Quantifying the value of contingent staffing
Ok so “what’s riding on our placements” isn’t quantifiable.
I’ve complained on different ocassions in this blog that staffing firms have such the bad rep online, specifically in the Blogosphere. There’s a two-year-old post entitled “reducing staffing firms’ margins one blog post at a time” and on the ERE network, “recruiters are blood-sucking parasites,” the point from both posts were that staffing firms’ “cuts” or “mark-ups” are simply unjustified and that the company itself will save more money if they just hired directly, as opposed to a “contract-to-hire” or the more popular term “temp to hire” arrangement.
This argument is everywhere, on and offline. I hear it every day. Why should I pay you $75/hr for someone I can hire directly for $45/hr?
Unfortunately for our industry, it doesn’t seem to be a well-known fact that a person’s hourly wage is the only thing that comes out of his/her employer’s pocket. Most know that benefits need to be added too, but beyond that, most are still unaware of other employer costs which are abated by the use of a staffing firm.
If you are hiring on your own, you will most likely have to spend some money on advertising, which could run you an average of $150/posting per job board. If you post it somewhere popular you’re probably going to get at least a couple hundred resumes, 95% of which are probably not qualified for your position for one reason or another. So in addition to your $150/posting/job board cost, factor in the amount of staff time that will be spent sorting through those resumes, replying to them, and then contacting the ones you are interested in, bringing them in for their first, second, third interviews, do their reference checks and background checks (cost varies). Then add to your cost whatever projects that were delayed because staff’s attention was diverted to hiring or because the project needed that new hire’s expertise. And that’s even before the employee even begins employment or collects his/her first hour’s wages from you.
Hiring on a t-p basis through a contingent staffing firm, on the other hand, minimizes the above activities to a minimum. Contingent staffing firms charge a fixed hourly mark-up that their clients don’t have to pay for until the employee works his/her first hour. Meanwhile, you got your job sourced for and advertised. You only saw the top two or three candidates for an interview versus having to see 10 or more. Someone else did the reference checks and background checks. The time it took you to hire that person was dramatically reduced and you got your project started right away. What is the ROI on that?
Employment
FUI, SUI, FICA, workers comp insurance, payroll taxes and benefits add up to 38% on top of an employee’s hourly wage.
Termination/Attrition Costs
It happens. Sometimes the hire just doesn’t work out, or due to unforeseeable economic events, you had to let the employee go. Start adding on COBRA, outplacement services, and (if you have a large number of former employees drawing from it) the risk of your unemployment insurance rates increasing. Oh. And if the former employee decides to file a grievance. Add your legal fees.
Contingent staffing firms charge a fixed mark-up and are only applied to the employee’s hourly wage. On the low end it will be around 45%, on the high end, around 55%. No charges before, and the charges end when the employee is terminated.
So in doing the Math, hiring through a contingent staffing firm just makes sense, doesn’t it?
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The value of the right hire
I went swimming today and the thing about it is that when you’re swimming, there’s no one to talk to, there’s no iPod to listen to. It’s just you and the water. Plenty of thinking time.
So on this morning’s workout I was reminded again of Steve’s post on how complicated the staffing industry has been. Why can’t we just go back to basics? Why can’t it just be about the best candidate for the best price?
I agree with Steve, it should be as basic as that. But the thing is, the industry feels that just providing the candidate for the best price doesn’t present much value to it. Heck, even I, as a college student working my first agency job, thought it was gonna be a piece of cake. Find this person for this job. Match ‘em up. How hard would that be? So we add on things that, as Steve’s post demonstrates, complicates things.
But anyone in the industry knows it isn’t that easy to match up a candidate with a job. We all look for things. We all have our individual recruiting practices. We all recruit based on our individual criteria. And we all know why we go to such lengths to screen candidates — it’s because we know what’s riding on our placements.
Which is, I think, all that needs to be the main message communicated to our clients. It’s not this reporting feature or that online invoicing feature that we offer. Those are just tools for convenience.
What’s riding on our placements?
No matter what we recruit for, whether it is a front desk receptionist, a PCB assembler, or a software engineer, they are individually crucial to a company’s success. The critical roles they play in a company should be value enough for a staffing service.
The receptionist you place will represent your client and will be the very first person that greets their clients when they walk through the door. Pick the wrong one and it could just break your client’s image.
