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Are There Too Many Staffing Agencies?

by
Matt Lowney
Nov 16, 2011, 5:59 am ET

Staffing agencies struggle to differentiate their brand message and uniqueness in a sea of competition. In my dealings with staffing agencies, their pitches all begin to sound the same, but they also recognize that the sheer volume of competitors makes it difficult to sound different, if they truly are. In most local markets there are a handful of solid players and a larger number of peripheral staffing firms that tend to create the “noise” (read: sales calls). Here are some thoughts on being a top staffing agency player in your market.

Be different. I harked on this point a couple of months ago, but I challenge any staffing agency that wants to be great to clearly communicate their compelling business case. Talk about your recruiting process, client relations, local market connections, and client successes.

Don’t be a cheesy sales guy and don’t treat your own recruiters poorly. I know a lot of staffing agency recruiters, and I shy away from vendors that treat their recruiters like dirt (this also drives high turnover and lowers the professionalism bar for all recruiters). Some vendors may say how they run their businesses is none of my business and I should judge them simply on candidates hired. And in response, I will say that how you treat your people speaks volumes about how you are different/better.

Understand your competition and how they do business. As an extension to my previous point, I think staffing firms are so entrenched in the daily operation of their own business that they don’t take the time to understand the competitive landscape. Are your competitors dropping the ball with other clients? What are they doing to build business and break into new accounts you’d like to be in? I think that the typical staffing agency only has a superficial understanding of their competitors and then tries to sell against these perceived weaknesses (for example, I hear “we don’t just send you a bunch of resumes like everyone else” a lot).

For the savvy staffing agency, this in-depth knowledge of the competitive landscape should provide you with worlds of opportunity. The truly great vendors know their competition, know their recruiters, and know their challenges and strengths. This knowledge should provide an agency information on where business development opportunities lie in the market. As a corporate recruiter this information can provide me with much-needed insight into the current talent pool and where my recruiting headaches may soon lie ahead.

Too much business development is done with the “give-us-a-shot” approach. When I wrote my previous article several agency recruiters reached out to me and said, “How will you know that I’m different without giving me a shot at a tough requisition?” While I appreciate their effort, I can’t simultaneously engage a lot of vendors with this request. My world would be consumed with just managing vendors and their candidates.

Here’s a business development suggestion: Go to a client where you’ve had solid success and ask them to either A: Make a call on your behalf (I know that’s a huge stretch but I’ve done it before), OR B: Ask if you can use their name and success story when calling into another company. Strong relationships with clients allow this level of imposition. Lastly, don’t be everything to everybody. One issue I’ve seen with vendors is that they contract with every company in town. In the staffing business I know that means more sales, but it also limits your ability to recruit talent away from my competition.

Maybe there is a need for this many vendors. Ultimately I know the answer to this question is dictated by the market. If there were truly too many staffing agencies, natural selection would weed out those that are less successful. This is an effect we saw during the Great Recession. Some staffing agencies closed up shop while others were able to stay in business and make it through a couple of tumultuous years. However, the handful of excellent staffing firms drown in a sea of mediocrity.

The few solid staffing firms have a reputation built on years of experience, consistency of internal staff, and relationships built with hiring managers and human resources. As a result, a lot of their business development comes when a trusted hiring manager moves to a new company. This person becomes a strong internal champion helping introduce the agency to a new client.

Maybe they are all the same. In consideration of this article’s content, maybe we need to consider this reality — the vast majority of staffing firms are the same. Their sales pitches sound the same and their recruiting approaches are pretty similar, so maybe the best staffing firms simply have the best salespeople.

Perhaps it’s time for staffing firms to admit this reality of sameness and let hiring mangers work with the salespeople they like the most (or take them to coffee the most or get them football tickets, etc). What if success is truly predicated by luck and “dialing for dollars”? If this were the case, then treating vendors as a commodity is the only reasonable course of action (And further reason for the proliferation of vendor management systems).

In closing, I will be the first to state that I don’t know if there are too many staffing firms. At first pass, my opinion seems to be yes. I get way too many solicitation calls for the same service to think otherwise; however, the reality of the market will really bear out whether your local market can absorb new players and will weed out others.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

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  2. Jerry Albright

    There certainly are too many agencies. I can only imagine the ringer I would run every newly minted Account Manager through when they came across my number in their CRM!

    I realized long ago I was not faster than my competitor. I am not privy to some secret stash of “top talent”. I have no particular ability to judge whether someone is in the top 5% of the talent community or the top 30%. The list of commonalities shared among the recruiting world is staggering.

    That’s why we have done something that sets us apart. With the click of one button – our clients get to listen to the candidate describe why they’re a fit for the job. Not me pitching them. Not a point by point email summary. Just the guy telling it like it is. No software to download or pass codes. No Video baloney. Just their voice – on top of the resume.

    Yep – we are different. Thanks for reminding me Matt! Nice read.

  3. John Kreiss

    Here are some of my thoughts on how to differentiate your staffing firm from the others.

    Focus – It’s impossible to be an expert to everyone. Concentrating on a target niche helps recruiters understand their client’s needs better. It’s also easier to build brand recognition among the smaller prospect base.

    Stimulate Prospect’s Income – Refer business opportunities to prospects, and see them come to you when it’s time for them to hire.

    Be an Industry Advocate – Support your target market causes, write legislators when issues affecting your target market arise.

    Develop an inbound marketing strategy – Cold calling is not a good long-term brand development strategy. It’s a rat race, and the strategy doesn’t differentiate your firm from all the others. Start getting clients to come to you using things like blogging, commenting on industry specific blogs, speaking at events, getting quoted in trade magazines, etc.

  4. Thomas Mulhearn

    The market is ruthless. The market will decide when there are too many.

  5. Brian Kevin Johnston

    Title Question: Are There Too Many Staffing Agencies? YES
    Why? Because you can make a $hit load of money, BUT humans are inherently selfish and lazy, especially recruiters. When you find a recruiter that leads her life with her “heart” (God) vs. her head (Ego), stick with them.. Over the long term, you will both WIN.

  6. Michael Silcox

    Great article Matt. After 15 years of technical recruiting and account management I have come to realize that dialing for dollars is a thing of the past or for the newly minted Account Managers :). I strive to get my new business through referrals or working with past candidates now in a hiring role. I stay away from the companies that use multiple vendors, they are too much trouble to deal with and sucess is based more on luck than skill. My two primariy responsibilities are the happiness of my client and my recruiters, anyone who can balance these can be a sucess in this business.

  7. Isiah Savage

    Online presence is also extremely essential in today’s market. The average daily internet exposure in America for individuals 18 to 64 in 2010 was 5.17 hours. That is why when job seekers see staffing companies with web sites and ATS’s from 2006 they will pass on the company. I work for jobing.com/recruiting.com in which we create career micro-sites and
    various technologies. If anyone has questions about improving there online marketing please feel free to contact me at 1-888-851-9004 ext 3881 or at least check out the site to see if we can help in your efforts.

  8. Jerry Albright

    Sorry Isiah – but I’m going to disagree here. An online presence is not essential. In fact for quite a few recruiters I see them spending more effort on “being present” than “making presentations” which – for an agency – is critical.

    The recruiters who concentrate on what their paying clients see/feel/touch rather than some ambiguous “brand” have always been and will continue to be the winners.

