Hiring in a hurry
The cost of hiring entails more than just the person’s hourly rate. These costs start to incur before before the employee works his/her first hour and may continue on even after the employment is over.
When you are hiring in a hurry and in volume, these costs and risks get magnified. This is an area where contingent staffing could provide a cost-effective solution.
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Job boards facing extinction?
When Monster announced last month that it was laying off 800 employees I wasn’t really shocked. Watching how job boards haven’t really evolved much to adapt to the changes brought upon by Web2.0, it was just a matter of time before we started hearing news of the sort.
Since that info is about a month old now I won’t dwell on it and maybe put in my two cents on why it wasn’t a shock.
I’ll cut to the bottom line. Pricing. How much can you really charge to access a database of resumes and the ability to post jobs? In 1999, it was definitely worth the hundreds and thousands of dollars annual spend, but in the Web2.0 era where you could search LinkedIn and Facebook and people search engines such as Spock, the pricing doesn’t seem so reasonable anymore. And less so in a market short of candidates and recruiters are having to seek out passive job seekers (”I’m employed but tell me what you’ve got…”).
And no, passive job seekers normally don’t post their resumes on job boards because they know their employers most likely has access to those job sites and it would be the kiss of death to be employed and have your resume found there (unless you informed everyone that you were looking). Oh. And not to mention recent incidents of job seekers’ info getting compromised. See here.
Now I’m not saying that people who post their stuff on Monster or Careerbuilder aren’t good. There are still great candidates to be found on those sites. I’m just saying that access to those resumes aren’t worth the thousands of dollars in subscription fees. Not anymore.
Ok fine they let you post your jobs too. But then again. With your target audiences probably looking elsewhere (blogs, anyone?), again, it’s probably not worth the current prices. Especially with new options like Simply Hired that would let you post jobs on blogs, I think the conventional job boards will have to evolve and adopt to the new trends. And when I say “evolve,” this (and raising their fees) is not what I had in mind.
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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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Selling the middleman?
I had one of those eye openers earlier this year when I was invited to do a presentation at ProMatch. It seemed easy enough. Speak to the members about “How to work with a staffing firm.” I knew there were going to be plenty of questions so I came with just four Keynote slides on the basics of working with recruiters.
I was introduced to a full auditorium of maybe 75 job seekers ranging from financial analysts to project managers to HR managers. I didn’t really have a fear of public speaking, but when your introduction goes something like “please go easy on her,” I say brace for impact. They don’t want to know how to work with a staffing firm. My gut feeling was they they’ve all had some sort of interaction with one or several staffing firms and judging from my introduction, their experience with staffing staffing firms weren’t positive.
So I scrapped my presentation and felt my way around, asking the audience to share their experience with staffing firms. A majority of the stories that were shared fell under one category. Lack of feedback from recruiters who initally call and promise to submit their resumes for a requisition they were working on, never to be heard from again.
I can vouch for a handful of recruiters I personally know and have worked with and honestly say they give their candidates the courtesy of a follow up call, but I must say this is also a widespread issue. I bet some of you will even scoff at this post and tell me to post about more interesting things like VMS or better margins. But I found it fitting to post about this first before anything else, because let’s face it. First things first. The candidates are our bread and butter. There will be no VMS or margins to speak of if the candidate refuses to work with us.
Aside from not getting follow up calls, the job seekers that I spoke with also felt that staffing firms are just middle-people taking a huge chunk of what the company is actually paying for their services. Sure we can talk about overhead and fringe benefits and statutory costs but that’s not the point. Staffing firms are seen as unnecessary middlemen. In their eyes, we are just a barrier between the employee and the employer. There is no value to working with a staffing firm.
But there IS value. Otherwise there wouldn’t be a market for our services and the staffing industry wouldn’t exist. And even more perplexing, why isn’t that value communicated anywhere? Wouldn’t our jobs be much easier if the publics we served (the job seeker community and our clients alike) understood why we exist? Why we are relevant? Let’s face it. It’s hard to sell from the position of a middleman.
This blog will attempt to answer that question, one post at a time. But in case you wandered into my blog, please feel free to answer this question in the comments section.
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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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