The assembler you place will be holding a hot soldering iron on that costly printed circuit board. Pick the wrong one and it could cost your client thousands of dollars in damaged components.
The software engineer you place will be writing the code to what could be your client’s next cutting edge application. Ask the client how much damage a bad code can cost and see if that cost is worth the penny-pinching in hiring a mediocre staffing firm based on price.
That’s where the value of a staffing firm lies. The value of the right hire.
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The Way of the Blog
Maybe something was wrong with Google the first time I was searching for other contingent-staffing specific blogs…because as it turns out, there’s a lot of them. But then maybe it’s not Google’s fault that I can’t find them either. It seems it’s just the way recruiting blogs are set up that’s making it difficult to find them.
I’ve always known of ERE, but I’ve always thought they were more for internal/contract recruiters or for direct placement agency firms. They have their own recruiter blogosphere populated by various people from the recruiting industry. Now, given the recruiting industry is huge (are we talking recruiters, direct placement, contingent staffing firms?) to lump all the recruiting bloggers doesn’t make sense.
Please don’t get me wrong, I think it’s a great resource and it’s huge. I just think there would be more active conversations if more recruiters blogged as individuals instead of as a part of a branded recruiting blogosphere.
Again. That’s cool. But in the true sense of blogging, I’m not sure this is the way to go.
The posts look really interesting and definitely worth a lot of discussion, however the site and the individual blogs are not set up to encourage the “conversation.” First, it requires you to register at the site just to comment. Now I know our industry is really paranoid about bad things being said about us, but if they’re not being said in the staffing blogs (and they are being said…just not as apparent as they are in Technorati or other authorities) they are being said elsewhere and not being addressed.
Also as a narcissistic blogger, I don’t like it that when one clicks on my name (on the comments section), that it doesn’t take the user to my blog, where I might be saying more things. One must understand that bloggers bother commenting not only because they are passionate about what you have written, but also because they want to promote their own. It’s a way to drive traffic to their own sites. It’s The Way of the Blog.
And because ERE is such a closed system, it limits the individual bloggers from harnessing the full power of blogging. ERE bloggers already seem to have decent Technorati Authority figures just from linkage with each other. That’s the other observation I have. The ERE bloggers are blogrolling each other. Which is cool and all… I mean…it isn’t against Blogging Law to blogroll your own network but you would get more incoming links if you were also open to linking others outside of your network. Imagine how much higher that Technorati Authority number would be if there were external linking activity as well.
I’m definitely not in a position to make any marketing recommendations to ERE here as my Technorati Authority is kind of in the dumps (my Technorati Authority is 1 and my Technorati rank is in the millions…). My goal is not to criticize any blogs but to just put in my two cents because I really want to get the conversation on contingent staffing rolling.
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How the staffing industry lost perspective
I was reading Steve Ranson’s blog today about how complicated the staffing industry has become. So complex that the industry has lost perspective, when really, it’s all about coming up with the best candidate for the best price. He questions the need or the effectiveness of having different staffing firms for each specialized need and argues that while it is nice to have a specialized service for a specialized need, it is definitely costly.
As a gym rat who owns a pair of cleated shoes for cycling, a pair of running shoes, a pair of walking shoes (indoor, outdoor, mud, etc), yoga shoes (not exactly for yoga itself which you do barefoot anyway but just for walking to yoga class), not to mention a variety of dress shoes (which is still considerably less than what other women own) I gotta say that I love the sports shoes analogy.
I have so many thoughts that I can’t come up with a cohesive comment on Steve’s blog so I’m responding here.
Contingent staffing/staffing/recruiting services, whichever term we choose to use, IS a positive solution. Otherwise, there wouldn’t be a market big enough for all 9,000 firms (and counting). I also have to add here that the growth of specialized and niche-oriented staffing firms is just a result of the industry evolving with the markets it serves. Using Steve’s analogy, yes, a shoe is a shoe and it really doesn’t make much difference because you can use running shoes to walk and cycle, but as someone who uses cleated cycling shoes I’d have to say that there is definitely an advantage to using them. Just like there is an advantage to using specialized staffing firms. I work for a staffing firm that specializes in serving technology clients but even the term technology itself has evolved.
