10 Reasons to use a Staffing Firm

By: Lou Adler, Linked In

1. Since they cover both the active and passive talent market, they can help raise the overall quality level of every new hire.

The only reason you should pay a fee of 20% or more for a candidate is if the person is clearly superior to the people your company is finding on its own. To get a sense of this, have the firm present a few of their best candidates, ask how they found them, and then compare them to those you’re now interviewing for the same roles.

Generic placeholder image

2. Given fewer assignments, they have the time to hone their search skills. In this case you’ll see and hire stronger people.

You need to have exceptional recruiting skills when dealing with passive candidates. To be successful staffing firm recruiters must excel here. Even if corporate recruiters have similar ability, due to their workload, they just don’t have the time to invest in passive candidate recruiting.

3. The best people want to work with them.

Top passive candidates, especially those with three or more years of experience, seek out the best third-party recruiters to keep them aware of opportunities at different companies. This is a huge advantage over corporate recruiters who only represent one company.

4. They have deep networks to find talent fast.

Part of being a strong recruiter is the opportunity to develop deep networks of passive candidates. This gives them a sourcing and speed advantage and allows them to find top people quickly.

5. They understand real job needs, so you’ll hire people who can hit the ground running.

Part of being a strong third-party recruiter, especially those who are industry specialists, is understanding the real job needs, as well as the hiring manager needs. While corporate recruiters could certainly do this, they rarely get the chance. As a result, too many corporate recruiters over-rely on skills, experience and compensation to filter candidates, eliminating high potential and diverse candidates from consideration.

6. They have more time to source passive candidates.

Convincing a person who’s not looking to consider an opportunity takes more time than recruiting someone who is anxious to leave. Most corporate recruiters spend the bulk of their time sourcing the latter types of active candidates. The best external recruiters should be spending 80-90% of their time networking and recruiting passive candidates.

7. They have credibility with hiring managers.

The best third-party recruiters need to work more closely and more often with the same hiring managers. This develops a trust factor that is hard to replicate with a corporate recruiter who needs to work with many different hiring managers. Surprisingly, many talent leaders prevent their external firms from working directly with hiring managers, losing the chance to leverage this essential partnership.

8. The best staffing firms offer longer guarantee periods.

If an external recruiter isn’t willing to offer a six month or one year guarantee, I’d question their ability to deliver stronger candidates. However, if they truly know what they’re doing and are allowed to do it, this type of guarantee should not be a problem for either a contingency or retained search firm.

9. For an external recruiter, the focus is on placements not activity. As a result, you won’t need to see as many candidates to get a top person hired.

When a person’s compensation is based on their performance, some recruiters throw as many candidates as they can into the hopper, hoping one sticks. These types of recruiters should be avoided. The best external recruiters work with fewer high-quality candidates and by managing the process from beginning to end, don’t need to present more than three to four candidates in order for one to get hired.

10. Since external recruiters are they’re more consultative than transactional, their candidates take the job for the right reasons.

The best external recruiters are focused on having passive candidates understand the long-term career opportunities that come with a new job offer. While this takes more time for the recruiter, it ensures that the hire will be more successful in the long run because the offer is accepted based on actual job needs and the upside growth opportunity, not just the size of the compensation package.

Using a high-quality external recruiting firm that meets the above criteria should be part of every company’s talent acquisition program. However, when you find a firm like this the worst thing that can be done is to force it to comply with internal rules or processes that negate their unique strengths. Instead, leverage their abilities, pay their one-time fee, and recognize that hiring the best people is a multi-year investment that keeps on giving.


What Are the Benefits of Staffing Agencies?

By Ruth Mayhew, Demand Media

Staffing firms perform recruitment and selection processes for organizations that don’t have the time, expertise or resources necessary to manage the employment processes. Some staffing agencies provide temporary workers, and others provide candidates for temp-to-hire arrangements. Regardless of the employment type, there are certain advantages to employers’ use of staffing agencies, including expertise, cost, availability of workers and employee retention.

