Avoiding Payroll Godzilla: How to get bigger without being eaten alive.
For anyone who has ever owned an alarm or security business, it's a well-known fact: payroll for your technical and installation crews can eat you alive if they aren't working at near capacity. Most companies spend the lion's share of their operating revenue on payroll.
But with the natural ebb and flow of an installation business, many owners run into a catch 22. How do you deal with a constant expense such as payroll for installers when business can fluctuate by as much as 50% depending on the season?
For many companies in the wiring industries, the outsourcing of specialized wiring labor has become the answer. They are building a flexible workforce.
Mr. Bobby Mauro, an Operations executive with NetVersant Solutions, a national provider of electronic security systems, high-end telephony and network infrastructure solutions, puts it this way, "In our business, we need flexibility, but what we don't need is more fixed overhead. By using temporary outsourced staffing, we don't have to hire for peaks – we know we can get the talent we need when we want them, and once the job is finished, they're not our liability. So we can bill for them, but not have to pay for even one extra hour."
Outsourcing a certain part of your labor force can do more than just add workforce flexibility and lower costs. It can also help you bid on larger contracts, knowing you have access to the qualified labor you'll need to fulfill the job.
Mr. Greg Stearns, C.E.O. of Tel Tech Plus, a large Southern California engineering and structured cabling company that focuses on inside and outside plant infrastructure explains it this way. "At any given time, we'll run the gamut of having no outsourced staffers on board to having as many as 40 temporary workers. The flexibility we have to respond to our customers is a direct result of being able to outsource quality personal when we need them, and send them back to the agency as soon as the job is over."
Mr. John Meyer, a Senior Project Manager for Tel Tech Plus, concurs. "A good portion of our business is based on projects - and the ability to scale up or down on a moment's notice is huge," Mr. Meyer explains. "It allows us to pursue the larger contracts and know that we will have quality manpower. When it's all said and done, the hourly rate being paid to a specialized outsourced laborer is comparable to what my direct hires are compensated, especially when you take into account benefits, vacation and taxes. The difference is that the moment their services are no longer required, they can be released or moved to another project without any additional administrative efforts."
Another big benefit of outsourcing a portion of your labor needs is that it saves the company unemployment costs. Mr. Frank Spaeth, an executive with Network Infrastructure, says. "By Outsourcing a portion of our labor, we don't run into the yoyo reaction of having to hire and fire people. So you're not putting people on unemployment, which saves the company money and avoids the pain of having to tell someone they no longer have a job."
While outsourcing of labor isn't new, the concept of having specialized people in the alarm and security business might be. Specialty staffing firms have been adding security, fire alarm and access control arms to their already successful offerings, offering companies the opportunity of having their own flexible workforce.
Mr. John Lowell, NFBAA member and CEO of Outsource Telecom, a national staffing firm specializing in the wiring industries, sums it up this way. "Structured cabling continues to get more specialized, and we've adjusted to the market. During the past year, we've expanded into fire alarm, CCTV, security system and access controls, and because of the demand, we've moved from being a regional company to a national company."
And while Mr. Lowell's company continues to grow, it's the market demand that is fueling the growth. "A lot of clients realize that they want to get bigger and take on more jobs, but they're afraid to get caught with too much payroll. Even a three or four week slowdown can take its toll on a company when there's no work to bill against. That's why they turn to us. We can give them exactly what they need, when they need it, with no liability whatsoever. When the job is finished, the workers are off the job."
We've all heard about Fortune 500 companies outsourcing to India, but this is different.
Mr. Spaeth of Network Infrastructure Corporation explains. "Say we're looking for a certain type of installer, one that has certification, and needs to work on specialized equipment. By the time we recruit, interview and hire, we could have had someone in here for a week and the job would be done. From a timing standpoint, it just makes sense to outsource a certain part of your business, in essence creating a flexible workforce."
Another benefit of outsourcing is the ability to test someone out, to see if they're right for your company and your culture. The reality is that only about 50% of all hires ever work out. That's why it's so important to retain your best people with competitive pay and good working conditions. But with outsourcing, most staffing companies usually offer some kind of temporary to permanent hiring opportunity. So if you really like someone, you can usually hire him or her for a pre-set fee. That becomes a pretty good value proposition considering you didn't have to go through the recruiting and hiring process yourself, which has its own set of costs.
Now, we're not saying that outsourcing is going to take over the world. There is still a core group of key employees that every company needs to maintain the status quo. But there are very few people reading this article who wouldn't readily admit that they'd like to bid for larger, more lucrative contracts if they didn't have to risk hiring more people that may not be busy all the time. So outsourcing a certain part of your labor can help you compete and win the larger contracts and give you a business strategy that minimizes risk and maximizes upside potential. It's a growing trend and it's here to stay.
About the Author:
John Peretz is a nationally recognized author who covers technology integration issues. He resides in Steamboat Springs, CO and can be reached at johnperetz@yahoo.com.
