do a door-to-door marketing blitz delivering brochures, business cards, advertising specialties, etc.
- Putting ads in local newspapers/local community websites/bus benches, etc. telling the business community you've arrived.
- Having an open house and hoping someone with actual buying authority at a company you want as a customer shows up.
- Delivering cupcakes to potentials as part of your door-to-door/cold calling approach.
Although most of the above seem to be more of shotgun approach – that is go for a wide dispersion and see what you hit after the fact – some of the above approaches to market expansion can be focused. Cold called prospects can be pre-qualified so you only contact industries you want to service and/or identified geographic areas. But, making that decision as to what industries and sectors to target can often be a hit or miss situation unless you know the employment trends occurring in those industries and sectors.
It is a bit more logical, scientific, and ultimately successful to identify what industries are experiencing employment growth in that market, discover the companies in those growing industries, and schedule meetings with the appropriate decision makers. It is possible to easily assess the performance of new or existing customers and align your marketing strategies against those current conditions. In brief, by examining the dynamic relationships between a number of employment matrices, new and fertile markets can be uncovered.
For example, depending upon your approach to the staffing business, you may want to concentrate marketing efforts on sectors experiencing high employment growth under the concept that there could be strong demand for employees and workers in those sectors. But even before approaching those companies in your market area, you may want to pre-qualify those companies by assessing if the wages paid in the sector are consistent with your current business plan. For example, if you provide high-skilled staffing and solutions workers, the average wage base of a sector may reveal that strategic information.
But perhaps, instead of servicing the high-end of the staffing market – and therefore possibly thin in terms of volume – your expertise is providing the staffing to the middle market. Then you would be looking for different trends in terms of a number of different employment matrices by sector. Instead of looking for recent and rapid employment growth and above market wage rates, you may be more interested in looking at sectors with large numbers of workers with average market wages realizing that these sectors may experience high employee turnover rates and therefore always in the market for temporary workers.
The use of local employment data is not limited to identifying potential growth markets – identifying sectors that are declining in employment could have at least two strategic purposes. First, it may provide some guidance as which sectors to avoid approaching for selling staffing services, but it may be used to identify pockets of potential workers.
With the current employment economy possibly entering a period of long-term systemic workers shortages as evidenced by a persistent low national unemployment rate, sectors that may be producing available workers could be identified through declining employment. Coupled with local knowledge of the major local businesses and companies in those sectors, the savvy staffing executive should be able to focus in on companies that may become sources of workers for other client companies.
After all, isn't that what the staffing industry does best? Put people to work!
About VCG
VCG provides comprehensive staffing and recruiting solutions that power success. Since 1976, VCG has helped hundreds of companies and more than 14,000 professionals worldwide achieve operational excellence by streamlining their unique business processes and accelerating finding and placing the people most likely to thrive. VCG, C-PAS, StaffSuite, TempWare-V, WebPAS, StaffSuite WorldLink and WebPAS WorldLink are registered trademarks of VCG, Inc.