Buy one stapler at one price, buy 20 and get a better price. Buy 200 and get an even better deal. Promise to buy in bulk exclusively from one supplier, save the most. This is how you purchase a commodity. Getting the best price is one way that companies reduce expenses and save money.
The definition of a commodity is
“a good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors (such as brand name) other than price,” (Merriam-Webster)
and that is obviously true of staplers. But everything is not a commodity.
People are not a commodity. They are not objects that act predictably, and although there are millions of people on the planet, they’re not “widely available” in the commodity sense. Compensation, the equivalent to price, cannot be the only or most important factor. Supply and demand is more volatile in the labor market. People care about more than just money, and what they care about changes frequently throughout their career.
People simply don’t meet the definition of a commodity and hiring them like they are is a mistake. But they are a “cost,” and it would be foolish, even reckless, for a business not to manage costs and save money. Procurement and HR departments are tasked with doing just that. The trick is finding smarter ways to save while not compromising too much.
With any purchase it’s a question of value for cost. How much do you have to pay to get the quality and results you want? When it comes to staplers, the difference between low and high is small, while the difference between the kinds of software developers you can hire is big. For the most part, a $7 stapler works as well as a $15 or $20 version. But hiring a software developer for $75,000, $110,000, or $145,000 will get you very different results. Education, skills, experience, and proficiency are different for each IT professional, and it determines their level of salary.
The importance of the purchase to your company also affects the quality you need and what you are willing to pay to ensure it. The stapler is more critical to the copy department than it is to the receptionist. Office Max might buy a $150 stapler. What’s critical varies from company to company, department to department, and even position to position.
Therefore, it’s important to understand how critical IT is to the overall health of your business. If your website is down, how will your customer’s place orders? If the new software rollout doesn’t happen on time, can you remain competitive? If customer data is hacked, how many millions will you pay in lost revenue, tarnished reputation, and damages?
Understanding the contribution that IT makes is an important factor in determining the value of an IT hire to the overall business. Understanding the IT labor market, current compensation trends, and what it really takes to find and hire qualified IT consultants is pivotal. It’s up to IT leadership and hiring managers to help HR and Procurement learn and navigate the specific nuances of IT hiring. Together they can develop a true strategy for hiring smartly without sacrificing quality for savings.
Why does this matter to me?
Because I’m in the business of finding and hiring IT professionals. ATR International provides IT consultants with access to companies across a variety of industries. Companies who need qualified, experienced people to supplement their permanent workforce. When a company follows the commodity game plan in hiring, that extends to their contingent workforce and it makes our job much harder if not impossible.
Of course, there are companies who do things well, and working with them is wonderful. There are well-run MSPs and internal programs that truly partner with their staffing firms. They save money and bring consistency and efficiency to a difficult process without getting in the way of success. Here are a few recommendations to help you be one of them:
- Rate structures, contract language, length, and other requirements that follow the commodity playbook too closely will far too often place the most importance on price, making it difficult for staffing firms to successfully serve their client and make a profit. Driving rates too low makes it unprofitable to work for some companies and we have walked away from many opportunities because of this. We work with many great clients that get it. Don’t scare away good firms due to unrealistic demands.
- Price and value are linked. Don’t sacrifice quality for savings. Trying to pay the lowest salary possible and expecting top notch results is unrealistic. Pay for value. Keeping rates as low as possible can result in critical positions remaining open longer because it takes more time to find people who are willing to work for that rate. It may also result in settling for people who don’t have all or even most of the skills you were looking for.
- Don’t institute procedures that hinder your staffing firm from doing their job. Some programs balance the need to create efficiency, consistency, and control costs, while allowing the kind of access and communication that leads to real success. Unfortunately, there are still many that institute restrictions, blocking recruiters and hiring managers from contact. Some submission processes and timetables make it hard to find quality candidates – they end up rewarding speed over quality. Tailor your program to avoid this. A one-size fits all process isn’t the best answer.
I’m a business owner. I don’t like to spend money needlessly either. But cookie cutter purchasing rules aren’t the best answer. Applying commodity-like pricing strategies to everything isn’t a recipe for success. A tempered approach that blends best practices in cost cutting and hiring for IT positions will yield the best results.