As the interest in everything diversity-related grows, buyers of contingent labor and other solutions are looking closely at diversity-owned staffing firms. But that’s not all; client companies are looking to take things to the next level within their workforces.

Spend on diversity-owned staffing firms is more important than ever. In addition, client companies are also looking at what staffing firms are doing to promote diversity, looking into specific types of diverse firms and seeking to get diverse talent. Seeking diverse talent is of major importance to client firms and using staffing firms to bolster diversity can help ramp up diversity relatively quickly. With client companies converting on average 30% of their contingent workers into direct hires, it’s a reliable way to drive diversity mix.

But as large and small enterprises shore up on their diversity initiatives, they want their efforts to be more than a check-box endeavor — they want to see a commitment from their suppliers.

Research from SIA backs this up, with diversity ranking as one of the top goals for large staffing buyers in SIA’s “Workforce Solutions Manager Survey” released last year.

The report found 64% of large firms that use staffing services had a program for diversity suppliers in place during 2020 and 30% planned to put one in place within the next two years. That’s up from a similar survey in 2019 that found 60% of large firms had a program for diversity suppliers in place and 29% were planning for one in the next two years.

This year, SIA’s list of Diversity-Owned Staffing Firms — US and Canada has 151 firms representing numerous staffing segments.

Numbers Reflect Interest

There is a groundswell of interest in working with diversity-owned suppliers. Gene Waddy, co-founder and CEO of staffing firm Diversant (one of the diversity-owned staffing firms on the list) and payrolling provider Alpha Business Solutions, says: “I’ve never seen it this active.” In fact, some companies he has been trying to sell to for some 15 years are now approaching him.

In addition, customers are becoming more granular in what they are seeking. Years back, they would ask for a diverse supplier; now, they are more specific about the type of diversity they are seeking in a supplier based on any business gaps they are trying to fill. For example, they may be looking specifically for a Black-owned, Latinx-owned or LGBTQ-owned company.

A number of factors appear to be driving that interest. Besides Black Lives Matter and the events last year sparking a global movement, the contentious 2020 presidential election changed how people view big companies and their leadership. Does the corporation have a diverse workforce? Do they hire from underrepresented communities? How is this talent being treated? As a result, “the big Fortune companies are all putting more thought and vigor into workforce diversity,” Waddy says.

Tammy Browning, president of KellyOCG, the talent solutions division of Kelly, also notes increased interest in diversity, equity and inclusion reflected in the spend. KellyOCG handles $2 billion in spend from diversity-owned staffing firms.

This interest is expanding among industries as well, Browning says. Some, such as life sciences, were always aware of their diversity spend; now all industries are. And it’s across North America, Europe and Asia.

“It’s every customer,” Browning says, whether the customer’s spend is $2 million or $150 million.

No Secret Sauce

Staffing clients are now beginning to ask more questions — such as how a staffing supplier is developing diversity both internally and externally, Waddy says. They are asking how diversity-owned suppliers are mentoring other diversity-owned staffing firms. What are they doing to increase diversity talent? Are they investing dollars to create a talent pipeline? Do they actually hire diversity candidates ahead of anybody else?

Mahfuz Ahmed, CEO of Digital Intelligence Systems, or Disys, another firm on the list, is among those seeing greater interest in diversity. Disys is among the largest diversity-owned staffing firms in terms of revenue. It also ranked as the 16th-largest US IT staffing provider overall among all types of firms in 2020, not just diversity-owned firms. Recently, it announced the acquisition of Signature Consultants, the 15th-largest US IT staffing firm, which would give the combined company annual revenue of $860 million.

One challenge for diversity-owned staffing firms — and all new firms — is they have to break through long-established relationships. And it can be a challenge to be on the outside coming in.

“Most of the big companies do have a minority development organization to assist,” Ahmed says. In those cases, the minority development organizations help the diversity-owned company network and introduce them to hiring managers.