Generic placeholder image

Expertise

Staffing firms often have a level of expertise that far exceeds some employers’ human resources departments. Hiring recruiters, employment specialists and an employment or recruiting manager to supervise staff could require a lengthy recruiting period to find qualified employees. Staffing agencies provide services that rival the best qualified recruiters and employment specialists, usually at a lower cost. Employees of staffing agencies generally have a higher level of expertise related to job knowledge, employment trends and recruitment practices by virtue of continuous placement of employees. They also have industry expertise if they work for staffing agencies that specialize in certain fields, such health care providers.

Cost

Using staffing agencies can result in lower costs associated with hiring adequate staff to recruit applicants. However, because staffing agencies manage the entire employment process, they also relieve employers of costs related to pre-employment testing, background investigations and drug screening. In addition, employers save money related to the expense of payroll processing and benefits administration. Small employers find that they can rely on staffing agencies to provide them with qualified employees at remarkable savings.

Network

Staffing agencies have a larger network of available workers than do many employers. Employers looking to hire seasonal workers, for example, would need to advertise job openings, interview candidates and process new hire documentation for a relatively short period of employment. Staffing agencies, on the other hand, may have relationships with workers they’ve already identified as dependable, reliable and conscientious and who can fill a vacancy in a matter of days, or even hours. The network that staffing agencies maintain is a broad one from which they can tap potential employees who can fill any position an employer might have or anticipate.

Retention

Employers that engage the services of staffing agencies for temporary employees get an opportunity to observe employee performance, qualifications and work habits before offering the temporary worker a permanent job. This can cut down on turnover once the trial period is complete and both the employee and employer are satisfied the job is a good fit. Using staffing agencies for high-volume placements can result in tremendous savings related to turnover, training costs and the intangible costs of turnover, such as employee morale.


The Silliness of Measuring Cost Per Hire, and How it Can Reduce Your Strategic Impact

By Dr. John Sullivan, ERE Recruiting Intelligence

I nominate the calculating of “cost per hire” as the single most pointless and damaging exercise in recruiting. Even though the cost per hire metric is widely used, that certainly doesn’t mean that it adds value, and it may in fact actually hurt the recruiting function. Years ago when I was a chief talent officer, I even went so far as to ban the calculation of cost per hire.

Generic placeholder image

I did this because cost per hire had the negative effect of causing our recruiters to shift their focus toward cost reduction and away from our real job, which was to produce high-performing hires. If you’re going to be a strategic recruiting leader, you need to stop thinking like an accountant (who focuses on transactional costs) and instead act strategically and focus on the more important and higher value business and revenue impacts that great recruiting can produce. If you were the CEO of the Miami Heat and you were hiring LeBron James, you would consider the cost of the recruiting transaction to be insignificant compared to the economic value that he produced (winning a championship).

A Long List of the Reasons Why You Should Stop Worrying About the Transactional Cost of a Hire

You might think that calculating cost per hire is a low-impact thing to do, but you would be wrong. The metric and how it is used can have many negative consequences that recruiting leaders need to be aware of. The problems with the metric include:

• Recruiting transaction costs are a distraction — in my experience, nothing distracts from what should be recruiting’s primary focus more than forcing recruiters and administrators to focus on transactional costs. Unfortunately, calculating the cost of recruiting in isolation often has the net effect of forcing recruiters to primarily worry about the cost of hiring (which may average $5,000) even though the business impacts that the new hire produces may be many many times higher (at Apple for example, they exceed $2.2 million per year for each hire). In my experience, cost per hire is an evil metric because calculating it takes up time and resources away from measuring the quality of hires. For example, if you required brain surgery, you would certainly be concerned about the cost of the surgery, but the cost element would be of minimal concern compared to be value of the output (living and having a fruitful life).

• Return on investment is the metric that should be used — in every other part of the business, managers never look at simply costs. You instead compare the costs to the value of the output or the result that those expenditures produce. The most strategic and widely used metric in business is ROI and this metric contains two elements. The “I” in ROI stands for the money invested or costs. But the other side of the equation, the “R” or return, is equally or even more important. The ROI formula forces you to compare the cost relative to the return that the costs produce. Reporting hire cost without directly linking it to the dollar impact of quality hires calculation is simply a bad business practice. Cutting recruiting costs may actually cost the firm money.

