I don't know if you have heard or not, but there's a recession going on outside, and it's been pretty bad. While most analyst are predicting that the recession should end sometime in September of this year, there has been a growing demand from a number of companies to reduce how much they are paying for their people in an effort to curb cost and save money. While it is agreed that during these difficult times, saving money has to be a major priority of any company looking to survive, companies who make the decision to focus on doing this at the cost of what they pay to hire new quality talent are making an immensely poor decision that could lead to more of their demise than their salvation.Is Quality Ever Cheap? The Danger of Trying to Get Deals on Employee Labor During a RecessionBut there are so many people looking for jobs now! Why would I want to pay MORE, when I can get more for LESS? This is the natural order of thinking and initially seems like the right thought. However, similar to most things "That which seems the most obvious is often not." - (A Ken Middleton original quote BTW) Therefore, if we look a little deeper, three things come to light to combat this statement and effectively bring to light that companies hurt themselves more than anything else when they implement this strategy.
I.TOP QUALITY EMPLOYEES STILL HAVE TO BE LURED
While the current national unemployment is 9.1% as of today, the reality is that the majority of individuals who are no longer working were all laid off for a reason. While there are always exceptions to the rule of individuals who lost their jobs because of strategic decisions made by the company to go into another direction, realistically 90-95% of individuals who were let go were done so because of one reason - there were expendable. Expendable can mean a lot of things. Simply put, however, it means they were a B player or lower. Therefore, the best quality employees are still working. To ensure that you company gets the top quality talent and is able to put the best people in the right position; one has to still pay premium rates for premium services.
On the flip side of this, some of the best employees who are still working are still open to listening to a new employment opportunity if offered the right price for which they feel their services are worth. While a number of companies are lying off employees to save money and help the "bottom line," the left-over duties that are being taken over by the remaining employees can create a heavy workload and long hours. For this reason, there are a number of A-quality employees who are open to listening to another job opportunity more openly than ever before. Especially if this person has been asked to take on more work as well as take a pay cut for the "good" of the company. Offering a lucrative pay package that demonstrates this worth could potentially land you a primetime player who would end up saving your company millions with innovativeness and brilliance.
While individuals with jobs still need to be lured with quality money, top quality employees are also very much more likely to be willing to wait on the sidelines until the market rebounds before accepting a position that is beneath their skill level. These individuals generally have accumulated enough money due to their abilities and are financially stable enough to remain on the sidelines, while others may take the first thing that comes their way. These individuals could even decide to begin their own business if they feel that there are not enough opportunities out there that pays them for their worth and skill level.
II.NEGATIVE FEELINGS AND VIEWS FROM PAST, CURRENT, AND FUTURE EMPLOYEES While many are able to underpay employees because one would think someone was "happy to have a job," it is very dangerous to think this way when it comes to the long run of retaining these employees. Paying someone what you think they will take as opposed to what they are worth could ultimately hurt more than help an employer in the long run. Think about it: How would you personally feel if someone only paid $25/hr for a job that they know is more of a $35/hr position because they know that you are desperate and would take what you could get. While we may all decide to take this job and do it happily, we would not forget this treatment and could build up a wall of resentment towards our employer. This could cause quick problems with retention down the road, as employees will have less of a sense of loyalty to an employer who they feel took advantage of a down economic situation to underpay for quality.
To add onto the past and current employees who would have major feelings of resentment and anger, this could be small in light of what kind of tales of despair could grow about your company throughout the respective industry's employee community. It is widely known throughout any particular industry when a company has a "bad wrap" for their treatment of their employees. People are typically going to believe their friends and if there are continuously telling them about how ungrateful they felt working for a certain company; they are going to inevitably believe this person and, more than likely, share it with someone else. And, as in the game of telephone, the story would probably only grow worse as it passed from person to person. Have a bad reputation may not be that big of a deal as employees are hard-pressed for some positions, but as the economy recovers and the unemployment rates begins to drop back to normal level, having such a dire reputation could consistently keep the top talent from wanting to get aboard of such a employee-unfriendly company.
