{"id":2184,"date":"2024-11-25T19:23:46","date_gmt":"2024-11-25T19:23:46","guid":{"rendered":"https:\/\/techscreen.com\/?p=2184"},"modified":"2025-01-16T14:49:14","modified_gmt":"2025-01-16T14:49:14","slug":"new-kpi-yield-deficit-unveils-it-staffings-undetected-profit-killer","status":"publish","type":"post","link":"https:\/\/techscreen.com\/new-kpi-yield-deficit-unveils-it-staffings-undetected-profit-killer\/","title":{"rendered":"New KPI ‘Yield Deficit’ Unveils IT Staffing’s Undetected Profit Killer"},"content":{"rendered":"

This is the second in a 3-part blog series encapsulating the fractured nature of IT Recruiting, in general, and IT Staffing, in particular. Part II illustrates the true reason IT Staffing firms routinely suffer shockingly low profit margins \u2013 and NONE of the firms even recognize the problem.<\/em><\/p>\n

By Mark Knowlton<\/p>\n

IT Staffing firms are big outliers among service industry providers.<\/p>\n

Service industries typically have robust profit margins. Stock\/Commodity Exchanges and Commercial Leasing both make slightly over 51% margins, so you might assume that it requires advanced degrees and complex knowledge to attain such levels of profitability. If so, why does the category of Nannies, Maids and Gardeners beat both of those industries by a whisker?<\/p>\n

Statista says IT Staffing did about $100B in revenue in the US in 2023, so how it is possible the industry has delivered 4-5% profit margins for the 60+ years of its existence? This low profitability is typical in Retail and Logistics, industries with massive overhead because of physical goods. Where is IT Staffing missing the boat?<\/p>\n

The answer is incredibly simple, but industry leadership either hasn\u2019t noticed or accept it as an immutable reality. Option C doesn\u2019t exist.<\/p>\n

Submittal single point of failure for revenue<\/strong><\/p>\n

IT Staffing firms have 100% of their revenue relying on one thing: A Manager reading a resume. Firms have no way to predict or control what a manager thinks of their submittal, but the decision happens in seconds and in the vacuum of their thoughts. Many firms boast of having \u2018rock star\u2019 sales people who build phenomenal relationships. That may be true, but it means nothing if they can\u2019t influence a manager\u2019s interpretation of a static document. \u2018Thanks for dinner, but I am passing on your guy.<\/em>\u201d<\/p>\n

When a manager reviews a resume, their objective is to move to the next resume as quickly as possible. Three resumes among a pile of six dozen may be from the firm with the rock star salesperson. The manager is just scanning content in rapid-fire mode, so if they don\u2019t see ‘API integration’ or ‘microservices architecture’ in the right context, their brain says \u2018NEXT\u2019. Sorry, rock star.<\/p>\n

Yield Deficit Staffing’s new KPI<\/strong><\/p>\n

That may seem harsh, but what evidence do we have to make such a concrete assertion? The evidence comes with a new KPI we discovered about a month ago. We have named it the Yield Deficit, which is the other side of the Sub-to-Start coin and it will be the key to driving robust double-digit profits in IT Staffing.<\/p>\n

The Yield Deficit measures the hard cost of time spent on subs that produce no revenue. The Yield Deficit illustrates WHY profits are so low and attrition is so high in IT Staffing. The Yield Deficit chart shown above is based on 3 TechServe Alliance staples and one estimate of mine:<\/p>\n