Note: This is part four of a four-part blog series about positioning your consumer reporting agency (CRA) or background screening company to survive and thrive through the current economic turbulence and the turbulence sure to come.
We’ll finish this series by looking at strategies for maintaining relationships with your most valuable assets during challenging times: your clients and your employees.
Consumer reporting agencies (CRAs) and background screening companies are in the people business in more ways than one.
Yes, you help employers identify the right people for their companies. But your business also depends on nurturing solid relationships with the right people, specifically two groups of very important people: your clients and your team members.
This is never truer than during times of economic uncertainty. To keep the revenue and work flowing during a difficult period, you need to have the best people on your side serving the most loyal and understanding end-users.
Why Your People and End-Users Matter Now More Than Ever
If the experts are correct, the economy is headed toward a recession, at least for certain sectors. (We may be experiencing a “rolling recession.”) While unemployment is low and the national quit rate remains high — both of which traditionally drive background screening demand — many industry observers do not expect the good times to last.
Large publicly traded CRAs, such as First Advantage, HireRight and Sterling, forecast negative to single-digit growth for 2023.
A turbulent economic outlook calls for careful planning. The post-pandemic marketplace is gone. Existing clients may be reducing volumes or looking for price concessions and new clients will be much more cautious about committing. Risk aversion is everywhere, making it difficult to maintain volumes that you built your organization to handle 12 to 24 months ago.Maintaining a core of competent, experienced team members is essential for operating as efficiently as possible and providing the highest level of service.
Help Yourself By Helping Your End-Users
It’s important to remember amid an uncertain or difficult economy that your end-users are experiencing the same pressures as your business.
“It’s really critical to understand what your customers are going through,” said InformData Chief Revenue Officer Marco Piovesan during a recent webinar on preparing your CRA to survive and thrive during economic turbulence. Because this may be a “rolling recession,” some of your end-users may be flourishing. “But for the end-users in verticals that are more highly impacted, they may be struggling.”
Like your business, this group of customers is dealing with declining demand and seeking to control their accounts payable. There’s no need to give up on these struggling customers. You can retain their business and strengthen your partnerships by helping them weather this crisis.
“It’s really important for your account management team to work with your end customers to understand their position, their industry, their demand, and their forecasting for 2023 and beyond,” Piovesan advised. “If you’re smart about it, there are so many ways to help them through these tough times.”
It can start with something as simple as reviewing your clients’ mix of product packages with an eye toward reducing or eliminating elements they don’t currently need. You might also consider trading lower prices for longer commitments.
“There are ways to discount some accounts receivable here and, rather, look at long-term contracts,” Piovesan said.
Your clients’ trust and loyalty can help sustain and even grow your CRA during an economic downturn. But to earn their trust, you need the right people to deliver the high-quality results and service your end-users expect.
3 Tips for Maintaining Top Talent During Recessionary Periods
Wilder had a clear takeaway for the webinar attendees: “Focus on your top 25% and try to ensure they are taken care of and prosper during these times.”
To do that, you need to understand what they want, Wilder said. Some items on your employees’ wish lists may be obvious.
“I think we got a lesson loud and clear that people want remote work,” Wilder said. “We’re also seeing a lot of movement around alternative work schedules.”
Wilder offered three more pointers for maintaining an engaged, productive, and cost-effective workforce:
1. Convert Guaranteed Pay Into Incentive Pay
Many CRAs pay their workers a guaranteed rate, perhaps with an annual bonus. That’s just what we did at InformData — before we decided to reward our most productive workers and, by doing so, spur them to continue their excellent work.
“We took some of what would normally be guaranteed raise money, and we turned it into an incentive,” Wilder explained. “We anticipate seeing our best workers getting disproportionately larger compensation in ’23 as a result.”
2. Consider Labor Arbitrage
If your workplace has gone fully remote, there’s no reason to confine yourself to the local talent pool. Now is the time to ask whether hiring exclusively from your CRA’s own backyard makes business sense.
Asked Wilder during the webinar: “When I need to start hiring and replacing people, can I use labor arbitrage? Meaning, can I hire people in other locales either within the United States or across the globe that frankly can do the job at a lower cost structure?”
3. Lean on Your Vendors
When demand increases, most CRAs and background screening companies tend to staff higher and rely less on outsourcing. When demand starts heading down, outsourced vendors can help you maintain an even keel.
With vendors, your company only pays for the transactions you consume; if your volume drops, so do your costs. The same is not true with employees, who you must pay regardless of volume.
So, Wilder suggested, if someone leaves your company, don’t be so quick to replace them.
“Maybe now is the time where, instead of hiring that replacement developer, I use a contractor at a higher price per hour, but I only pay for what I consume,” he said.
We’re All In This Together
CRAs like yours, your end-users, and data providers like InformData are all seeking the best path through the current economic turmoil. We can get through it together by sharing ideas and we hope we’ve given you some things to think about in this blog series. If you have ideas about how your CRA can improve efficiency and become more flexible and responsive to the changing economy, reach out to your InformData sales professional or customer success associate. They are your conduit for introducing ideas that can help us help you.
Just to review, we made our best guesses as to what the economy holds for the next two years, offered some tips for streamlining your operations, discussed growth through innovation, and explored ways to maintain and strengthen your client and labor relationships.
Click any of those links to revisit previous parts, and click here to watch the entire presentation in webinar format, featuring experts from the InformData leadership team.