  9. Keith Halperin

    I think there are too few recruiters, or at least too few recruiting/staffing models. I’d like to see more experimentation and differentiation. I saw a very established and respected niche recruiter do a 3”-3-3 Model”: 3 clients/market, $3k/mo retainer, $3k/hire. I like the idea of someone charging to create a viable community/pipeline, as opposed to just hires. I want to see more “Solution Recruiting” where they hire the recruiter to get the needed work done, whether by FT, PT, contractor, consultant, automation, outsourcing, or even elimination, as opposed to just selling/renting a walking/talking “widget”. I’d like to start seeing Ivy League- and other elitely-educated, rightly-connected Indian recruiters who look like Bollywood stars and speak with posh Oxbridge accents start going after the executive recruiting game for 10-15% fees. I’d like to see expat American, British, etc. recruiters going off to 3rd World countries where they can live like kings and compete effectively on a cost basis with internal corporate recruiters. I’d say: “Don’t get me started” but it’s too late for that.

    Cheers,

    Keith “Ask Me How to Do These” Halperin

  10. Karen Kerr

    In my past years in staffing, I have been through enough reorganizations, re-engineering, and “new business models” to develop a very cynical view of this…. The market will take care of who survives and who doesn’t, and no, there is no secret business model… except maybe trust and mutual respect. And a decent bill rate.

  11. Keith Halperin

    @ Karen:
    “Trust” and “mutual respect”? I thought this was supposedly a recruiting forum….

    Cheers,

    Keith

  12. Suzanne Sears

    Well Matt: The conversation continues with your spot on challenging questions…..always up for a challenge.

    The question: are there too many recruiters: probably falls into the same category as Are there too many lawyers? or too many real estate agents?

    The answer of course is:
    You arent going to retain endless numbers of lawyers to represent you: you will pick one that you have confidence in and pay him a retainer.

    To sell your home: you will give an exclusive listing to just one agent.

    Simple: problem solved……..those industries know you obtain best service by “locking in” with someone to represent the client fully.

    HR departments have created this situation themselves by throwing open the doors to their searches in the mistaken belief that “more is better”.

    More recruiters is usually more dilution: less connection with you and your corporate needs. More recruiters is a replication of candidates.

    More in this industry is not better.

    But as long as its “free”….i.e. contingency: Hey what the heck?

    Send a dozen people out there to scramble for you in a wild scavenger hunt and then tell them how lousy they are that they didnt bring back the Ark of the Covenant for you as a candidate.

    Why bother paying a retainer?….so that the dynamics are set up: First in with the candidate: first to be paid.

    That switches the focus to quantity and speed: not quality.

    Matt; I challenge you back that the quality of recruiting service HR receives is what they set themselves up for…..

    Contract your recruiting services the way you do your legal services and see what service you get……I challenge you to try that first: and then come back and report on the poor state of the recruiting industry.

    Smilz :)

  13. Alan Fluhrer

    There is guilt on both sides here. For hiring companies, treating all agencies as commodities, and expecting great service, is naive. Likewise, agencies only dialing for dollars is naive, and plays into the commodities argument.

    Having been both external and internal at many firms I can attest to:

    1. Out of every 20 agency vendors, may 2 are doing a good job.
    2. For recruiting firms that have a good reputation and produce, there are some firms that will bring you on even if the “period of reviewing vendors” is past/closed.

    One of the biggest fallacies is the following: “But we’re XXXX”, (fill in almost any company name here). Unless you are Microsoft this just doesn’t hold water anymore.

    Here is a very out-of-the-box idea for companies, and I have seen it work. Take a new agency on, or, when you redo your vendor list, offer to pay more than the typical fee, (Ok stop laughing), this really works. From an investment point of view, you are not paying that much more per-hire. AND, you get an enormous amount of good will and the absolute first rate service and attention of your vendors. You will actually save more money that you can imagine, in the long-run.

    If you have questions about how much $$$ you can save, and it can be millions, feel fee to ask me

  14. Michael Silcox

    Excellent Comment Suzanne!
    This is my biggest complaint about today’s recruiting business model:

    Why bother paying a retainer?….so that the dynamics are set up: First in with the candidate: first to be paid.

    That switches the focus to quantity and speed: not quality.

  15. Keith Halperin

    Here’s a rule of thumb:
    Under the standard model, don’t prepare to take an agency on to do work that you’re not prepared to pay 30-35% to have done for you. Do not expect quality “on the cheap”. (BTW, I’m not a contingency or retained recruiter.)

    -KH

  16. Alan Fluhrer

    The other thing of setting things up as a horse race is the effect upon your company’s brand.

    Suzanne/Michael/Keith, excellent comments

    We all know that you can’t get something for nothing. One of the opportunity costs that may play out more in the near future could be the perception of the hiring firm’s brand within the candidate community.

    Recruiters that know what they’re doing, and do it well, are an advocate for you and can even help broaden your firms reputation. This has great value beyond finding the candidate.

  17. Keith Halperin

    Thanks, Alan.

  18. Darryl Clements

    I agree with KH that there probably aren’t enough recruiters.

    However, it’s a very difficult to be different and present a different model when so few companies are willing to try something different.

    I’ve posed to companies before that perhaps they should consider moving to a larger, more diversified list of smaller, retained recruiters willing to compete on service distinctions first, then price. Few accept that challenge.

    Instead, far too many companies continue to haphazardly use contingency agencies and limit retainers to only very senior positions. Have to ask why? Does it make sense to have a pipeline/relationship-driven connection to recruiters who do a significant portion of hiring at other levels? Every time I ask that question, I get strange responses.

    Could it be that the relationships that matter most with recruiters should be on the lower end? I think so.

    That’s where KH’s suggestion of 3/3/3 comes into play. I’d only suggest that the figures might need some tweaking.

  19. Alan Fluhrer

    Darryl,

    You are asking a big form to think outside of the box and be flexible. Unfortunately this is challenging for most firm this size. We have had good results with some firms where leadership is courageous and understands the argument.

  20. Keith Halperin

    @ Darryl: Thank you. I’d be interesting in hear your tweak of my colleague’s 3/3/3.

    @ Alan: “Courageous leadership”? I’ve HEARD of it…
    Beneath a thin veneer of “hard-edged, no-nonsense, profit-maximizing pragmatism,” most business decisions are run according to the GAFI Principles of Greed, Arrogance, Fear, and Ignorance/Incompetence. Our job is to try and figure out which of these (in what strengths and combinations) are motivating our potential client. One thing that might help is part of the “Fear” motivation: IMSM, research has shown that people are more afraid of losing something http://en.wikipedia.org/wiki/Prospect_theory) than they are of gaining something, so it’s a stronger motivator to say that clients will lose by not doing what you want than by gaining if they do what you want….

    Cheers,

    Keith “Ask Me About Behavioral recruiting” Halperin

  21. Amybeth Hale

    All: please read this article on our sister site, SourceCon.com, by my colleague Ray Towle, which talks about the good/fast/cheap model. This will answer all your questions on how to choose an excellent agency PARTNER. Basically, you can have any combination of 2 of the 3 — you just can’t have all 3. Decide which one you’re willing to forgo, and then move forward: http://www.sourcecon.com/news/2010/08/17/the-good-fast-cheap-model-%E2%80%93-a-job-aide-to-better-decision-making/

  22. Cass Draper

    I think most of the good staffing companies get bought out by the big guys. Technisource was bought by Spherion and Spherion was gobbled up by Randstad. Sapphire is also another Randstad company. Adecco bought Modis a few years ago…My point is there are really only like seven large staffing companies left. The problem is they are horrible at defining their brand across subsidiaries, and they end up competing against themselves. Another key distinction is, do you want to work with a “monkey in the seat” company that believes all they have to do is hire anyone with half a brain and train them on their processes, or do you want to work with a company that hires really smart people and allows them to use process as a tool. The different business models are also very important. I would never sign up Volt to do my high level IT staffing, but Volt is a great company for general staffing and payroll. I like the previous comment about working with staffing companies that treat their staff well. I wouldn’t work with any staffing company that turns 100% of their staff over every year, and charges an 85% markup (RHI).

