3 Pivotal Ways Direct Sourcing Will Greatly Disrupt the Staffing Industry

Direct sourcing has become an increasingly important topic within the staffing world, in large measure, thanks to its ability to disrupt the industry as we know it.

This isn’t necessarily a bad thing. As seen across dozens of other industries, disruption often leads to better, more innovative ways of doing crucial tasks. Quite often, the early adopters are the ones who stand to benefit the most, as they gain an essential leg up on the competition.

This disruption is already taking place. Research from Staffing Industry Analysts reveals that a full 60 percent of contingent workforce leaders expect to utilize direct sourcing in the coming years — far outpacing the adoption of other staffing trends.

With that in mind, understanding how direct sourcing is poised to disrupt the staffing industry will be increasingly important both for industry members and those who use their services.

  1. Reduced Need for Generalist Staffing Firms

Companies use their employer brand to curate a private pool of pre-qualified talent in the direct sourcing model. This could include contractors who have worked with the company, “boomerang employees” who retired from the company but are now interested in contract positions, and even “silver medal” candidates who were previously qualified for a position but did not get the job.

With a strong employer brand, companies can build up their private talent pool relatively quickly, making it much easier to attract talent for open positions. When successful, these programs should fill the majority of the open positions a company might experience.

Not surprisingly, this would significantly reduce a company’s need for generalist staffing suppliers. An organization that previously worked with several generalist staffing companies would likely no longer need many of its services once it primarily draws talent from its talent pool. 

Generalist staffers that don’t have a strong relationship with their clients could see themselves losing business. On the other hand, staffing suppliers that focus on specialized and hard-to-fill positions will continue to be needed to help attract and acquire talent that isn’t already part of the private talent pool.

  1. Curation Partners Creating Win-Wins

While more organizations that use the direct staffing model will start to move away from working with generalist staffing suppliers, this doesn’t mean they will abandon staffing firms entirely. 

In reality, most enterprise organizations are likely to retain one trusted partner who can curate candidates into organized talent pools and manage outreach and onboarding when new openings arise. After all, even with a private talent pool, some messaging and vetting will need to occur to ensure the right contractors are brought onboard for a particular project.

This helps create win-wins for both the client and its curation partner. Staffing providers can operate at scale thanks to accessing a more significant number of jobs from clients who previously have worked with several agencies. Continuing to deliver quality results by curating the right talent for each opening will lead to a robust and long-lasting relationship.

Unsurprisingly, this will require staffing suppliers to prove their worth to become a client’s single dedicated curation partner. Agencies already in a position to adopt the direct sourcing model — or have begun using it with other clients — will have a much more significant advantage over laggards.

Of course, this also helps the client by further streamlining the staffing process. Working with a single talent curation partner can help eliminate back-office miscommunications and reduce staffing expenses.

  1. Increasing Importance of EOR Services

The direct sourcing model is primarily targeted at working with the contingent workforce. While contingent workers can provide much-needed flexibility in how an organization operates, the increased prevalence of freelancers and independent contractors can further complicate an organization’s back-office procedures.

Enterprise businesses stand to benefit the most when they partner with a direct sourcing provider that also offers employer of record (EOR) services. An employer of record takes on all the responsibilities and liabilities of a traditional employer, including onboarding and offboarding, managing pay and benefits, and ensuring that workers have been correctly classified.

While an organization may have the resources in place to adequately manage the HR needs of its full-time staff, a constantly changing pool of contract talent can be much harder to manage. For example, unwanted delays often occur as a contractor is handed off between departments, disrupting the hiring process. Misclassifying a contract worker — even accidentally — can lead to significant fines from the IRS and state agencies.

In this environment, the direct sourcing model is poised to make EOR services more critical than ever before. Enterprise organizations that can transfer these and other back-office employment tasks to a trusted partner will have peace of mind and greater confidence in their ability to provide a strong employer brand experience for contractors. EOR providers use their expertise to streamline the contractor experience and ensure total compliance with employment regulations.

For staffing firms, obtaining the role of curation partner will ultimately require much more than knowledge of how to attract the right talent to a job opening. It means handling HR needs from start to finish to deliver consistently positive experiences to their contractors. 

Preparing for Change

No industry is immune to the forces of change — staffing included. Today’s work environment requires greater agility and flexibility than ever before, and direct sourcing gives clients better access to the talent they need when they need it.

Of course, taking full advantage of the direct sourcing model requires the right partners — and this is where full-service solutions like myBasePay can make the difference. Offering a full suite of back-office solutions and EOR services, myBasePay is uniquely positioned to help clients transition to the direct sourcing model while maintaining full employment compliance.

Direct sourcing can ultimately become the model by which staffing firms and their clients scale more successfully than ever before. Those who take advantage of this disruptive force will be that much better positioned in the months and years ahead.


Author: Cesar Jimenez

Cesar A. Jimenez is an entrepreneur, investor, and military veteran with over 25 years of staffing industry expertise successfully leading technology staffing organizations. His expertise in the IT industry allows him to use his experience as a thought leader for talent acquisition, staffing, IT, and recruitment technologies with a passion for contingent workforce solutions.

Cesar has held various leadership roles for both a global staffing organization and technology solutions companies. This expertise has enabled him to develop alternative workforce models that provide the agility for organizations to be competitive in today’s marketplace.

In his spare time, I enjoy spending time with my family, working out, and coaching high school baseball players.

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