1st Commercial Credit

Learn About Funding and Supply Chain Finance Solutions, Business Tips, and Industry Related Articles.

Over 18 Years in Business

Recent Transactions

invoice factoring for a long haul trucking company dry van

$750,000

Long Haul Trucking Company

invoice factoring for a invoice factoring for an audio visual design and installation company

$1,500,000

Audio Visual Design & Install

Is Corporate Downsizing Helping The Staffing Industry?

Every story has plenty of different angles to it and it is usually possible to spin a story into something positive. It was not that long ago that words such as "outsourcing" and "downsizing" were dirty words in the corporate world. Companies were trying to remain competitive, so they would put facilities in foreign countries where the wages for workers were a fraction of what they were in the United States. Everything from call center work to factory production jobs was being moved to other countries. The American worker population panicked and it seemed like the corporate world was heading for disaster.

One of the things to remember about business is that everything has its ups and then it has its downs. The dot com revolution looked like it was going to put brick and mortar stores out of business for good. But the dot com bubble burst and brick and mortar retailers made a huge comeback. Today, there is a healthy financial tug-of-war going on between physical stores and online retailers. The same kind of swing is coming around in the corporate world where outsourcing and downsizing are not quite the dirty words they used to be. In the staffing industry, downsizing has become a blessing.

What Exactly Is Downsizing?

To clarify this discussion, we need to first understand what downsizing is. Downsizing and outsourcing are not the same thing. Outsourcing is utilizing less expensive means to get the same results. For example, a company will outsource its payroll functions for a flat rate and save significantly over the costs of doing the payroll itself. Downsizing is when companies shed employees because of decisions to eliminate parts of the company or as a cost-cutting measure. Outsourcing can often lead to downsizing, but a company can choose to downsize without the use of outsourcing.

Outsourcing can enhance a company's ability to deliver results to clients. For example, if a company outsources its IT support functions, then the ability to stay up to date on the newest technology will allow the company to remain competitive. Downsizing often hurts a company's ability to perform its functions because it no longer has the staff necessary to maintain its previous level of production. In some cases, a company will take calculated immediate losses as a result of downsizing to try and realize long-term financial benefits. But it can be difficult for a company to bounce back quickly from a bout of downsizing.

How Do Companies Cope After Downsizing?

The whole intertwined stories of downsizing and outsourcing meet at a crossroads that is known as the point of diminishing returns. Basically, this states that there is only so much production a company can get from the resources that it has. A company can increase its marketing efforts to increase sales which, in theory, should increase revenue. But when the increased need for production is not offset by an increase in the personnel necessary to satisfy customer demands, then the investment in increased marketing suddenly becomes meaningless. The companies that had downsized to save money were finding it difficult to bounce back because they did not have the resources necessary to meet demand.

The dilemma for businesses becomes the need for personnel without the funding necessary to bring in new employees. Instead of solving their problem with downsizing, companies complicated things by cutting themselves short with personnel. That is where outsourcing enters the picture. Staffing companies suddenly found themselves acting as outsourcing organizations and providing personnel on an as-needed basis for companies that had left themselves depleted with downsizing. It seems like a short-sighted move by the corporate world, but the solution actually benefits staffing companies and their clients.

The Staffing Company Business Model Was Ideal For Downsized Corporations

Prior to the downsizing trend that started to take place in the 1990's, corporations looked at staffing companies as suppliers of seasonal workers and temporary workers when regular employees called in sick or went on extended leaves. Because the costs of maintaining an in-house staff were manageable for most companies, the notion that a staffing company could be a valued outsourcing partner never really entered into the equation. As salaries rose and market prices dropped, companies suddenly found themselves counting pennies and downsizing departments. Outsourcing was in, while maintaining a large personnel population was out.

The business model for a staffing company was ideal for the corporations that needed to meet customer demand but could not afford to hire more personnel. Staffing companies took care of the recruiting, the basic training, the orientation and the ongoing payroll needs. All the corporate clients had to do was pay the flat fee and outline the job requirements for the staffing personnel. It has been the business model for staffing organizations for decades, but it took on a special importance when the corporate world suddenly found itself in need of a cheap way to meet customer needs.

Staffing Outsourcing Is Rapidly Becoming A Way Of Life

It is funny how necessity often creates solutions that would never have been considered under other circumstances. Prior to the onset of downsizing, the role of a staffing company was strictly defined as a company that supplied temporary personnel for various situations. The idea that a staffing company could become a valued business partner was not something that most corporations had considered. In the past, a company would simply hire the personnel it needed to meet client demands and then try to maintain its growth to continue to pay the additional personnel.

The ebb and flow of consumer demand made it difficult for many companies to continue to add personnel during peak times and then layoff that staff when the peak times ended. It suddenly became easier to outsource all of that work to the staffing companies, especially when the staffing companies started to take on more prominent roles with downsized companies. Through the natural evolution of business, the idea of a company hiring more personnel to meet cyclical demands started to fade. Instead, the corporate world decided to partner with staffing companies and make life easier for everyone.

Downsized Employees Found Better Careers With Staffing Companies

A computer specialist who carries a variety of hardware certifications may become too expensive for a company to keep. In the old business model before and during downsizing, this is the kind of employee that would be the first to get a pink slip in his mailbox alerting him that his services were no longer required. The panic would set in and he would start to comb the want ads to try and find a job before his savings and unemployment ran out. That was the kind of process that did not benefit anyone. That certified hardware specialist spent years developing his career and felt punished when he reached a high level of competence. It was a cruel way to treat experienced employees.

Staffing companies were the perfect solution for certified hardware specialists because these staffing companies had a variety of clients who needed the services of a specialist like that. Instead of worrying about whether or not he would have a job the next week, the specialist found himself involved in a variety of interesting projects that enhanced his career and made him excited about the future. Instead of worrying about becoming too expensive for a company to hire, the specialist would continue to pursue more certifications because the staffing company offered a rewarding future for him. In this way, downsizing has helped much more than just the staffing industry. Downsizing has helped experienced employees all over the world to maximize their careers and forget about being let go because of their growing resume.

Downsizing Seems To Be A Thing Of The Past

These days, we still see stories in the news about companies that have laid off employees because of financial concerns and there are still experienced workers who are being let go because of their rising salary needs. But the staffing industry seems to be stepping in and helping itself out as well as the corporate world. Instead of hiring employees and then being forced to let them go, the corporate world is turning to staffing companies for help in meeting temporary spikes in demand. The staffing companies offer full-time employment opportunities to people who may have otherwise been struggling to find work.

When experienced employees lose their jobs with corporations, they tend to start looking at staffing agencies instead of the job market. The downsizing of the corporate world changed the way that everyone looked at companies and personnel needs. Staffing companies went from being organizations that supplied a temporary need to their clients, to becoming vital business partners in every clients' success. The tendency now is for corporations to discuss their staffing needs with a personnel organization before making any moves of their own. It is interesting how the idea of outsourcing has gone from being something that struck fear in the hearts of the corporate world, to being considered a significant beacon for opportunity.

When trends in the corporate world are given enough time, they often come full circle. The proactive staffing companies of the corporate world were in a position to satisfy the personnel needs of downsized companies at a time when the employment market was in complete disarray. Today, the story of downsizing has become an important chapter in the story of the success of the staffing industry around the world.