  23. Michael Rosmer

    Great topic for conversation and one I spend considerable time with given that I own a staffing company and we’ve made a lot of attempts over the last few years to be different.

    Let me start by saying there is something to be said that “if you’re more than 10% different you’ll generally be rejected by the market”. Meaning at the end of the day you have to be similar enough that there’s not a learning curve and companies understand you. Here’s an example, most major companies are structured to deal with conventional staffing companies, they understand how they work, they have a budget for the fees in certain cases, they probably work with some or have worked with some, etc. What this means is say you’re doing permanent placements and your competition are contingency firms. If you come in and say “we require an up front fee for our services prior to engagement” your sales process stands a high chance of failure. The reason this is especially bad is because it drives your customer acquisition cost up and therefore drives the fees you need to charge your clients up and potentially decreases their ROI. By contrast my company currently runs a $150 customer acquisition cost (not the cost of sales, just the cost to initially acquire the customer, then there are placement costs, account management costs, invoicing costs, etc.) If you’re spending $1500 on customer acquisition you’re going to have a hard time competing with me where fees are concerned. Differentiation needs to make sales easier not harder. In most cases this tends to limit to a fairly significant degree the amount of freedom you have in differentiating.

    The question then becomes “prove it to me”. See the typical differentiators are “we offer longer retention guarantees”, “we have a bigger database than our competitors”, “we have a more thorough screening process than our competitors”, etc. the problem is none of those things are actually important to the client. Gillette doesn’t advertise that they’ve got better manufacturing processes than their competitors nor do Apple and Walmart advertise they’ve got better supply chain management or business models than their competitors, even though they do. It’s not how you do things that differentiates you to the client, it’s how how you do things makes things better for them (in the case of Apple you get a better more consistent user experience and higher value to price ratio, in the case of Walmart you get lower prices and greater convenience). Thus, I don’t really believe talking about your process is necessarily a valid option. What I also know is you tend to get lost in the drone of other companies saying similar things without a way to quantify it.

    There’s another fundamental problem, which is the ability to compete at all. What do I mean by this? At the end of the day most staffing companies have essentially the same resources available to all do more or less the same thing. Differentiation shouldn’t just be a message, to have real success it should be built around genuine competitive advantage so instead of asking “how can I be different” the better question might be “where and how can I carve out a competitive advantage” (hence the second point in the article about knowing your competition to begin with). Part of this might involve the question “would you use your service if you were a company?” If you wouldn’t pay your own rates, which I suspect is true for many companies, your clients obviously shouldn’t.

    With that in mind lets start by breaking down the competition within the staffing field, of which we can broadly categorize 4 competitive types:

    1. Do-it-yourself – by far companies hiring themselves internally is the largest competition to staffing agencies

    2. Contingency firms – the important thing here is no results no fee

    3. Retained or managed search/services – the important thing here is you pay regardless of the results

    4. Large agencies – the important thing to understand here is they have enough scale and reach to provide benefits, at least in theory that smaller companies don’t have or can’t provide

    So, how do you gain a competitive advantage over other firms in the environment listed. Quick note, a fundamental understanding of economics is required here and this is where the part about genuine competitive advantage is necessary. For example, let’s say you decide to offer a 12 month instead of 3 month retention guarantee. This is all well and good and benefits the client but unless you’ve got systems in place to ensure the people you place are retained longer than those of your competitors (or the competitors are operating with a market inefficiency where their people are staying 12 months anyway but they aren’t advertising it) you’ll end up paying for that retention guarantee in the form of decreased margins or higher fees, meaning there’s no net gain to you and the client (it’s not a win-win and not sustainable). At the end of the day there needs to be a genuine improvement in the underlying economics, which you can then pass on to your clients in one form or another.

    This is where an understanding of business scale and strategy come in to play. Small businesses have certain inherent advantages that large businesses don’t have. Large businesses have certain inherent advantages that small businesses don’t have. The key is to identify those and leverage those strengths as much as possible. For example, one or two man staffing companies can be run out of a home thereby reducing overhead and offering higher margins or potential cost savings to clients. Large companies on the other hand can easily have bigger databases and greater reach than small companies offering better access to a larger candidate pool and increasing the potential of finding someone hard to find. A small business might involve intimate knowledge of a particular industry with deep key relationships both on the client and candidate side that are difficult to match in a large company. This allows for a better fit, better retention, and might involve faster placement. It could involve lower fees too by knowing the industry in a certain geography and knowing which companies are better and which companies are worse. By screening potential clients a company ends up serving only the creme of the crop and not wasting time on the bad clients, which improves margins and allows those efficiencies to flow over to the clients.

    Using certain personality testing might be helpful and provide a competitive edge, or having some very highly trained recruiters who have better depth of knowledge of the client company and can therefore make better hiring decisions.

    Your competitive advantage might even be a better sales process (lower customer acquisition costs mean either better margins or lower rates for clients), though of course the sales process is aided by having a genuine operational competitive advantage.

    Here are some things we’ve tried at my company over the years:

    1. Faster placements – not a bad offer but again unless you’ve got some competitive advantage to drive faster placements you’ll have problems, we used a particularly effective offer (from a marketing standpoint) but the offer, which included free service if we didn’t deliver didn’t encourage us to maintain our same level of effectiveness if we slipped up and couldn’t deliver

    2. Longer retention guarantees – I really think this one is mostly stupid for staffing companies to do to the point that I’ve entirely eliminated retention guarantees, the reason is good companies retain staff bad companies don’t, while the recruiting has something to do with it guaranteeing retention is putting you at the whims of your customers and penalizes the good companies while enabling the bad companies

    3. Performance based staffing – this is where we’d hire someone and not charge them any up front fees but rather charge them on-going for a certain period of time based on their performance, this was particularly targeted at sales people where we’d take a percentage of commissions as our fees, turned out to be more trouble than it was worth, the sales process was very easy but structuring the deals became more complex, monitoring what was owed became a lot of administration, and the reality is you’re again putting yourself at the whim of another entity that you can’t control (good salesman with a bad sales manager isn’t going to perform as well as with a good sales manager so you need to pick your clients very carefully)

    4. Fee per qualified candidate – this was a model where we charged based on a per candidate basis as opposed to a per placement basis, which actually works out really well for the clients and is something that works pretty well for us as well but it’s a much more difficult approach to sell so the client acquisition costs go up and you need a fairly high volume of business to justify it, however it has worked quite well for us in terms of cultivating regular repeat business for positions where clients might not otherwise use our services

    In practical reality I’ve found most methods of differentiation in staffing that I’ve seen haven’t worked out very well, though I continue to search and would love to see any model someone’s got that they claim works really well. What seems to work well is the following:

    1. Good targeting – focus on a tight space that you can know extremely well

    2. Build a lot of depth in that space in the form of large databases of candidates and deep understanding of the needs of the position

    3. Communicate to the potential clients using language and with understanding that demonstrates an obvious knowledge of what you’re doing for their particular needs (great example is when hiring for engineers for commercial building services understanding the difference between commercial and industrial, and understanding the difference between building services experience and other fields) this expertise goes a long way and has helped us win over clients that other companies haven’t been able to work with

    4. Sell based on present reality rather than based on potential – the difference between saying “I’ve got someone who I think fits what you’re looking for” and “I can find you someone” is a world of difference, shifting from the later to the former alone has more than doubled our sales effectiveness

    Doing a combination of the above 4 points combined with running a good business (good account management and relationship building, providing a consistent source of well suited candidates in a timely manner, etc.) seems to be a formula that works pretty well. It doesn’t create explosive growth but it creates consistent and steady growth. I’d love to see a model that allows for explosive growth, I’ve had two models that I thought would do so but haven’t quite caught the way we were hoping, if anyone has something that’s producing explosive growth as a result please share.