• Attracting quality is often expensive — marshaling the resources that are required to produce quality hires is almost always expensive. Hiring great recruiters is certainly more expensive, and using the best sources like social media, referrals, and the mobile platform may take longer and cost more than less-effective sources. Job board ads may be relatively cheap but saving a buck by using them may actually cost you a bundle as a result of lower-quality hires. To put it bluntly, you get what you pay for.

• Low cost may mean slow hiring, which can be expensive — if you cut costs by understaffing your recruiting team, your “time to fill” will increase dramatically. These delays will mean an increase in costly vacant position days (especially in revenue-generating positions). Additionally, being slow to close on candidates who are in high demand may cause you to lose the very best ones.

• Many of the factors that increase the cost per hire may be outside of your control — your cost per hire may fluctuate regardless of what individual recruiters do. For example, if most of your recruiting costs are relatively fixed for a year (i.e. LinkedIn licenses, ATS costs, your corporate career site costs, and vendor costs) a dramatic cut in recruiting volume will automatically cause the cost per hire to skyrocket. And conversely, a doubling of recruiting volume will reduce your cost per hire, simply because it spreads your fixed costs out over many more hires. If the mix of job openings changes so that higher-level jobs and hard-to-fill jobs make up a larger percentage, your cost per hire will also increase dramatically, despite your best efforts. If more external executive searches are required, the cost per hire will also increase dramatically.

• The cost per hire metric is not externally comparable — if the goal of calculating the cost per hire metric is to show that your recruiting costs are competitive with other firms, you are in for a big surprise. Not only are the formulas used by other firms not equivalent, but getting accurate hire-cost numbers from your competitors is almost impossible. This means that your only remaining option is comparing this year’s costs to last year’s.

• Candidates can tell a cheap operation — the very best candidates judge the company based on what they experience during the recruiting process. For example, if candidates who are innovators don’t see innovation in the recruiting process, they’ll assume that innovation doesn’t permeate the corporation. If you lowball a top candidate on their flights and hotel costs, they may judge your entire organization to be equally as cheap. A cheap process may scare away the best candidates.

• Low-cost hiring may result in a weak candidate/manager experience – overworked recruiters and low budgets may negatively impact the candidate experience. A bad candidate experience will hurt your offer acceptance rates and your employer brand. The resulting low level of candidate and manager satisfaction may also be a “hidden cost” not included in the cost per hire calculation. • Cheap hiring may drive away the best recruiters — top recruiters aren’t stupid, so if you dramatically cut recruiting resources, you simply won’t be able to recruit or retain top-quality recruiters. And without sufficient resources, even the best recruiters can’t work miracles.

• Attracting active candidates is cheap compared to the cost of attracting non-jobseekers — if your primary focus is on hiring a large percentage of the so-called “passive” non-job seeker, your cost per hire will be dramatically higher. This is because it takes more time to find and to build relationships with individuals who are not actively looking.

• Cost per hire metrics don’t vary very much — in my experience, even when recruiting leaders put a lot of emphasis on cutting cost per hire, the figure generally only goes down by a small percentage. This typically low percentage of cost savings makes me wonder whether all of the effort and emphasis are really worth it. In my experience, even the best cost-cutting efforts in corporate recruiting seldom save more than $100,000 per year. That’s not very much money in most corporations. The many hours that recruiting leaders must devote to calculating and improving cost per hire may have a high negative impact on the quality of the recruiting process.

• Hiring cheap may require the use of inexpensive sources and tools — hiring cheap might force you to use only inexpensive or free sources like “help-wanted” signs, posting exclusively on your career site, career fairs, and Craigslist. Unfortunately, the cheapest sources are seldom the most effective ones in attracting high-quality candidates.

