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A Virtual Bench of Affiliates Is More Cost Effective Than Maintaining Under-Utilized Employees

A recent research study by the Hinge Institute, reports that professional service organizations grew faster in 2019 than in the last five years yet they remain threatened by new competitors, commoditization, talent shortages and changes in buyer behavior.  If you’re in the consulting business, these forces call for a new way of thinking.

In order for firms to maintain a strong foothold and drive growth while finding ways to be more efficient with competitive pressures in the new decade, organizations need to consider their headcount and strike a balance on their bench between full-time affiliate labor and consulting resources.  As the image below illustrates, the most efficient companies will find that they should ideally maintain staff levels that are just below their average needs rather than maintain a costly bench of under-utilized affiliates.  As projects and client demands ebb and flow, this allows firms to adjust their use of non-employee labor to fill the gaps and retain them only as long as they are needed.  If a firm maintains a full-time workforce at a level higher than that, they run the risk of having too much labor capacity and running inefficiently (read, lower bonuses for everyone).

Maintaining a full roster of full-time staff, and running at too high a capacity is a significant problem for consulting companies where these resources are billable. The adage, time is money, is a true reality for firms and the loss of revenue associated with idled resources is an additional blow to the profitability equation.  Most consulting firms measure themselves through utilization rates and the most efficient organizations should strive to be at 85% to be most economical.  If a firm is staffed at the ‘Peak staffing level’ line above, then the efficiency of that organization is going to be far lower than their peers’ during the inevitable lulls that firms encounter.

One way to increase the productivity and profitability of consulting companies is to curate and leverage a non-employee bench that can be ramped up during a time of demand.  Ideally, a company would engage a strong recruiting team internally to identify potential resources and create a virtual bench of highly-skilled affiliates that would work only when needed.  Historically, it has been difficult to hold on to that kind of talent.  It requires expert skills and foresight to predict and understand future needs, strong curation capabilities to develop relationships with the talent and technology to engage and support the effort.

Alternatively, firms can engage an outsourced provider to source and recruit top talent.  However, this typically has been a high-priced model that was cost prohibitive and still required a team of experts to determine the quality and capabilities of these third-party resources.  Oftentimes, this solution resulted in a staffing strategy that was expensive and not much better than just operating with higher-than-needed levels of staff.

All of that said, it’s a new day.  Smart firms are developing stronger predictive capabilities.  And to curate their virtual bench they have options to build the recruiting function in-house, or outsource the recruiting of candidates to a third party.  Organizations are then choosing a firm like TalentWave as an extension of their employment brand, to efficiently engage these workers on their behalf and provide top-tier benefits and services, similar to those offered by traditional employers.  In this model, there’s a relatively low cost of acquisition, and there are far fewer unproductive and costly man-hours. In fact, some firms are able to lower their full-time workforce to a level well below the valleys in the chart which raises their utilization rates across the board. An added benefit is that employee profit sharing and bonuses can rise along with company efficiency too.

The model delivers a win for all parties.  The firm creates a competitive differentiator and saves money by not paying for under-utilized talent to sit on the bench.  The non-employee workers enjoy the flexibility and independence so many gig professionals are seeking today. And the firm’s clients receive the benefits of great work, from the highly-skilled, engaged affiliates you provide as a resource.  Let us show you how we can help!

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