  24. K.C. Donovan

    Keith – I’ve got a great slogan for your your colleague with the different 3-3-3 fee approach – “Cain Un-Cubed”

    To clarify the un-cubed, are they only providing their 3k retainer to three clients per market or three clients per industry…or something eles? (btw: the approach is not new as we’ve been doing this for almost a decade… :)

  25. Ken Forrester

    @Mike Rosmer
    Great thought-out comment! Obviously you also saw a need for differentiation in the agency space and have made documented attempts with varying results. I also believe that differentiation is the future of the agency model as you pointed out that internal recruitment is now the main competition of the agency model. As more tools become accessible, you can expect to see more agency recruiters going corporate. I recruit in a niche market with relationships on both the candidates and clients. We recently transitioned to smaller clients as our National clients now have their own internal recruiters. We have been pushing the 3/3/3 model that Ketih Halperin mentioned in an earlier comment. Even though we are gaining some traction, it is not the result we expected. The bottom line is that even though clients recognize the benefit of higher quality service at a lower cost, they find it very difficult to pull the trigger as they are intellectual committed to a model they understand. As a result, we are backing into more traditional business, which is the good thing. Not sure if it the result of more aggressive business development efforts or that we are showing creative marketing ingenuity.

  26. Jerry Albright

    Great reply Mr. Rosmer. I can agree with quite a bit of what you’ve written. Glad to see there are others concerned with actually doing something different out here.

    As I see it – most (read: 99.9%) of the agency recruiters are far better at lip service regarding “new, better, different” than actually performing anything new, better or different. It’s as if we were all taught from the beginning a very specific and canned mission statement. “We work with a proprietary database of top tier professionals.” < No you don't. We all have the same names by now, don't we?

    Faster though? Please show me a client prepared to be on the receiving end of that.

    Longer guarantee? In my 25 years of recruiting I can't recall the guarantee ever being exercised. So sure – I'll do it. But is that really a unique or valuable service if it's never used? Perhaps just the perception of value is a value?

    Enjoying the discussion folks. Thanks.

  27. Keith Halperin

    @ Amybeth: I often use Ray’s good/fast/cheap discussion with my hiring managers, though in a broader, strategic sense. So far, the $6.25/hr virtual internet, phone, and board sourcers I’ve been using have been good AND fast AND cheap!

    @ Michael R: Thank you. This was one of the most well-written, detailed, and logical analyses I’ve ever read here on ERE.

    ISTM that there are relatively few competitive advantages which a firm of a given size and type can’t quickly duplicate, with the big exception of an established and trusted professional network (which is very different from a big database). Do any other difficult-to-quickly-copy competitive advantages come to mind?

    Cheers,

    Keith
    keithsrj@sbcglobal.net

  28. Darryl Clements

    KH – Let’s connect separately for additional detail or discussion if you’d like, but briefly my initial tweaks to 3/3/3 would be:

    1) Use 3/3/3 to “groom” or try out new agencies at non-senior positions first. 3 clients/mkt @ $3k/mo + $3k/hire works well for higher-volume, up to mid-manager/mid-professional-skilled type positions. I’ve often proposed this type of solution, but companies often get stuck on “I won’t have to pay if I just use a contingency agency.” The major fault of the contingency-first approach is that it’s practically impossible to develop an effective recruitment and networking relationship on behalf of the company. I believe the value of the 3/3/3 model is strongest at positions where “pipeline” is a constant need and that will outlast the individual hiring manager’s preferences that adjust manager-to-manager.

    The #1 obstacle to 3/3/3 has been an incredible reluctance to challenge the mindset behind contingency or retainer agency positions. The irony is that many agencies would be better than providing the occasional buckshot/lucky hire if given the small connection (read retainer) needed to build pipeline connections.

    The 3/3/3 makes most sense at positions up to about $80k(here in the northeast) or some regional adjustment in other locations but for higher-paid positions, $3k at the end might not be the right figure because more senior positions may take a bit more resources intensity to develop. Surprisingly, in-demand candidates often associate value with being with a particular agency. Sometimes candidates make those decisions knowing full well they are not with the new/small/lowest-paid agency. That’s a whole mindset to break through, but ignoring it detracts from success.

    The other major tweak would be defining what the retainer is for. A retainer for names, resumes, and bios; or a retain for that same info plus a dinner meeting or some other type of connecting event?

    Faster and cheaper is always a business goal, and it works really well with things that can be automated or done by someone who can do it for less. Better – well – that’s another story.

    Apple products arguably aren’t technically better than non-Apple products. However, through Apple’s iTunes, people now carry around more and customized products and content than ever before. That’s what 3/3/3 thinking can stimulate.

    On the corporate side, I can remember losing my best agency relationship. He wasn’t the business owner, he wasn’t even a senior leader. He was an absolutely outstanding connector. My company at the time wouldn’t allow me to add any retained agencies. So what I worked out with him was changing the terms of just a few of his congingency hires (adding some bonus incentives on a few existing openings) that essentially gave him time to build a pipeline.

    Sadly, my company still wouldn’t approve converting him to a retained agency even though it would cost less. Did we stop hiring from him due to cost? No. I even encouraged managers to reach out directly to him for positions I knew our internal recruitment staff could not effectively fill. Nevertheless, it worked. It just couldn’t survive the formality of new contract approvals inside my company.

    My advice to agencies would be to figure out how to create an informal 3/3/3. Sometimes corporate clients don’t know they should like it or that it’s good for them even while it’s happening. Not unlike how sometimes the easiest way to get children to take vitamins is to disguise it as gummi chewables.

  29. Darryl Clements

    Alan,

    Exactly. I advocate constructive challenge/constructive discontent from both sides. Oddly, it shouldn’t take “courageous leadership” to introduce or test fundamentally sound or risk-acceptable ideas and practices.

    Recruiting has drifted away from being relationship-driven and pipeline-feeding to a once-and-done transaction. That may be a good way to address an unexpected gap or sudden need, but it’s not the way to build talent.

    Having the wrong mindset and practices with staffing agencies also proves to be very directly and indirectly expensive. I have found that the converts and believers quickly get it when looking at cost.

  30. Hello Chicago! « thelarkogroup

    [...] sourcing articles for our monthly newsletter yesterday I came across an interesting piece by Matt Lowney of ere.net titled “Are There Too Many Staffing Agencies?”. This [...]

  31. K.C. Donovan

    Darryl – Amen – the process has fundamentally remained the same since the 1950′s…

    Here is how it typically is…high performing internal recruiting – tactical, high performing external recruiting – strategic…(doesn’t have to be this way…)

    To be successful an external recruiter MUST have a vibrant pool of contacts in their industry of choice and cultivate them for career long relationships…with people that rarely if ever look for a job because they are top 20% performers that consistently get challenges offered to them…these people only are interested in hearing about challenges that are even better – from people they see as their talent equal or greater – all about relationship… (strategic approach)

    To be successful an internal recruiter needs to lower time to hire rates to keep mgmt from screaming that they don’t have the butts in the seats to get the work done (and these mgmt folks are just down the hall!). They need to be great at systems and vendor management to keep cost per hire low. Basically they’re not set up to conduct any sort of pipeline development or cultivation aside from reviewing a static database of people that weren’t previously hired – all about process… (tactical approach)

    My 2 cents…

  32. Keith Halperin

    @Darryl: Thank you.
    @Ken F: this tweeaking was for you.

    Cheers,

    KH

  33. Michael Rosmer

    Regarding this 3-3-3 model…the problem is at the end of the day where is the real benefit? How do the underlying economics/risk-reward change?

