Four New Roles for Staffing Agencies

Several weeks ago, on March 19th, I wrote an article called Value and Frugality: The Do-It-Yourself Decade. This article did what it was intended to do ó create a stir and raise the level of awareness as to some of the trends we will have to deal with in the future. I try my best to act as a scout of the future, looking at what I see happening and reporting on it with my own thoughts. I don’t always agree with or advocate what I see happening, but I do think we have to face the facts whether we like it or not. Here are a few important facts that I see right now. Fact Number 1: The market is a ruthless judge of value. It has decided that staffing agencies are not as critical to corporate success as they once may have been. The number of agencies in existence is down considerably, and those that were large are now much smaller. Many who owned or worked in staffing agencies are now working on the inside as corporate recruiters. While the agencies may list off scores of ways they add value, most corporate executives don’t see it that way. I hear executives say that they perceive most agencies as organizations that, in many cases, simply use the Internet better than their recruiters do and charge too much in the process. So they have sought out corporate recruiters who can do it themselves, as I pointed out in the article cited above. The agencies that have survived are doing things differently, and I’ll discuss some of these in a bit. Fact Number 2: The Internet changes everything. Successful agency recruiting has always relied on two factors: knowledge about who and where talented people are, and the ability to screen and sell that talent to the right client. Getting to know candidates used to require lots of legwork; hours on the telephone; attendance at meetings, shows, and professional organizations; and a big network of friends and colleagues who would refer people to you. Screening required interviewing skills and intimate knowledge of the client’s needs. And the really good recruiters who worked in staffing agencies were excellent salespeople. They could convince candidates in the merits of jobs and clients on the merits of candidates. There is still hope for agencies in the future who can sell well. The Internet makes finding candidates fairly painless. AIRS and a host of other organizations have been teaching us how to source on the Internet for close to a decade now. Most recruiters have at least rudimentary skills at doing this. Some are downright expert. Monster and other job boards have educated candidates about how to become known to recruiters, and most candidates have an online presence of some sort. Corporate websites, while woefully inadequate for the most part, at least exist and periodically gather thousands of prospective candidates. The popularity of employee referral programs has also added to the candidate stream. Alas, most agencies that cropped up over the period from 1995 to 2000 were not very good at any of those things. They still used the old legwork approach and often could not economically find the right candidates soon enough. Many corporate recruiters were astounded to find that the same candidates they found were also the one being submitted by the staffing agencies ó who expected a hefty fee, as well. But those agencies are mostly gone. Fact Number 3: Corporate recruiters have the same (or better) access to potential candidates than do agencies. I think we can all agree that access to candidates is uniformly the same to everyone these days. The only differentiator is skill at using the Internet and at establishing electronic relationships with candidates. Sometimes corporate recruiters are actually at an advantage because they can create relationships with candidates who have come to them and are interested in their particular company or product/service area. So how can agencies survive and thrive? Here are four things agencies can do to adapt. 1. Differentiate. Face the facts that I have outlined above. Figure what the market will support. I believe that it will be necessary to differentiate your agency from others ó to most executives they are all the same. Find a focus area and develop it well, perhaps in collaboration or partnership with your clients. Agencies that are focused on a particular type of candidate or on a particular level of candidate can still be successful. Offer compete solutions or set up a way for organizations to buy some services, but not all. Some agencies have set up divisions that are branded under the client’s name and provide outsourced service that is transparent to the candidate. The agencies that broker temp-to-perm candidates have done well as have those that work with a small and select group of organizations in a collaborative manner. The key is to have a crystal clear and well-communicated strategy and focus. General purpose, broad-based, do-it-all agencies are not likely to thrive. 2. Lower or eliminate the commission. The market is becoming more and more resistant to “standard” fee structures. Creative recruiting executives want to negotiate for value. They want a more competitive and fee-for-service based approach to recruiting where they can better understand what they are paying for. I honestly believe that the days of 25%-plus flat commissions are gone forever. The use of automation, the Internet, and the far more varied ways of finding talent mean that a fee-for-service approach makes more sense. Along with this goes the need to keep costs at a minimum. Agencies have to work with many fewer people and research has to become automated. This means that agency recruiters have to be more efficient than their corporate counterparts and need a high level of computer and Internet expertise along with good selling skills. 3. Provide anonymity when appropriate. There are many positions that are open confidentially, either because of the potential impact the position might have on strategy or competitiveness or because of some other business reason. An agency is obviously well positioned to conduct a confidential search. In fact, this is the most cited reason that agencies are used for executive recruitment ó not because they have access to exceptional candidates. 4. Advocate for candidates and clients. The ability to sell could be one of the most powerful benefits of using an agency. Most corporate recruiters have two strikes against them when it comes to selling their organizations and jobs to candidates. One strike is their own inability to see what benefits their organization can offer a candidate. Sometimes being in the trees makes it very hard to see the forest. Agencies can offer an outside view. The second strike is that candidates expect corporate recruiters to be “pro” their own organization. Well-positioned agency recruiters can be seen as much more objective and may be more credible to the candidate. In fact, I can see agencies becoming “talent managers” for certain kinds of candidates and negotiating a percentage of the final negotiated salary as their fee. This is much like the sports talent agents that all major sports players use to find and negotiate their positions and salaries. This will eventually extend into the corporate arena and represents a rich area of growth for staffing agencies. Staffing agencies, in some form or another, are not going to disappear. What is disappearing is the agency that relied on corporate ignorance and indifference as the source of its business.