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Are Direct Employer Jobs Going Away?

Structural changes in the economy are having a direct effect on hiring practices, and by default, the staffing industry. Temporary positions are becoming the norm in some areas of the country as employers make slow decisions to hire candidates for temp-to-perm and direct hire positions. Unless staffing agencies adapt their service offerings, they could risk losing clients that need innovative strategic workforce planning.

Historically, economic downturns allowed the staffing industry to perform well. However, the recent recovery is bringing mixed results in an environment still teetering in job creation. The monthly pulse survey conducted by Staffing Industry Analysts finds that direct hire growth decelerated in the second half of 2012.

The influences over these changes are as varied as the types of positions staffing agencies fill. Generally, this causes some within the industry to question whether direct hire jobs are losing their flavor. Perhaps any recognizable changes are not permanent and the real occurrence is natural adjustments to a new employment environment. It is possible that direct hire placements will remain, but the landscape of hiring practices will look different.

Social Media Takeover

One reason why employers seem to be using staffing firms less for direct hires is the advent of social media. For employers looking for alternative recruiting tools, social media networks, allows HR departments to find active and passive candidates on their own. Some industry experts view this as a threat to the staffing industry that requires immediate attention.

The percentage of new hires that employers found through social media sites doubled since 2005. According to a survey by the Society of Human Resources Management, nearly 44 percent of in-house HR departments use social media sites to connect to potential candidates. With more than 100 million users on LinkedIn alone, employers have a lot of options from which to choose.

The fear for some industry insiders is that the impact on direct hiring from social media will trickle to the temp-to-hire market for highly skilled workers. Full-time corporate recruiters have a ready platform to solicit referrals and connect with candidates. Others believe the rumored demise of direct hiring is more hype than substance. Accessing millions of candidates through social media can mirror wading through stacks of resumes.

Regardless, staffing agencies cannot ignore the expansive user base on social media sites. Freelance workers can market their skills to employers who want to save money. By hiring independent contractors, they do not pay full-service staffing fees.

Staffing firms can avoid extinction by becoming more adept than employers at using social media to recruit candidates.

Changes in Client Expectations

Another possible reason for fewer direct hiring practices is changes to client expectations. After downsizing the workforce, most employers consolidate positions with new hiring profiles. This practice can extend the average placement time. Positions that were once filled within days could take several months before the preferred candidate is selected.

Further, current pressures for improved productivity and reduced training budgets require candidates who are prepared to hit the ground running. Employers expect temporary workers to be a perfect match and may prolong the hiring process. They want workers who can quickly assimilate to processes and performance. Fear of hiring the wrong person causes some to take months with a single requisition.

To overcome this barrier, staffing agencies should provide continuous facts and data to employers about the realities of the current workforce. Eventually, most should realize that some of their expectations are unrealistic.

Additionally, agencies can offer precise protocols for matching jobs with skills and give employers a small number of well-matched candidates. Streamlining the hiring process equips staffing agencies with time to prepare temporary workers for assignments. The goal is to prevent a shutdown by hiring managers in making a hiring decision and fill the staffing need.

Staffing Agencies Should Mirror Company Hiring Processes

One of the biggest concerns of many employers when considering the use of staffing agencies is whether hiring practices are a good match. From the employer's perspective, finding a direct hire candidate is the same as hiring someone without agency assistance. If hiring criteria is different, the employer might not get the candidate they need.

For the staffing agency, it is important to determine specifics about the employer and the direct hire position. Their goal is to use tools to gauge applicant skills and present only well-qualified candidates. Otherwise, the employer is not saving any time or money by hiring the staffing agency.

Changes to Workforce Staffing

Jobs requiring middle-level skills have been declining for many years. The combination of technology advances and offshoring has eliminated many positions. The recent recession hastened the process as these workers were laid off without transferable skills.

According to the U.S. Bureau of Labor Statistics, by 2020 the workforce will have an estimated 1.2 million deficit of workers with a bachelor's degree or higher. The continual decline in blue-collar, administrative and sales occupations will leave an untrained workforce. This raises the bar for agencies to compete for professional contractor positions.

Staffing agencies that specialize in light industrial and clerical positions have to restructure to meet changing workforce demands. The focus will shift from middle-skilled to highly skilled workers. Some might find that merging or acquiring other firms is the best way to survive the falling demand for middle-skilled workers.

Telecommuting continues its evolution into the workplace as another structural change impacting the staffing industry and direct hire practices. Some forecasts project a 30 percent increase in telecommuting by 2019 as more employers work with tight budgets. Allocations for relocation and travel expenses make working from home an attractive option for employers and employees.

Technology proves to be a contributing factor to incorporating telecommuting in hiring practices. Migration of applications to the cloud, for instance, makes it easier for contractors and employees to telecommute. New software on the market also allows employers to keep track of performance measures from remote locations. One industry in particular – call center agents and customer service representatives – requires more adjustments for staffing agencies.

Generally, staffing agencies cannot ignore a large percentage of the labor market that can affect their profitability margins. They must find creative ways to screen potential candidates and use onboarding tools for remote workers. In some situations, they may need to expand services to offer a stipend, assistance with virtual office functionalities and communication tools. Doing so will help to improve the efficiency of remote workers.

Professional contractors, on the other hand, will usually have their own tools such as laptops and smart phones. Employers can provide web-based programs and applications along with privacy policies. Staffing agencies can act as intermediaries to make sure both sides are legally compliant.

These and other structural changes require staffing agencies to rethink the hiring process for employers. Continuing down the same path while employers' needs are shifting within a new economy is a no-win proposition. Failing to change with the times will cause staffing agencies to become irrelevant.

Alternately, these structural changes can signal a new growth stage for the staffing industry. Social media and technology notwithstanding, using staffing agencies for direct hires will be the same as making selections without assistance. As needs continue to evolve, staffing agencies must use foresight to anticipate client needs.