    I’ve worked with companies that do retainer models say $5k/mo. sometimes with an additional fee per placement, sometimes not. Let’s weigh out the advantages and disadvantages:

    Advantages
    - You get steady cashflow, the client can better budget monthly expenses
    - Client gets some degree of exclusivity to your services meaning in theory less competition for the same candidates and there is an encouragement of deeper relationships (though not necessarily, just greater incentive)
    - Clients are less likely to use other contingency vendors when they are already paying a monthly fee to you
    - A different pricing model makes it more difficult for them to compare your services to other companies
    - There is the potential of higher perceived value and greater commitment to the process when paying a monthly fee

    Disadvantages:
    - This model will have a higher client acquisition cost, which drives margins down or prices up for the client
    - Working for only 3 clients in an industry space means lower economies of scale (if you can send someone to 10 clients as opposed to 3 there’s a higher likelihood of placing them when your costs to acquire that candidate remain the same, thereby dropping your average costs per placement)

    Overall, when I look at it it seems different but not necessarily better. I really don’t see a net economic advantage that can be exploited on either side. What I do like about the model is there is still a performance incentive component of the fees, but one thing I find in practice having tried the monthly fees model is that the value of those fees become questionable. For example, a company with 20 employees will never be able to afford to pay a $3000/mo. base fee plus placement costs unless the placements are very high end, in which case I question whether it’s worth it for the agency to offer such a model. On the other hand a really large company will potentially place more demand on the services than can be addressed with a $3000/mo. fee (the performance component helps scale it a little but only so far). This means you’ve got a relatively narrow strata of companies you can approach and successfully work with, which has its own set of challenges in terms of business development and in terms of finding the best fit for candidates.

    Something to think about regarding pricing models as a means of differentiation…they aren’t real differentiation. Why? Because the underlying operational economics remain the same. Let’s contrast the two simplest models: fee per placement or monthly fee.

    Often recruiting companies will prefer a monthly fee because it’s assured cashflow, while the client will prefer fee per placement because it lower risk. But at the end of the day both parties are lying to themselves if they figure they are getting some kind of deal. It works like this, if you’re really good at making placements you’ll be able to do higher volume and therefore you’ll earn more by getting paid per placement. If you’re poor at it you’ll want to charge a monthly fee because you aren’t sure you’ll be able to deliver results. But really, that’s the short term picture, in the big picture economics will win out, if you’re not providing value you’ll lose the contract, if you are providing more value then you’ll want to raise the fees and the client will pay them.

    It doesn’t make any sense to cut your margins for the benefit of the client. There’s a market value for what’s being provided and you’ll generally want to fit within it how they pay whether it’s monthly installments on each placement (we’ve tried that) or just up front fees per placement, or a retainer or some blend, it costs what it costs to do business and you need to make a profit, and the client needs to realize some value from the services you provide and need to receive that value consistently. Pricing trick don’t constitute a valid competitive advantage, they need to flow from a valid competitive advantage.

  34. Alan Fluhrer

    KC,

    Agreed, What this really comes down to is
    1> A talented recruiter/agency/firm, that knows how to do their job- check

    2> A company that thirsts for a relationship with a firm like this. This will save, potentially millions over the long-run.

    3> Good+Fast+Cheap has never worked, and probably wont. Yes a company can hit the lottery every now and then, but much less often than you think.
    With the talent crisis here…now,(yes folks it is), both companies and recruiters will be relying on each other like never before for candidates, market info, and everything else.

    4> Both parties having the understanding that all relationships have learning curves. And dumping a relationship at the first bump in the road, as long as the bump is reasonable, is a lose-lose. These bumps always happen, are chances to learn, and strengthen the relationship over the long-run. This takes maturity. professionalism, and willingness on both sides to work together.

    I feel very lucky to have these relationships with clients of over 10 years. We have gone through a lot, learned, and continue to work together.

  35. Michael Rosmer

    @Ken

    Thanks for sharing what you’re doing.

    I’m a big fan of business models that decrease the overall cost structure (I’m skeptical about organizations that say they can consistently and predictably provide higher value to the client in the form of quality, I think speed, cost, and consistency (of course customer service but you only pay so much for that and if the others aren’t they you won’t pay at all) are the most significant leverage points for organizations using outside recruitment agencies.

    What does this thing about business models that lower the overall cost structure mean? In my business I’ve got basically 4 major costs:

    1. Client acquisition costs – these have to be covered off one way or another, the lower you make them the better margins you can have or the less you can charge the client, or the more value you can provide to the client for what they are paying, right now my costs are running at $150 per client acquisition

    2. Account management costs – I measure these as an average cost per placement, which right now is running about $250-$300 for me, we’re working to lower it to about $200

    3. Cost per placement – this refers to the candidate side and includes all costs of advertising, time emailing candidates who will never respond, interviewing, setting up interviews, reference checking, etc. Right now this is the #1 area I’m working to decrease as I’ve been paying $1000-$1500/placement, when I believe I can lower it to a consistent $500-$750 for the types of placements we’re making

    4. Operational overhead – these are the fixed costs we have whether we do any business or not, they include computers, software, phones, utilities, office space, management (it’s debatable whether you want to include hiring and training costs here or in one of the other categories, I usually account for them here)

    The point is this, it costs me a certain amount to manage accounts and make placements, so whatever I’m charging, whether I charge it over time or immediately, as a fee or a retainer, etc. I need to pay these costs so I need to get paid more than that. Additionally, I need to cover my client acquisition costs so I need to do enough business on average that those costs disappear (in most conventional businesses, not mine but in many there essentially isn’t any profit in the first transaction because the profits from that transaction go to cover the client acquisition fees, therefore you’re relying on repeat business to derive good margins). Finally, my monthly volume needs to be high enough that I can cover all my operational overhead (fixed costs) and still create profit. This means the more business I do proportionally the lower my prices need to be in order to remain viable.

    There are a few interesting synergies that happen though. When I have a lower client acquisition cost I tend to have more clients, which means on average I’ll tend to make more placements, when I’ve got more clients and more placements I’ll generally have a lower cost per placement because I have a better chance of placing each candidate we’re working with, because of this I can charge lower prices to the clients, which makes the sales process easier and drives down the client acquisition cost further (usually it’s not substantial, which is why I’d generally suggest not decreasing your fees but rather taking it as profits, unless you can get a larger share of the client’s business) , which makes it easier to attract more candidates, and creates a cycle.

    The competitive advantage lies in how do you reduce your client acquisition costs? How do you decrease your account management costs? How do you decrease your cost per placement? How do you provide a higher level of customer service? How do you decrease the time per placement? How do you change the risk profile for the client? How do you provide a greater level of consistency to the client? These have to be the driver, the wrapper if not backed by one of these (perhaps there are a few in that list I’m missing) is just that, a wrapper, it’s not going to create a meaningful difference in the business or to the client.

    I’d love to hear from people on how they’ve answered these questions.

  36. K.C. Donovan

    Michael you certainly have a lot of energy on this topic! What is important to realize is that the prism you view the world is your own…you view it through what sounds like a contingent agency prism and the questions you bring up are focused on your situation.

    I assure you there are a number of differences that you aren’t going to grasp through a contingent perception…and no offense meant at all but I don’t have time to respond in length as you have…

    Here is one example. If you are going to maintain a pipeline of contacts for a company to hire from for a monthly fee, it is only with the understanding that there are hires to be made from it or it is not needed. We have been doing this type of work for a long time and we direct source pipelines of functionally targeted passive job seeking (no advertising) contacts only and maintain it for the number of months it is needed and then shut off the talent spigot…the deal is that we only support large companies and at any given time we may have 6-7 of these talent pipelines open for hiring…clients pay for the months they are open and for the hires they make from it. internally when a pipeline gets turned off we put the contacts from it into a large pool and keep them motivated for that company until needed again. Of course, if another client has a need for that type of function in the same geography we will also make them available to that company…its democracy of talent – the contact decides whats best based on Employment Brand…as it should be…

    Our clients pay on average 50% less per hire than a typical Agency fee and we make margins that are healthy enough that we have been doing this successfully for more than a decade…

    Incidentally, when adding up your numbers above it seems as if you must be making a killing as your costs outlined seem less than $2,500…if you are getting market fees as you describe – I’d say your margins are ridiculously healthy…nice work if you can get it…

  37. Michael Rosmer

    @Jerry

    Great comments, thanks for the reply.

