It’s been a daunting several months for businesses worldwide. Initially scrambling to optimize remote work both internal staff and temporary workers, companies then found themselves focusing on maximizing health and safety best practices for returning to the office. Once those more urgent matters are dealt with, they then must turn their attention to the damage brought to the health of the business.
In a recent Staffing Stream blog post, Adam Hawkins, head of search and staffing at LinkedIn said, “While Covid-19 has presented businesses with many challenges, it has given every company the opportunity to reflect, reset and come back stronger.” While he discussed ways recruiters would be poised to bounce back, there are steps for business leaders to follow to protect and grow their business. Here are eight:
1. Bolster cash. Staffing firms are particularly vulnerable to shocks to cash flow as they pay their temporary workers at the end of each week (or sooner) while collecting payments from clients much later, on average 31 days. This is why you need to bolster cash levels and scenario test cash flows for liquidity and solvency. The 13-week cash flow forecast is one standard tool to help you do this.
2. Check clients. It is imperative during the current pandemic to track customer payment trends and to monitor the financial health of your client portfolio. Businesses often rely on one or two big clients; what would happen if these companies disappeared?
3. Limit outflows. On the flip side of managing cash inflows is controlling cash outflows, mainly by reducing operating costs. Asked how they save their business in the last recession, 42% of respondents either cited reducing headcount (Internal staff payroll represents by far the most significant operating expense for staffing firms) or cutting costs.
4. Work with government. One factor that was not available in the last recession were the many government schemes around Europe that have aimed to support businesses. The difficulty will be for companies unwinding furlough or kurzarbeit (short-time work benefit) schemes. Up to 9 million workers in the UK alone are in such arrangements.
5. Look at alternatives. The economic upheaval caused by the pandemic means that usual sources of demand for staffing firms may be disrupted, but also that new jobs and new sources of staffing demand are emerging. For example, we have seen an increased interest in statement-of-work consultants, and according to Oxford Internet Institute, the demand for online staff is at the highest it has been since they started measuring it.
6. Transform digitally. Companies faced with the crisis have been looking to go online. As Microsoft’s CEO Satya Nadella said in a recent quarterly earnings report, “We’ve seen two years’ worth of digital transformation in two months.” For a useful categorization of the main technology functions in staffing, I recommend SIA’s report, The Staffing Company Tech Stack.
7. Grasp opportunities. While some of the actions highlighted above call for a defensive mindset, we would be remiss if we did not mention the importance of taking advantage of long term strategic opportunities during a downturn. Many staffing firms have formed or planted the seeds of their growth during a recession. Similarly, some staffing firms have expressed regret at not moving more quickly as the situation recovers.
8. Organize. For this reason, we believe that executives in staffing firms should already be forming task forces to organize a route back to work, plan for the impact of any reemergence of the virus. And organize any strategic pivots to new clients or new services,
If you want to read more about the route to recovery or action that companies took during the last question, please see our Coronavius playbook (UK staffing firms; US staffing firms) and survey.