• The formula almost always undercounts the real costs — the formula used by many recruiting functions excludes the cost of the hiring manager’s time. Referral hires never include the cost of the employee’s time. Almost all cost of hire efforts fail to also calculate the cost of bad hires, the low retention rate of hires, the lack of diversity of hires, and the need to terminate bad hires. Omitting these negative performance factors means that you will underreport the actual costs by a significant percentage.

Final Thoughts

All professionals should be cost conscious; it is simply part of their job. But overly focusing on the transactional aspects of recruiting has simply been a distraction. To make matters worse, the recent American National Standards Institute/SHRM herculean effort to standardize the cost per hire metric has resulted in an increased emphasis on costs. And unfortunately, the areas that really need work, measuring the dollar impact and the quality of hire, are unlikely to be produced any time during this decade.

So if you are recruiting leader, two strategic metrics that you must develop on your own are 1) the relative on-the-job performance of new hires and 2) the dollar impact on the business of great hires (compared to average hires). Every other area of the business has learned to measure quality and their function’s dollar impact. Only HR and recruiting have yet to come on board.


5 Reasons to Hire a Staffing Company vs. Hiring a Direct Employee

By Kim Coulter-Davis, Linked In

Most small business owners are not aware of the tremendous benefits of leveraging the services of a staffing company. Many owners have a vague recollection of working with a temp in their corporate life in a larger company but are unaware of how staffing companies can help their smaller enterprises.

Business owners who have discovered the many advantages of using a staffing agency are reaping the benefits of costs savings, work force flexibility, better access to top talent, less administrative work, and a better engaged workforce.

Here are 5 reasons why you should hire a staffing agency:

Generic placeholder image

I did this because cost per hire had the negative effect of causing our recruiters to shift their focus toward cost reduction and away from our real job, which was to produce high-performing hires. If you’re going to be a strategic recruiting leader, you need to stop thinking like an accountant (who focuses on transactional costs) and instead act strategically and focus on the more important and higher value business and revenue impacts that great recruiting can produce. If you were the CEO of the Miami Heat and you were hiring LeBron James, you would consider the cost of the recruiting transaction to be insignificant compared to the economic value that he produced (winning a championship).

Expertise

Staffing agencies often have a level of expertise that far exceeds the human resources departments in most small businesses. The agencies are more in tune with employment trends, law changes, and recruitment best practices because this is their core business.

2) Better Talent Pool

Many smaller employers cannot compete with the larger businesses when it comes to pay, benefits, and recruitment tactics. As a result, they are left out of consideration by top performing talent. Staffing companies bridge the gap by leveraging their larger buying power and transferring those benefits to their clients.

3) Cost Savings

Using a staffing company is a cost effective option for certain processes and positions within your company. Your cost savings will be realized by

Efficiency: Recruiting, screening and hiring a candidate takes a lot of time. Delegating these tasks to an expert will reduce the amount of time and expenses you spend on the hiring process. Hiring a staffing agency will also allow you to onboard your new team member quickly and reduce down time.

Advertising dollars: Recruiting for top talent takes an investment in advertising dollars to reach your talent pool. Staffing companies have already set aside advertising dollars for recruiting and are already reaching the talent you need. You can leverage their dollars and save yours.

Convert Fixed Costs to Variable Costs: For some positions in your company you could save money by converting your “Fixed Employee Cost” to Variable Employee Cost” for example, if your business has very little room for overhead costs but you still need employees to respond to customer orders. You could use a staffing agency only when you had orders to fill. Even though you pay a markup on the hourly rate you wouldn’t have to carry the fixed employee costs when you didn’t have the work.

4) Reduce Risk

When you engage the services of a staffing firm, you get the talent but not the HR overhead. The employee reports to you but you have no liability for workman’s comp, payroll taxes and unemployment claims. Hiring a staffing agency employee is also a better protection than hiring an independent contractor especially if that independent contractors is a one-man show.

5) Flexibility

Larger companies are already taking advantage of using contingent workforce to ramp up or down. As a small business owner you can use the agency’s employees as much or little as you need and have the flexibility to discontinue them once your work is complete. During slower times of the year you can downsize without going through painful layoffs. During busy times you will have access to great workers who can fill a vacancy in a matter of days.