    In regards to placement speed, I know a number of companies that value this service. In fact I’ve found it can be a big deal depending on the type of position. In fact there’s a case study in the book “Mastering the Rockefeller Habits” that is all about a company that built themselves on this premise of delivery within 14 days from start to finish. We have an IT client that values speed above almost all else. I’ve seen it many times where someone quits and the company is in a panic and needs someone yesterday. They want speed. This isn’t “speed at the expense of quality” but they want candidates this week not next week.

    Regarding retention guarantees, I’ve seen them exercised, in fact I’ve offered them and acted on them, one case in particular stands out. Granted it’s rare, as with most risk reversal strategies and like you said the optics are often more important than the execution where risk reversal is concerned but it’s a way that companies have tried to differentiate. It’s a bad way in my opinion, but it’s a way.

    @Keith

    Thank you for the kind words.

    I agree, differentiating in this industry is very difficult, especially in a way that’s believable and easy to articulate in a way that others aren’t saying the same thing.

    There are a few that I think are under exploited:

    1. Training – the difference between a well trained team and a poorly trained team can be a world of difference, included here is quality of management and leadership…honestly, there have been times when my company has been successful and I’ve chalked it up to nothing more than being willing to push harder, longer, and in a more focused way than the competition, resolving to succeed and not letting difficulties stop the process

    2. Technology – what systems you use to complete the work can provide some competitive advantage, allowing for rapid searches, great organization of information, a broader reach, less man hours invested, better communication, etc. I’m not sure I’d say this is one of those that is necessarily under exploited in the sense that technology isn’t used but rather that agencies rarely closely align their business strategy with their processes, with their technology. For example, some of the areas my company recruits for are in the manufacturing and energy sectors for the types of positions where the candidates don’t use LinkedIn, so even though LinkedIn provides great tools and I believe they are highly effective for certain fields (such as IT and engineering), it would be a waste to invest in those technologies for these purposes. Generally we don’t accept resumes by fax but for these sectors we do simply because believe it or not there are people for whom this is more convenient and the few applicants we get through fax each month are worth processing, but I wouldn’t do it without digital fax as scanning would make it too much work.

    3. Brand – I rarely see well branded agencies and definitely almost none with brand loyalty among candidates…I think there’s some potential merit to building a strong brand identity in the minds of candidates

    4. Geographic reach – What I’ve found is the mid range companies with mid range positions are the best place to make money in the recruiting industry. As hinted at by some others large companies have internal teams and more importantly they have far reaching brands so everyone’s already applied there. On the other hand small companies don’t hire a sufficient volume of employees to justify the sales and account management. When it comes to the positions, the high end positions involve too much competition for candidates and insufficient volume, on the low end (such as retail) companies are unwilling to pay because the supply is too plentiful and the advantages are negligible. Mid sized companies (lacking big employment brands, usually local or regional in their presence) hiring mid range positions ($50k-$80k typically though that’s just a ball park) are limited in their ability to reach the market so there’s a big advantage to partnering with a company that can reach into other markets to find them people where they lack brand awareness, and there are enough candidates that it’s not a struggle to consistently make placements with massive competition for each candidate, but at the same time they are valuable enough that companies are willing to pay to find them. Being able to have geographic reach is in my view certainly an advantage one company can offer or another.

    I’m sure there have to be more but I’d love to hear them if people have ideas.

  38. Howard Adamsky

    Wow: Michael Rosmer first comment is over 1,800 words. 1,000 words longer than my articles.

    Is this a record for a comment in terms of length?

    Is Rosmer a closet ERE writer?

    Lets wait and see!

  39. Michael Rosmer

    @KC

    Thanks for the reply. Regarding your first comments, I’d note that the lens you’re approaching from seem to be based on a recruiter perspective rather than a business perspective. This is a totally valid and important perspective but in my view individual recruiters don’t need to be as focused on the differentiation mentioned in the article above as businesses/agencies do and in fact recruiters within given agencies (or even internally) will do better with companies where the company offers such differentiation.

    Regarding your comments about the lens of contingency. It’s true that my comments reflect that viewpoint and it’s largely designed to illustrate a point as opposed to provide specific analysis since examining each model (RPO, temporary, retained, temp to perm, etc. etc. etc.) would take far too long and I’m already writing a lot so please understand the comments are designed to illustrate the underlying challenges by discussing a particular example set but the principles (needing to have operational advantages that affect the basic economics for clients and the company remain true regardless of what model or even what business you’re in).

    Thanks for sharing what you do, it sounds very interesting. In terms of 50% lower than normal industry fees and healthy margins that’s excellent to hear. At first glance I’d wonder a few things about why you might be able to do so with your model, my guesses would be:

    1. You probably get a greater volume of placements from your clients than a typical competitor would using say a contingency fee based model

    2. You probably have greater client loyalty than your typical competitors

    3. I’d be interested to know what specifics of the service you provide are compared with your competitors (my guess is they vary somewhat and that difference in focus affects your underlying cost structure)

    My point is this. Either your margins are a fraction of your competitors who charge fees that are twice as high (I doubt it and honestly if that were the case I’d say it’s a poor business decision), or there are underlying economics that allow you to maintain those higher margins (this would be my guess). I’ll give you some specific examples based on my experience with some typical firms:

    - A lot of companies spend a great deal of money doing business development almost for its own sake, meaning they end up with a lot of clients who they never place anyone for. Let’s just pick some numbers out of the sky and say on average it costs a company $1000 to acquire a new client, but on average they only place one person with every 3 clients, meaning their real client acquisition cost per placement is actually $3000. This seems to be pretty typical and from the feedback I’ve received frustrates clients to no end that they’ve got 20 vendors they are using but only 4 of them are producing any results. I imagine you probably average multiple placements for every client you have thereby amortizing your client acquisition costs over multiple placements and creating higher margins at a lower price

    - The same is true on the candidate side, most companies spend money building huge databases, each candidate costs money to acquire whether it is calculated or not, however, most candidates who are acquired and even interviewed by a typical recruiting company will never get placed, meaning their candidate acquisition costs per placement go way up. In your case I’d imagine because you’re doing passive and probably very selective pipeline building. What this means is as a percentage of the candidates who you acquire you probably place a relatively high percentage of them, driving your candidate acquisition cost per placement down and offering you better margins at a lower fee to your clients. (I know someone who runs a business a bit like this and does very well, his business doesn’t do any advertising it’s all targeted recruiting because it means they only invest in people they have a relatively high likelihood of placing. It’s resulted in their being able to do revenues of $2.5 million/yr. with 5 staff and no office space…not bad).

    If my guesses above are accurate it serves to reinforce the point, you can’t just focus on some sort of pricing model, instead you need to change your operations to provide built in advantages that others who aren’t using your business model can’t replicate while charging the same fees and maintaining the same margins. The premise is going to be the same regardless of the business type or agency type we examine. We need to focus on how to create a competitive advantage in the business model not in the wrapper we put on for the client.

    Thanks for your insights, sharing what’s working for you has been the highlight of this discussion for me.

  40. K.C. Donovan

    Michael – you get it exactly!