III.ENSURE THAT YOU WILL GET BETTER OVERALL QUALITY
While ensuring your employees happiness if a very good reason to open up the purse strings, the most important reason is generally the most obvious: QUALITY ISN'T CHEAP. While we have heard this many times since we have been small children, it is amazing that the "intelligence" of the corporate world seems to contradict this old adage. Top companies offer quality products at quality prices. While quality doesn't mean it's the most expensive, it definitely doesn't mean it's the cheapest. Take a simple comparison between two generally recognized car brands in the US: Dodge Neon vs. Honda Accord. While the Neon was known as the car that wouldn't hurt your pockets too much and young college students and high school students loved this car since they could generally afford it, once individuals were able to pay for a little more quality, they did so. It is not a coincidence that the Dodge Neon is no longer in production, while the Honda Accord has been in the top 10 for best selling cars for the last 10 years...and doesn't seem to be going anywhere soon.
If you want a quality employee, you have to look to work with a staffing company that is charging quality prices for their people. While one may think that all staffing companies are the same, this simply isn't true. Honda and Dodge may both get you from A to B, but it is very apparent that Honda offers something that allows them to charge more for their product than Dodge, and, therefore, produce a better product that allows them to continue to be in the top 10 for the past 10 years. If they were overcharging people for the quality of their cars and service, wouldn't consumers eventually stop buying this product? The same is true from a staffing perspective. Unfortunately, there is a largely misguided opinion that large staffing companies overcharge. Do people think Honda overcharges for its Accord? Of course not, since most people recognize the quality that it provides. This is the same with staffing agencies. Higher end staffing companies are charging a premium for their services because they are giving you a premium product. It is most understood that quality is not what you see, but what you don't see that makes a difference. While "Dodge" staffing companies are willing to cut corners and lower their rates because the quality isn't there, "Honda" staffing companies understand the quality of the products they provide and will rarely reduce their prices to reduce the level of quality they present to you.
The final question that a company must ask itself is simple: how important are your people to the success of your business. If your business can still thrive and prosper by employing mediocre people in various positions, then there is nothing to worry about it. But if this isn't the case, you have to consider paying quality to get a quality person in place. Let's look at a dinner jacket analogy. If you and your buddies were going to a Halloween party and you need a dinner jacket (or dress) to complete some goofy looking costume, you would probably go to a supermarket store (i.e. general staffing company) and get the cheapest jacket (or dress) you can find that would last through the night. However, if you were shopping for a dinner jacket (or dress) to attend a major dinner function in which you are going to meet your significant other's parents for the first time, you would probably go to a specialty store like Joseph A. Banks (specialized staffing company) to make sure you would get the quality that would impress and last for a long time. You would pay more, but the importance of the situation would ease your mind, as you would know you are making an investment more than anything else.
While managers might think that they could still do fine with going with the cheapest model, the true danger in doing so could be more detrimental than you think. By deciding to go with the cheapest price over quality and trying to pay as little as possible for talent, you run the risk of hiring someone who ultimately could cost you your own job. How do I reach such a conclusion? Well, it is widely recognized that every manager who hires someone who doesn't work out is directly or indirectly hurting the rest of the overall team in some manner. Hire the wrong person more than two or three times, and you could put your job in serious jeopardy, as you co-workers would not be as understanding of your decision to go with the cheapest to make your final line look good, at the expense of your co-workers' angst. In conclusion, while saving money on employee salaries and staffing hourly rates may seem like a good result of the economic downtown, to acquire the high quality candidates that will bring quality results to your bottom line overall, one should still consider paying premium rates. The fact that most of these candidates are still working and have to be lured, will remember being "low-balled" when the economy turns around, and understand the price of the quality of service they provide, makes the old adage consistently resonate in the ears of those who are listening - "quality ALWAYS (even in a recession) comes with a price."
By Ken M. Middleton
Ken Middleton is an Account Manager for TEKsystem for the past two years and works with IT/Telecom companies to help forecast their potential needs for contract labor. He then works to help identify talent to fill these positions. If interested in discussing TEKsystems services for your company, feel free to contact him at 919.816.1470 or email him at kmiddlet@teksystems.com
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