But diversity staffing firms also have to concentrate on quality in order to
succeed, just like any other firm. “There is no secret sauce, it is about being
relentless about delivering a quality product to your customer,” he says.

Mirtes Lobaito, founder and CEO of IT staffing firm AGM Tech Solutions, which is on this year’s Diversity-Owned Staffing Firms — US and Canada list, says it similarly. “Just because you’re diverse doesn’t mean you’re going to succeed,” Lobaito says. “You still need to be really good at what you do and communicate that to the companies you want to do business with. … At the end of the day, it’s about delivery and execution.”

Other important things to keep in mind: Diversity-owned staffing firms must make sure that their designation is clear to client organizations, Lobaito says. Diversity certifications such as those from the National Minority Supplier Development Council and Women’s Business Enterprise National Council are also important. They serve as independent confirmation that a company is diversity-owned and offer these businesses networking opportunities.

She also notes providing a specialized service will help a firm stand out. KellyOCG’s Browning said her division has a supplier advocate team dedicated to doing nothing but supplier development, and they advocate on behalf of diverse suppliers across their client base. Diversity-owned staffing firms should take advantage of the opportunity and proactively reach out to engage with such teams. Also, staffing firms should proactively contact on-site MSP teams to learn how they might be of greater service, especially in terms of providing diverse candidates with the right skills.

“It’s still a relationship business,” Browning says. “Building relationships is very important especially when working through an MSP and when a VMS is the technology interface.”

That said, staffing suppliers also need to take advantage of data and analytics portals that provide visibility to better target their approach. Many MSPs have a talent supply chain portal that allows staffing suppliers to see available opportunities across different clients, and those suppliers taking advantage of visibility can thrive.

Stepping it Up

Brian Hoffmeyer, senior VP of market strategies at VMS provider Beeline, says staffing firms need to speak with their clients and understand where they are on their diversity, equity and inclusion journey. Some clients may need education or help on executing a program — and that’s where staffing firms can help and make a difference, such as by showing how they can recruit a diverse set of quality candidates.

Hiring of diverse candidates is more important than ever for client companies as well. “They want the workers themselves to be diverse and need to be able to show their entire workforce — which includes employees and non-employees — is ‘x’ percent diverse today and they have a goal of getting to ‘y’ percent diverse in two years.”

Using diversity-owned firms is especially important for firms that do government contracting, Hoffmeyer says.

Diversity-owned staffing firms supply all types of talent, whether diverse or not. But AGM’s Lobaito says diversity-owned staffing firms can have an edge when it comes to locating diverse talent.

“I think that diverse companies are more intentional in looking for and identifying diverse candidates for their clients, for sure,” she says.

Disys’ Ahmed notes staffing firms must specifically focus on recruiting diverse candidates, especially if that is what the client wants. However, such a focus may take more time. Additional criteria also shrink the pool of potential candidates, he says. On the other hand, this is an area where, oddly enough, the pandemic appears to have had an unintended benefit, having spurred increased acceptance of remote work. And for client firms that have accepted remote work, it also means a larger area from which candidates can potentially be recruited.

The Future

Going forward, it appears that interest in diversity is showing no signs of abating.

Diversant’s Waddy says business at his four-year-old payrolling company Alpha Business Solutions is up and external worker headcount has risen 30% since Jan. 1. Revenue is set to double and that, in turn, is helping the company do more to hire people from the communities it serves.

But Waddy’s company has certain criteria that they won’t back down from.

“We will only sign up for an engagement if we can do a good job; we’re not going to sign up so someone can check a box. We’re very specific about what good business looks like for Alpha or Diversant.”

And as the interest in diversity continues, many staffing firms are jumping on the bandwagon as well. What bodes well is that staffing firms are doing what it takes to distinguish themselves from the competition, trying to serve the communities — underrepresented and otherwise — they hire from, rather than just checking the ownership box.