    “…change your operations to provide built in advantages that others who aren’t using your business model can’t replicate while charging the same fees and maintaining the same margins”

    Excellent! I would add one point – if you can lower your fees and maintain margin while accelerating sales due to your “built in advantages” then pricing can be a powerful competitive weapon…(you have made the point of not leaving the money on the table if you can get it – but I would use that as a key separator…)

    I am a firm believer that there are a ton of inefficiencies built into the recruiting process and by eliminating and streamlining the work there are huge advantages to be made…recruiting is one of those old line industries where only a few have stepped back and continually asked, “why do we do it this way?” Most of the technology developed has been providing band aids to hold together a poorly functioning business practice – instead of scrapping our systems and implementing a fresh efficient approach…most HR and recruiting thought leaders will agree that the resume, ad, interview model is a horrible basis for successful hiring – yet it has existed since the early 1950′s…that is crazy!

    At our business we have continually envisioned ways to do it faster, better and more cost effective – I think its cool that you are doing the same by consistently reviewing your metrics for areas of improvement! Bravo…

  41. Todd Raphael

    Howard, re: your question “Is Rosmer a closet ERE writer?” I’d love to have him and any of these other great commenters write an ERE article, any time.

  42. Patti Green

    In my opinion, it’s all about the candidate. If you make a targeted call and present a compelling, top notch candidate, they will give you a shot. Once they hire that person, you are in. My philosophy is “Don’t EVER market marginal candidates (period!”. You can visit their office looking like Carmen Miranda, throwing beads and trinkets from Tiffany’s, but if you don’t give them what they need/want absolutely NOTHING else will work. That means you have to LISTEN. Most recruiters are sales oriented and accustomed to doing the talking. This is one industry where that just won’t work EVER! I have seen so many recruiters talk themselves out of a sale that it saddens me. I just want to run over and put my hand over their mouths! Listen, Listen, Listen.

  43. Jerry Albright

    I find it rather interesting how the conversation now seems to be focused primarily on cost/pricing issues. Competing on price is one quick way to your next line of work. I’ve been watching it for years now. “I’m smaller – I can work for lower fees.” or “They’ve got multiple openings – 12% is fine since we’re going to fill a bunch of jobs there.” Yep. Good luck.

    For the most part I believe clients have accepted the cost associated with our services. Those who haven’t will not find me scrambling to find ways to convince them of the value we bring to the table.

    Where I see the opportunity – and getting back to “Are there too many agencies”" is in the WAY the services are provided. Something I still find amazing is this simple fact: Recruiters as a whole spend millions/billions each year in the sourcing/job board, ATS/CRM, talent community, SM Recruiting world. Why? To make sure they have some way of connecting with every qualified candidate out there. The same candidates (presumably) we all have access to. The playing field has been somewhat leveled the past decade.

    Yet when it comes time to move that qualified person forward – they make very little (or no) investment in how the client “experiences” that candidate.

    Type up a nice summary email. Attach resume. Hit send button. This is when your true client experience happens. If there is ANY differentiation – this is a key time for that to take place – yet it doesn’t. Same old – same old…

    I’ll get off my soap box here – and won’t clog this great discussion up with my own solutions. But let me end by saying this: There is a huge opportunity for any agency who finds a way to save their clients time – namely by having them interview the right people to confirm their skills and personality rather than the wrong ones who simply looked good on paper.

  44. Ken Forrester

    @KeithH Thanks for steering this discussion towards differentiation of agencies, I am learning a great deal for real recruiting pros in the trenches.
    @JerryA you brought up a good point in that the playing has leveled and all recruiters now has access to the same candidates, including the very clients they serve. This makes traditional recruiting more complex. It is no longer “already in our database” We now have to contend with “already a connection on LI” “already friends on FB” “already referred by an employee, already in our talent pipeline. You name it. The reality is that this space has been disrupted and it is time for new models to emerge. One that simplifies the whole process from the client’s perspective is a step in the right direction. The next model might very be the good-fast-cheap one, if it can be effectively sold and implemented. The 3/3/3 model make sense if you are highly specialized, where you can build a National talent pipeline of candidates with the same skills-set and place those candidates with only three clients in every major city.

  45. Howard Adamsky

    “Are There Too Many Staffing Agencies?”

    Interesting question on the surface but it is the wrong question to ask.

    In a free market, there are never too many or too little businesses. The number, if that is even important, is driven by the economy, business climate and other factors relating to supply and demand as well as supply chain logistics that act as factors to right-size the pool.

    I am stunned by many of the comments here that have people justifying their existence.

    “Will HM’s, HR and Agencies Ever learn to Work Well Together” might be a better question and as such, a better article leading to more thoughtful dialogue.

    Until the time comes that Recruiters see themselves as business people who do recruiting as opposed to Recruiters who are trying to do business, we will still have inane conversations just like this. This is very unfortunate because most recruiters I know have a good deal of the answers. What they lack is the ability to ask the right questions.

    Please be advised that I am not being critical of the author but I am astonished at the responses.

    Life is short folks. We simply must do better. Once again, recruiting has no bar to entry. If you have a phone and a spinal cord, you are in biz. I am not suggesting we create a bar for entry but I do believe that if we do not police ourselves and get a bit smarter, we are doomed to convos just like this on.

    Are there too many agencies out there? There is only one agency – your agency and its clients. To look elsewhere for unanswerable questions that are simply not pertinent is a distraction.

  46. K.C. Donovan

    Ken – you articulate the disruption quite well…

    The access to individuals is no longer the game – its the relationship you have with contacts that’s the key separator. The old guys will tell you it always has been that way…to a point they’re right (only to a point because there are huge segments of recruiting that make their money on resume hunting – not relationship building). I agree with the old guys (guess I am one…sigh) that relationship is King – the fun part as you point out Ken, is that the game to cultivate these relationships has changed drastically…(LI, Tw, FB, etc.), along with the ability to “scale” the number of these relationships. I actually wrote a blog on this very topic yesterday (http://ow.ly/7y1aO) where I outline how a company can implement an Engagement Hiring process to build relationships pre-hire with prospects that lead to the best hires made…

    the key for all of us is to keep innovating and finding ways to efficiently get it done…Jerry has embraced video introduction to separate, we’ve introduced community based recruiting, Staffingbrook has introduced crowd sourcing, Gild uses games and contests, what can you do?

  47. K.C. Donovan

    Howard is the the next post from you,

    “Will HM’s, HR and Agencies Ever learn to Work Well Together”

    …can’t wait to see your thoughts on that one!

  48. Alan Fluhrer

    Howard brings up a crux question that will be discussed forever. And Howard, if you want to work on this subject together, let me know,.

    The real value is twofold: the relationships and the ability to find the right people for your client. When you make your client the the hero, you win too. I am proud of my team as there is no person we cannot find, that is value to our clients. I don’t say that lightly. Try finding a meat sales manager that speaks both Mandarin and Cantonese, (we found 3 in 6 weeks with our process when our client couldn’t for 9 months).

    Until HR/HM and recruiting firms, “get along” the model may stay the same, except for those 10%-20% of companies that understand the true vale of these relationships over the long run.

    The amount of traffic on this topic proves that. There have been a few different ways discussed here. It’s good to see some firms willing to look at this.

    The talent crisis will not act like a crisis, it IS acting like a Tsunami. By the time the real effects of he talent shortage waves are fully realized, the firms that, then, start to act on it, will be too late to the party. Those that are now doing something about it, will be in much better shape over the coming years.

    For the companies that value these relationships, my hat off to you. For those that do not, as we all know, candidates have to come from somewhere.