But as Steve says, [contingent] staffing is a solution. It is such a great solution to a really important need on the part of our clients, that the use of contingent staffing has grown at such a rapid pace. In an ideal world without lawyers and sue happy individuals it should be simple, right?
However there are other factors involved, such as employment and taxation laws and regulations, that didn’t quite evolve with the rapid growth of the staffing industry. And now we have compliance issues, which probably should be the subject of a separate post, but I’ll go on to say on this post that the staffing industry and our clients are trying to comply with laws that were not written to address the industry. Lobbying for new laws and regulations to protect staffing firms as well as set ground rules for staffing firms, we have instead chosen to make the old laws and regulations fit and created a whole new industry just to address compliance, one of them being Vendor Managment Systems, which, depending on who you ask, creates more problems than it actually solves, is inefficient, and doesn’t really benefit the client nor the supporting vendors.
But at the end of the day, it’s really all about compliance. Our clients feel that they need to keep track of their contingent workforce because of this inherent fear of misclassification.
I can’t pretend to know what the solution is. Should we start lobbying for new laws and regulations to set ground rules for and protect the industry from ambiguous interpretation of obsolete laws? I don’t know. Whatever the solution is (or maybe there is none), there should at least be a conversation about it, address it, acknowledge that it’s there. Once we get our behinds covered, know the specific ground rules (instead of guessing and dancing around obsolete ones) designed specifically for us…maybe then we’d have the peace of mind to go back to what the staffing industry is all about. Providing the best candidates for the best price.
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Recruiting and social media
I went to the Lunch2.0 event yesterday at Netgear and was chatting a little bit with LinkedIn’s Community Evangelist Mario Sundar about social media and employment.
LinkedIn is becoming quite popular with recruiters these days because it allows them to tap into passive candidates who are not otherwise available on Monster or Dice. And as other social networking sites (MySpace, FaceBook, etc)become more mainstream with job seekers publishing more information in these sites, recruiters are also starting to tap into them not just as a resource for candidates, but also to research their candidates.
In addition to social networking sites, there are also new services popping up targeting the job seeker/recruiter market. A lot of them are designed to make the recruiting process more personable through the use of images, video and reference tools to allow the prospective employer to see the candidate beyond their skill set.
We already do this in recruiting. They are called in-person interviews. But social media allows recruiters/employers to see a more complete view of things that may not be mentioned in their resumes such as their personalities and communication skills before they even proceed to the interview, so in theory, shouldn’t social media be a valuable tool for recruiters?
In theory…yes. But in a litigious society, maybe not so.
Remember the old recruiting days when we used to toss out resumes that had pictures attached because employers didn’t want to be exposed to for racial, sex or age discrimination suits? Never mind that the photos were unsolicited? In the world of blogs, MySpace and FaceBook, pictures don’t have to be attached, they can be easily found via a simple Google search. If a candidate is not hired for some reason and a potential employer appears on that candidate’s site traffic report, can that person claim discrimination? “I applied for a job and employer A came to my blog, saw that I am Asian and decided not to hire me.” What about video resumes on YouTube or ResumeBook?
I mentioned this concern to Mario and he mentioned that this was actually one of the reasons LinkedIn members do not have the option to upload photos as part of their profiles — because the company recognizes that LinkedIn is used not just as a networking tool but also as a recruiting tool.
LinkedIn also has a recommendation tool that allows clients, partners, co-workers and bosses to comment about a person’s quality of work or credentials. I think this is a great tool because it allows recruiters to do a reference check before even possibly contacting a candidate. But as a former recruiter I seem to also remember widespread corporate policies prohibiting managers against giving references to former employees. Now…LinkedIn, despite it being a “professional” networking tool, is still a personal tool so I guess the point here is that social media definitely blurs the line between what is official and what is “personal.”
At the risk of being redundant, if recruiters/employers don’t find it on LinkedIn, it takes but two seconds to find it elsewhere.
I won’t offer any opinions here, other than to say that I am at a wait and see state. It would be interesting to see how the staffing and employment industry adapts to new trends in technology and social media.
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About This Blog
Lisa Amorao is currently the Marketing Programs Manager for ATR International, a Silicon Valley-based contingent staffing firm.
Lisa has held roles in recruiting and sales before moving on to her current role in Marketing.
The opinions expressed here are her personal opinions and does not reflect those of her employer or any of its clients.
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