This blog entry represents a counter argument for using a service my company sells. Trust I know the narrative that follows will be controversial within my own industry. However, I believe that it will show flaws with one of the services we sell and commit to provide here at EnGn and in that self reflection we become better . There are some answers and solutions that I will hi-light that will be a differentiator in subsequent blogs. Certainly the intent is not to marginalize one of the very services that will put food on the table for me and my colleagues. The true intent is to provide visibility into a primary continency staffing agency business model. Which means a firm only gets paid when they find someone for the job. It works very well in providing needed talent for many of our customers but also can be defeating on far more difficult to fill roles. The learning opportunity is for businesses/clients to recognize the signs of a failed search when they are showing up, what to do about it, and how other services can meet their needs.
I believe many who have not had the chance to fundamentally wrap their head around the primary business model; that permeates the recruiting industry, misunderstands the primary drivers and pitfalls. Understanding those variables, basic economics, and business motivators goes a long way in clearing up the challenges of the standard contingent (pay only when a hire is made) model. My wonderful wife indicates that I can take too much time to get to the point, nevertheless the stories I tell will illuminate the conflict in the plot. So let the storytelling begin .
Please imagine a profitable, private, and small to mid-sized business named XTECH, located in the Portland Metropolitan area. Their exact location is neither super attractive nor disappointing but rather non-descript in downtown. XTECH has a decent employment brand, if recognized at all, but what they are known for is hiring really solid talent, in other words their “bar” is high and anybody going there will work with smart people. They use some of the latest software development technology (but not all) within the Microsoft stack and are an agile SDLC shop. Their compensation is on the competitive side but not in the top 15% percentile, bonuses again are competitive, when paid out. XTECH also has middle of the road Health care benefits. Their product is an interesting, complex, data driven, web native, n-tiered architected application. Let’s imagine XTECH opens two positions, an Architect and a Sr. Mobile Applications developer. To fill these positions they sign up, at first, 3 agencies to compete with each other. Each agency is contracted at 15% of base salary. A hefty sum for sure considering the roles could, and probably will, demand a salary of over $110K. XTECH waits and initially receives 6-10 candidates out of the gates in the first 2 weeks. None of the candidates fit after an initial pass whether on resume review or brief phone interviews; another 2 weeks pass and a few candidates trickle in. It is clear these are hard to fill positions. 2 more weeks and there are no new candidates. The business is reeling because they need the positions filled and a month and a half has already passed. What has happened?
Here is what happened and why agencies can get a bad name and positions languish unfilled. They stopped working on it!! Simple business economics rooted in the contingent business model does not allow them to keep applying time and resources. These firms are working for free. The more resources they put towards the hard to fill position the more unprofitable they become. Those first candidates were the low hanging fruit (Monster, Dice, etc.) Everything after that takes true "Head Hunting" and mandates a plan, discipline, persistence, time, and money. The 3 original agencies were forced, not because they are bad firms, financially to focus on positions that were mathematically more likely to fill and earn money. Sure, XTECH could keep adding agencies and even up the percentage of salary regarding the fee. It won’t change the problem. There is a chance they could get their hires over a longer period of time but the time to fill can be very limiting and expensive to their business. This company is a victim of common supply and demand challenge seen as the talent wars for technical expertise shifts. So what is the answer? Stay tuned for XTECH 2 soon to be released.