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The Art of Choosing a Staffing Agency

Due diligence can help you develop effective partnerships with vendors.

March CoverUsing temporary workers should involve more than just calling an agency and asking the recruiter to send someone over. In evaluating vendors, get answers to the following questions:

What's in the markup?

Because the business is competitive, prices can be negotiated. Ask agencies to divulge what costs, such as insurance and benefits, go into the markup, says Gary Campbell, SPHR, director of human resources at Johnson Health Center in Lynchburg, Va. And make sure you know the going rates in the marketplace. "Markups can range from 30 percent to 40 percent to as much as 150 percent. As a rule of thumb, look very carefully at anything over 50 percent," he says.

Kristy Harris, account manager at NCW Resources LLC, a staffing agency in Rockville, Md., says markups for temp or temp-to-perm placements typically range from 45 percent to 60 percent. The fees for finding a direct hire can be 30 percent or below, she adds.

Know the market rates: Markups on temps ‘range from 30 percent to 40 percent to as much as 150 percent.'

How long does it take to deliver a qualified candidate? 

"Benchmark against your own data," advises Rebecca Callahan, president of SourceRight Solutions in San Diego. "If it takes you 70 days, the staffing company should produce in 60."

How rigorous is recruiting?

Know how the agency goes about finding and attracting candidates. "We screen 10,000 people, interview 10 percent and wind up hiring 1 percent," says Aaron Green, president of Boston-based Professional Staffing Group. Ask if recruiters are tied in to social media.

Does the agency conduct appropriate screening and background checks?

Depending on your locale and type of workers, the level of screening and depth of background investigation will vary. Find out what the recruiters do and how they go about it. If they're recruiting immigrants, do they have documentation? Are they using E-Verify? No matter how good a company is at screening, some bad eggs invariably wind up in the nest. How does the agency handle these situations? When a temp has "committed a crime and I look back at the staffing firm's files, I discover that in many instances they didn't do their job," says attorney Joel Klarreich, head of the Corporate and Staffing Group at Tannenbaum Helpern Syracuse & Hirschtritt LLP.

What does the agency consider adequate longevity?

Turnover remains a major threat to employers' continuity and efficiency. Find out the agency's annual attrition rate for the people it places. Is it higher or lower than the industry average of 277 percent?

What is the hire-to-interview ratio?

Find out how many interviews clients conduct for particular types of jobs. This rate will vary depending on the position.

What is the temp-to-perm ratio?

Find out how often temp-to-perm placements bridge to employment with clients. Tracy Menefee, HR administrator at Real Time Resolutions Inc., a mortgage collector in Dallas, says a good ratio for her company would be 80 percent.

Does the agency have metrics to show client and employee satisfaction?

"You're not doing your due diligence if you don't ask them how they do with their client scores," says Eric Gregg, chief executive officer of Inavero, a research firm in Portland, Ore. "Past performance is a good indicator of future performance. If they've thrilled 75 percent of their clients in the past, they should be able to thrill you."

Agencies without satisfaction data may offer client testimonials, but Gregg warns against giving these too much weight. "Everybody has three clients that love them," he notes.

Does the agency participate in the Best of Staffing program?

Sponsored by the American Staffing Association (ASA) in Alexandria, Va., and run by Inavero in partnership with CareerBuilder in Chicago, the program benchmarks company performance in the U.S. staffing market, comparing client and employee satisfaction among vendors. To earn the designation, an agency has to score almost double the industry averages.

What is the internal staff's turnover rate?

There's a correlation between an agency's internal attrition rate and performance. Determine the average tenure of recruiters and sales professionals working on your account. "A high internal attrition rate is a red flag," Gregg says. "I'd like to know that the people working on my account have been around for four or five years."

Lots to Choose From

The five largest U.S. staffing companies, by revenue, are Allegis Group Services, Randstad, Adecco, Manpower and Kelly Services.

In the United States, entry into the staffing business is relatively easy, creating a diverse playing field of more than 10,000 companies. International behemoths such as Randstad and Adecco vie against each other as well as against smaller locals and regionals. Yet no one company usually rises above single digits in terms of market share.

The top five companies share about 20 percent of the U.S. market. In contrast, the top contenders command more market share in other countries. For example, the five leaders have 80 percent in France and 85 percent in Italy, says Jonas Prising, president of the Americas for ManpowerGroup in Milwaukee.

Does the vendor offer training for internal employees?

Temps should receive training; ask for examples of what the agency does. At Randstad, every employee begins in an onboarding program that runs for several weeks. It includes face-to-face training and webinars while in the field, says Jim Link, SPHR, managing director of human resources.

Is the staff professionally certified?

To earn ASA certification, practitioners must take a test featuring questions about employment law. "People who complete the certification process are the ones getting real-time information on critical labor and employment laws," says ASA President Richard Wahlquist.

Who will be your go-to person?

Some agencies have sales teams that hand off accounts after the sales. At others, the staffing manager makes the sale, picks the talent and continues to be your contact. "It's a relationship business," says Steve Blubaugh, SPHR, vice president of HR at trucking company USF Holland in Holland, Mich. "The person needs to understand your needs and then deliver."

"My relationship with my HR client is critical," Harris says. "When we place someone, I call on the first day to make sure the person made it in, then three days later, then a week later to see if things are working out."

Is there transparency in reporting and administration?

How accurate are invoices and other documentation? Is the agency paying workers at the agreed rates? "Some staffing companies are reluctant to offer this transparency," Campbell says.

The author, a contributing editor of HR Magazine, is a lawyer and a professor of management studies at Marist College in Poughkeepsie, N.Y.

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