Direct hire employment still consists of the bulk of relationships in the workforce. Whether because of low unemployment, flexible staffing needs, or improved efficiencies, let’s examine three other options available; temporary staffing, outsourcing and fractional services. To keep the concepts consistent, we’ll look at each option through the lens of financial staffing alternatives.
Temporary
Temporary staffing has grown in popularity since the 1950s. In the 1980s Robert Half introduced the concept of specialized staffing by providing financial staffing services. Generally speaking, temporary staff are recruited and interviewed by the service and matched up with the proposed client. Markups usually range from 1.4 to 1.7 of base compensation though based on volume and skills it can be higher or lower. The temporary employee works at the client site under the supervision of the client. When a full-time interim need occurs, this can be a very beneficial arrangement and in some situations, the employee is offered employment at the client site, though a transition fee is often part of the pre-agreement.
Outsourcing
Outsourcing is often different than temporary in two ways. First, the entire group or department is outsourced, so the need to develop and improve processes are a large component of this arrangement.
Using the accounting group scenario; the Controller, accountants and accounting clerks are often not on-site or are on-site on a limited basis. The work is often handled in an off-site group setting amongst other clients that the company handles. Some companies believe that outsourcing a non-essential function is a better use of their resources. With the proliferation of on-line accounting systems this has become an ever-increasing development. Some firms even send the work offshore to lower cost countries.
Fractional
Fractional services are the newest of the alternatives, though the segment has been growing rapidly over the past several decades, especially with small and mid-sized organizations. With the small and mid-sized firms, they reach a stage where they need to bring in professional management with experience that can augment the talents of the founding leadership group. On the other hand, they don’t have the ability to afford, nor the need to retain high-quality expertise on a full-time basis. This matches up with the professionals who would be bored or underutilized if they were working full time at this size organization. The answer is to work part-time as a win-win for both sides. Changing demographics have provided a boost as well with experienced professionals being available for less than a full-work week as they transition in their career from a 40 to 60-hour work week.
The other key with fractional services is that some of these professionals work on-site, embedded into the leadership of an organization. It’s not just looking at the numbers and creating a financial model, it’s consistent conversations with ownership and various leaders in the organization to develop key performance indicators, develop what-if scenarios that help the owner make better and more timely decisions. In addition, some fractional service firms work in a team environment allowing the individual professional to leverage the knowledge of the overall team. This is different than temporary staffing where the individual is on an island and bring only the knowledge they personally have.
Temporary, outsourcing or fractional services. Each alternative can be the right decision based on the situation and goals of an organization. If you’d like to discuss the various options, I can be reached at j.farrington@focuscfo.com and I’ll be glad to discuss them with you.
