Hiring a Staffing Firm: Are Staffing Firms Effective?

One question often comes up among top-level business executives: Are staffing firms effective? A staffing firm’s effectiveness largely depends on the value they deliver to customers, and the value provided varies from firm to firm.

In today’s competitive corporate world, even the slightest edge can mean the difference between success and failure. The most successful corporations understand that beating the competition boils down to understanding their unique value proposition and executing diligently on the strategy.

Walmart founder Sam Walton once offered this pearl of wisdom, “Control your expenses better than your competition. This is where you can always find the competitive advantage.” Indeed, keeping costs in check gives any business a competitive advantage. However, keeping costs down does not mean cutting corners.

Great corporations also understand that the core of their unique value proposition lies in their employees. So, the question begs, how can you keep costs down while bolstering your corporation’s unique value proposition to attract top talent? The answer lies with hiring a staffing firm.

How Staffing Agencies Are Truly Effective

What Is a Staffing Firm?

A common misconception about staffing firms is that they merely hire employees on their clients’ behalf. While this may be true of most temp agencies, hiring companies, HR consultants, or headhunters, a staffing firm is much more than that.

A run-of-the-mill hiring agency fills open positions with able bodies. Hiring agencies often seek to save their clients money by finding workers willing to take the lowest possible pay. A professional staffing firm goes above and beyond “saving money.”

Professional staffing firms fill a need for their client companies. Experienced staffing firms understand the value of placing the right person in the right position. Former COO at General Electric Lawrence Bossidy once said, “Nothing we do is more important than hiring and developing people. At the end of the day, you bet on people, not strategies.” Strategies are only as good as the people that carry them out. Successful companies understand their success hinges on finding the right people. When a staffing firm finds the right person for the right spot, they help increase employee retention and save money by reducing the need for repeat hiring campaigns.

What Does a Staffing Firm Do?

The short answer is hiring and recruitment. However, that response is overly simplistic. A staffing firm does much more than merely supply workers. A staffing firm develops a keen understanding of their clients’ needs in order to find the right people who can positively impact their clients’ aims.

Critical intangibles fall through the cracks when HR consultants, hiring agencies, or even headhunters evaluate staff by merely checking off boxes. Neglecting to assess an applicant’s mindset may lead to hiring workers that aren’t the right cultural fit. For instance, a worker who isn’t committed to going the extra mile may not fit well within a service-oriented culture.

When working with a staffing firm, it’s essential to ensure that both the staffing firm and the client company are on the same page. A symbiotic working relationship ensures finding the best available talent.

How Much Does a Staffing Firm Cost?

The adage, “you get what you pay for,” applies here. On the surface, going with the cheapest hiring agency may seem like the most cost-effective option. However, it may prove to be the costliest in the long run.

How so?

When companies choose the cheapest option, they may end up spending more money when candidates don’t work out or increase opportunity costs when the role is not filled quickly.

Consider this situation:

A hiring agency charges $100 to source and place a worker. It takes the hiring agency two weeks to fill the position. The worker lasts two months and then leaves. The company must now fill the same position again. Consequently, the company must spend another $100. Furthermore, the company must spend more resources and employ staff hours for onboarding and training. Indeed, bringing new staff aboard becomes quite onerous over time.

How much does a bad hire cost?

The answer is straightforward. An article from Northwestern University, citing US Department of Labor Data, estimates that a bad hire is 30% of the individual’s first-year salary. This estimation implies that the higher the salary, the costlier the bad hire. For instance, an employee that earns $40,000 would represent a $12,000 cost. Moreover, a bad hire with an $80,000 salary would represent a $24,000 cost.

As you can see, footing the bill of a bad hire can become a needless drain on company finances. Working with a reputable staffing firm may cost slightly more upfront, but doing so saves much more in the long run. The difference lies in spending more upfront to make the right hire. But the overall savings of a bad hire pay off in droves with time.

Generally speaking, working with a professional staffing firm doesn’t have to be prohibitive. There are various arrangements companies can work out with a staffing firm. Consider the following:

  • Temporary staffing firms charge a bill rate for their temp staffing services. If the position in question pays $20 an hour, the staffing firm may charge a $32/hr; this bill rate includes the pay rate, overhead, payroll taxes, worker’s compensation insurance, unemployment insurance and more. This bill rate represents the total hourly rate to the client company.
  • Permanent placement staffing firms set their fee as a percentage of the referral’s first year’s compensation. This fee varies based on the salary and the difficulty in recruiting for the role.
  • A flat fee per position is a reasonably common practice, as well. This fee largely depends on the worker’s salary and the relative difficulty in sourcing talent.
  • Other staffing firms charge workers a percentage of their pay instead of billing the client company. This approach is largely considered unethical.

Companies looking to work with a staffing firm must understand its fees and the service they can deliver to best assess the overall value the staffing firm can provide.

hiring a staffing agency

Why Should Companies Work with a Staffing Firm?

There are roughly 25,000 staffing firms in the United States, accounting for 13.6 million placements annually. The domestic staffing firm industry boasts a $144.5 billion market cap. These numbers highlight the impact that staffing firms have on the economy. As more and more companies choose to work with staffing firms, there are five key reasons why your company should consider working with a staffing firm.

1. Staffing firms are experts at what they do. They have the experience and the know-how needed to find the right fit for companies and positions. Professional staffing firms have contacts, connections, and databases that facilitate sourcing top talent. They also leverage their vast network to find candidates who may not actively be looking for work.

2. Staffing firms save time. They have streamlined processes that ensure finding suitable candidates in a fraction of the time it takes most companies. By saving time on hiring, client companies can focus their efforts on their core business. Consequently, savings in time result in improved productivity and profitability.

3. Staffing firms help reduce staff turnover. Staffing firms reduce staff turnover by matching appropriate skills, experience, and attitudes to the company. By finding the right employees, staffing firms allow companies to cut down on turnover.

4. Staffing firms reduce staff workload. Staffing firms help take the pressure off hiring managers by handling recruitment tasks. In doing so, hiring managers can focus on their core activities and HR professionals can focus on developing staff, thereby helping the company grow.

5. Staffing firms are true business partners. Companies can rely on a professional staffing firm to come through them. For instance, businesses can rest assured a trusted staffing firm will be there when they need temporary, temporary-to-hire or permanent employees. Indeed, staffing firms provide peace of mind so businesses can devote their attention to what they do best.

How Can TalentZök Become Your Trusted Staffing Agency?

At TalentZök, we know what it takes to find the right people for the right position. We know that it’s not about checking off boxes on a list. Finding the right people is about matching skills, experience, and attitude with your company’s ethos. We have a keen understanding of how important your staff is to your success. We strive to help our business partners continuously grow by helping them build the right team.

Let us help you build the right team for your business. Find out more today about how we can become your trusted staffing agency.


This post is made available for informational purposes only to provide a general understanding of the topics discussed herein. It is not intended to provide specific business, legal, or professional advice and should not be relied on as such. TalentZök is not liable or responsible for any damage or loss arising from any reliance placed on such materials.

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