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A toxic relationship: 4 ways temp agencies are holding your business back

Staffing agencies had their uses in the past, but they have significant shortcomings in the modern marketplace. Instead of allowing temp agencies to constrain our companies, we need to take advantage of the full potential of the freelance economy.



What if I were to tell you that contractors outnumber direct employees at one of the biggest tech companies in the U.S.? And what if I were to say that these contractors are doing more than pushing paper—they’re writing code, testing products, managing teams, and recruiting talent? The company in question is Alphabet Inc., the parent company of Google.

This change at Alphabet serves as a perfect example of the shift in today’s workforce toward “gigging,” in which labor comes on a short-term or freelance basis. These freelancers can bring something unique to businesses, allowing companies to scale up or down on demand rather than maintain a massive team of full-timers.

Without a doubt, freelance workers will play an integral role in the future of the business world. But instead of taking advantage of technology to connect directly to these freelancers, many companies are living in the past by attempting to find temporary help through staffing agencies.

Staffing agencies had their uses in the past, but they have significant shortcomings at this point. The workers these agencies are attempting to place often want a temp-to-permanent solution, cannot secure jobs in a hot market, or have not been ambitious enough to contract out their services. Depending on the firm, many of these candidates have not even been vetted to ensure their skills match their résumés. Instead of a known quantity, companies must expend resources to further vet these potential team members for skills, experience, and personality.

More often than not, these companies use agencies for one purpose: to find warm bodies to get work done. They ignore the alternatives and settle for low-hanging fruit. In fact, 37 percent of agency clients have experienced something known as “ghost bookings,” a situation when workers are promised before they’re ever secured. Clearly, the working world has surpassed the capabilities of temp agencies.

A source of squander

Imagine your company’s controller unexpectedly quits. The process of hiring a full-time replacement will take an average of 65 days. In the interim, you decide to enlist the assistance of a temp agency.

Before you can get help, you’re going to need to review applications from submitted candidates. We’ll be generous and say that only takes you about 10 hours. If no one has the ideal combination of skills and background, you probably opt for a warm body rather than nobody at all. At least you finally have help—well, after you train that person for a month or two. And when that temporary hire finds a permanent job elsewhere (which is highly likely), you’ll be right back at square one.

None of this is to say that temp and staffing agencies didn’t have their uses back in the day. Before the cloud enabled us to connect in new ways, people had to be in the office physically. Now, we can pretty much work from anywhere. Businesses can tap talent from coast to coast, which is why it’s so befuddling that so many companies still lean on temp agencies when they need to fill a gap in their teams.


Businesses should take advantage of the freelance economy. (Source)

Business needs are changing at a rapid pace. As such, you must consistently evaluate your talent needs to ensure you bring in the right people for the right project at the right time. This is a significant investment, which is not lost on the 70 percent of HR leaders who say it takes longer to find and hire the right talent than it did a year ago.

It’s time to stop taking the easy way out. Instead of allowing temp agencies to constrain our companies, we need to take advantage of the full potential of the freelance economy. Still unconvinced? Here are a few ways that temp agencies hold businesses back:

1. They supply substandard talent. 

There’s a difference between the best person and the best available person for a job. With temp and staffing agencies, you typically get the latter. The talent does not always have the experience you need, but that person is likely the best option available. Perhaps more importantly, many temp and staffing agencies do not even screen for the soft skills that ensure a culture fit and improve the success of a new hire.

What’s more, many temp and staffing agencies have experienced a shortage of qualified talent. Part of that relates to geographic constraint, as these agencies are only able to tap into people from your region. With virtual workers, the possibilities are basically limitless—you could have a team of experts all living on different continents. Freelancers are a different demographic, as they have chosen to freelance because of the flexibility and autonomy it provides. High-quality talent is migrating to the freelance economy, and temp agencies aren’t able to pull from that pool.

2. They prolong bad habits. 

Companies often find themselves operating on autopilot. When someone quits, the first thought is usually to seek out a temp to fill that gap. These companies miss out on an opportunity to evaluate their overall business needs, which could be filled by freelancers of different backgrounds. These freelance workers have varied and highly specialized skill sets to handle a broader range of projects—and at comparable rates, no less.

3. They waste resources.

Résumés and referrals only go so far. You have to dig deep to learn relevant information about a candidate beyond what’s available on the page of paper (or computer monitor). Even then, you never know whether a candidate is a fit until your first meeting.

You can skip that friction in the freelance economy. Machine learning enables you to make decisions based on personality fit rather than the details of a candidate’s résumé. Freelance marketplaces—specifically managed marketplaces—cover the basics, so you’re only presented with people who have the qualifications you need. At that point, it’s a matter of fit instead of expertise or industry experience.

4. They stifle innovation. 

Most talent from temp and staffing agencies would like nothing more than a full-time position. These workers will do as they’re told and avoid rocking the boat for fear of losing their chance at permanent employment. They clock in, clock out, and hope for a long-term role.

Freelancers, on the other hand, are compensated for their opinions and unique perspectives. They are eager to offer their expertise and help you improve your operation, as they know that happy clients are more likely to bring them back for more work down the road. Instead of merely collecting a paycheck, freelance workers can be a source of innovation.

If you want top talent, you will need to take advantage of the freelance economy. And the workforce is heading in that direction. Thirty-six percent of workers took freelance jobs in 2017, and it’s projected that more than 50 percent of the U.S. workforce will be freelancing by 2027. What’s more, half of these freelancers say no amount of money would sway them to take a “traditional” job.

Marketplaces now exist for every business function you can imagine, which makes it easier, quicker, and more cost-effective to find incredible talent. If you aren’t leaning on these channels for your next hire, trust that your competitors are—and they’re likely getting someone who would be the perfect addition to your team.

DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.

Michael Burdick is the CEO of Paro, the alternative employment model for the future of finance work. Paro's purpose is to empower people to do what they love.