  49. Keith Halperin

    @ Alan: ISTM that the only “talent crisis” is for employers who want the “Fabulous 5%” of candidates but don’t have the “Fabulous 5%” of pay, benefits, opportunity, security, QoL, etc,. to get them. If an employer is willing to hire the 6%-20% they’ll have no problems…

    Keith “Tired of the ‘War for Talent’ Talk” Halperin

  50. Alan Fluhrer

    @ Ketih- Tired of the war for talent- talk–I get that. We’ve been talking about it for years, now it’s really showing its head. That topic is probably better for another topic post. As if there aren’t enough already.

    @ Keith- agree with you. Firms that are willing to offer hte comp/benefits/opportunity/…security? (not sure about that one), will get the great candidates and keep them longer than usual.

  51. Keith Halperin

    Thanks, Alan. As I stole from Patsy Cline:
    “Well people in hell want ice water – that don’t mean they get it.”

    As far as security- if companies were really serious about holding on to their “Fabulous 5%”- they’d offer multi-year, “no-dismissal-without-cause”, automatic raise employment contracts to them. I suspect this would substantially improve retention…

    Cheers,

    Keith

  52. Alan Fluhrer

    @Keith- Sure it would improve things. But in general it isn’t going to happen. Also, I think to some degree, you really can’t hold on to your top 5% for too long. One of the reasons they are top 5% is because they have more experiences from other jobs at other companies. If you maintain those relationships over the years, you can get them back and everyone wins, again. This sounds like a great webinar topic

    A great comparison case study with today’s shortages would be the Dot.Com economy. Some firms planned and acted according to the marketplace and provided comp/etc, as needed. Some firms didn’t/couldn’t. The ones that could did better than the one that didn’t.

    While the Dot.Coms happened very fast and to some degree, was concentrated in the tech and financial sectors, this time it is across disciplines, specialties, and across many countries. And it will happen so much slower that many firms wont see much change except salaries going up so much. There’s a lot of subjects that could be discussed here.

    Suffice to say that companies walking-the-walk, today, and not just talking about it, will be able to be better off in the short-mid-and long run.

  53. Keith Halperin

    @ Alan: quite true; the sensible but new is often hard to do…. Right now, we have at least 26 million people who want some or a lot work. Until these numbers get LOADS better, non-employers of choice will be able to do pretty much do whatever they want unless the candidate is in the “Fabulous 5%” and if they are an employer of choice
    they will be able to do pretty much do whatever they want unless the candidate is in the “Well-connected Fabulous 5%”. I think you’re going to have a whole Gen Y really timid and docile (or really angry: see Occupy Wall Street)because they’ll be coming into a stagnant job market with lots of debt. That’s why I encourage amny of them to consider emigration to Canada, Austalia, New Zealand, or prosperous Northern European companies that have economies doing better than ours.

    Cheers,

    Keith

  54. Ken Pryde

    I work for GoodTemps, which is the staffing division of Goodwill Industries of Greater NY and Northern NJ, and I found this article very interesting.

    As a company, we’ve been fortunate to have carved out a distinct market during the past decade. We’re the largest supplier of diversified temporary staff to the government agencies of New York City, and the State of New Jersey. Approximately 90% of the people we place into jobs have a disability of some kind, visible or invisible. Our key is that the people we place are job ready and able – we recently placed a disabled attorney with one client, for example.

    Disabled people are one of the hardest hit segments of the population where unemployment is considered – many choose not a look for work because they fear they won’t be able to compete. Many can, and we work closely with local community and service organizations to source and recruit qualified candidates for our jobs. We’re one of very few staffing agencies in our area who collaborate closely with such organizations.

    http://www.goodtemps.org – GoodTemps Staffing
    http://www.goodwillnynj.org – Goodwill Industries

  55. Morgan Hoogvelt

    Way too many…staffing is an industry where people on the outside hear about the money that can be made and get it in to chase money. Kind of like the stockbroker industry several years back when everyone jumped in head first to make money, and then it imploded.

    Hopefully our industry does not follow suite…

  56. Keith Halperin

    @ Morgan: I don’t think we have to worry about that happening for a number of years until the unemployment situation gets WAY better than it is now.

    -kh

  57. Sylvia Dahlby

    Are there too many staffing agencies? Or is the workforce turning temp? http://www.tennessean.com/article/20111110/BUSINESS/311100060/Is-workforce-turning-temp

  58. Michael Rosmer

    @KC

    “if you can lower your fees and maintain margin while accelerating sales due to your “built in advantages” then pricing can be a powerful competitive weapon…”

    Absolutely, at the end of the day the overwhelming power of price wins, it’s what’s made Wal-Mart successful, it’s why cable TV killed the movie industry, why iTunes killed the recording industry, why Netflix kills Blockbuster, along with pretty much every other case (that and marketing)…the thing most people don’t get when they are considering this though is you have to consider larger scale economics than just the price paid. It’s all about the value proposition, convenience is part of the price, so is the service itself, so is the reliability of the products, etc., which is why someone will be willing to pay more for a Mac than a PC, because the up front cost might be higher but the net cost of ownership if you have less failures, less crashes, less viruses, etc. might actually be lower.

    However, while pricing can be and is a powerful tool we also need to look at the supply demand curve. I could show you a chart of how much your sales need to increase to compensate for the difference in profit of lowering your price. Just as a quick example, if you have 50% margins and you want to drop your prices by 25% your volume of sales needs to increase by 100% just to make the same profit you were making before…so the question is will that decrease in prices result in that much higher sales? This is why often the best way to increase profits for a small business is just to raise their prices by 10% because 10% usually isn’t enough to cause customers who were buying anyway to go away but it will add 10% of your gross revenues to your bottom line.

    @Patti Green

    Absolutely, the candidate is the product, but one sale isn’t going to get you very far as mentioned above you rarely make any significant profit on a first sale, it’s all about repeat business about being able to consistently deliver and that’s where you need an operational competitive advantage and compelling value proposition.

    @Jerry

    As mentioned above all competitive advantages in business boil down to price…just price in a macro sense, in other words the overall value proposition. Keep a few things in mind:

    1. No business model works forever, one of the biggest problems I see with small businesses is not realizing you need to take advantage of the advantages you have at your scale and then learn to scale those up as you grow, which means how you operate today is not how you’ll operate after 5 years of growth, if you do then chances are you’re doing a poor job of it. (The best example of this is probably transitioning from personal relationships to relationship with the brand).

    2. You can’t use price as a competitive advantage…that is to say you need to have an operational advantage that drives a consistent pricing advantage and in this case it does work, for most micro businesses the operational advantages are personal service/relationship (which means customized service) and low overhead. That will get you so far, then you need to adjust but that’s ok because now you’ve got an established customer base with established cashflow and you can raise your prices without any problems as you move to your next operational advantage, which now starts to be more procedural built around efficiencies you’ve developed doing it for a while. At the end of the day you need something operational driving your pricing policies but pricing policies are important.

    3. Finally, it’s not about price overall, it’s about the value proposition (the best way to understand this is probably found in the book The Blue Ocean Strategy, which suggests creating a strategic canvas to visualize yourself relative to your competitors), this reflects in price but it isn’t built around price rather price flows out of it

    4. You have to keep in mind there’s a difference between what will work well enough to maintain and what’s necessary to create explosive growth. Explosive growth only comes from a highly competitive value proposition, but you can survive and have moderate growth (say 10%) without it

    You’re right discounting is generally bad business, but effective pricing built around a unique value proposition and clear operational advantages will create rapid growth for you.

    @Sylvia

    I consider tempt to be part of staffing and that’s part of the key, differentiating, and doing so in temp as well.

  59. Gabrielle Thooms

    Thanks for the good tips! I’m a newbie at work and yesterday I was told to recruit new people. I don’t want to fail it from the start, I’ll do my best following your advice.

    Here’s one of my company’s new projects:
    Convert YouTube to mp4 free software: http://convertyoutubetomp4.net/

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