The Eagle Blog

Staffing Industry Ethics

Sometimes I wonder what will become of our industry. There are many very professional companies that work extremely hard to raise the professionalism within our ranks, and then there are “the others”. I wrote a blog entry about the value our industry brings to clients, which I think is a very compelling argument … but we still have companies trying to give our services away!

In an economy that is going to be hammered with demographic pressures there is lots of business to be had … IF, as an industry, we can demonstrate our value to clients. One problem comes when the “bottom feeders” feel the need to cannibalise the existing good business. Going to a client and saying, “I will do that for a dollar less … just move all their people over to me”, is the kind of activity that creates an expectation in the client base that our service is just administrative in nature. I am also appalled that clients can feel comfortable in just taking a hundred people and “moving them” to another supplier! The legality of this move is also extremely questionable, particularly where restrictive covenants are in place, but once it reaches that stage a client relationship is already damaged!

I operate my business on a set of principles that govern our decision making. I would not make a decision that would treat someone else in a way that I would not like to be treated myself. It’s a pity that our industry is populated with a few companies who are totally focussed on making a couple of dollars, at whatever cost, even if it is bad business!

The other activity that I have seen recently is the willingness for some companies to sign anything! It doesn’t matter that the financial terms don’t make sense or that the contractual conditions are nonsensical! Their approach says that they will wait it out and things will get sorted out, which brings no value to their client and paints our industry in a very poor light. We need to be bringing value to the clients at every stage in the process and that means educating them about why we need to earn reasonable fees and why we need reasonable contract terms!

My message to the staffing industry is to be proud of our service, value what you do appropriately and don’t settle for a lousy deal and then do a lousy job for your client because that account doesn’t pay enough! Educate the clients and earn what we are worth, we all win in the end!


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8 thoughts on “Staffing Industry Ethics

  1. I couldn’t agree more!

    I am currently working for a major organization that has committed to do business with two suppliers for all of their IT needs. Obviously, it took years of tireless sales efforts, nurturing and positive experiences to build a relationship with this client.

    If we are unable to provide a candidate in a timely fashion for one of their roles, we will often look at a ‘split’ scenario with another vendor. These ‘splits’ are very common in our industry, and understood by all to be a mutually beneficial arrangement.

    The typical scenario (for a permanent placement) is a 50% – 50% split. Every organization that I have approached readily agrees to this, and understands that winning the client’s business in the first place is half the battle of a successful placement.

    It turns out that this particular organization is charging $1000 to ‘process’ a candidate that is placed by another, outside vendor who simply had the right candidate available at the right time.

    I was shocked to learn of this and absolutely amazed that a firm in our industry would put the time, energy and effort into landing a major client, only to give the business away to another vendor out there for a small ‘processing’ fee with no relationship development required.

    This will only force our industry into a transactional, impersonal business where client relationships would essentially be a thing of the past.

    The problem is making our clients understand the damage that this is doing to our industry!

  2. I couldn’t agree more!

    I am currently working for a major organization that has committed to do business with two suppliers for all of their IT needs. Obviously, it took years of tireless sales efforts, nurturing and positive experiences to build a relationship with this client.

    If we are unable to provide a candidate in a timely fashion for one of their roles, we will often look at a ‘split’ scenario with another vendor. These ‘splits’ are very common in our industry, and understood by all to be a mutually beneficial arrangement.

    The typical scenario (for a permanent placement) is a 50% – 50% split. Every organization that I have approached readily agrees to this, and understands that winning the client’s business in the first place is half the battle of a successful placement.

    It turns out that this particular organization is charging $1000 to ‘process’ a candidate that is placed by another, outside vendor who simply had the right candidate available at the right time.

    I was shocked to learn of this and absolutely amazed that a firm in our industry would put the time, energy and effort into landing a major client, only to give the business away to another vendor out there for a small ‘processing’ fee with no relationship development required.

    This will only force our industry into a transactional, impersonal business where client relationships would essentially be a thing of the past.

    The problem is making our clients understand the damage that this is doing to our industry!

  3. I have to speak up here as the owner and president of a firm that does things a little differently.

    I worked for a staffing firm for several years and saw many “unethical” things go on that finally made me go off on my own. We charged big fees, and our owner pushed us to be aggressive and to “defend the business” etc. etc. We were well trained, but we were trained to be salespeople, first. Because of the structure of the business, no relationship really belonged to us, but rather to the firm. After awhile, I felt like I was being “pimped” — for lack of a better term.

    I believe that “sales” should not be part of the hiring process, as in love, politics, religion. The pressue we were under to both feed our own families, as well as our boss’s, had us saying all sorts of things, from “If you don’t hire Bill by Tuesday, he’ll go and work for your competitor” to “This guy walks on water.” We all know that nobody can really know what another person will do, and past success does not always predict future greatness. So let’s not say these things.

    In our case, we provide candidate resumes for review, and then try to stay out of the hiring process as much as possible, because if you look at it objectively, many companies would rather handle this themselves, in many (although not all) cases.

    I used to have prospective clients tell me that they always felt an inherent conflict of interest when working with search consultants/headunters, etc. I always brushed this off, until I stopped to think that perhaps, if they were feeling this, I had to listen. Our mantra at the search firm was to “always control the process” — because to lose control of the process means that the deal will probably fall apart. But in the end, I believe that the process should be controlled by the hiring company and the candidate.

    The technologies of today can allow us to offer services at a lower price. My firm charges less, but I keep more; it is a fact that many of the tools we use today don’t cost what they did 2o years ago. It is not wrong to pass these savings on to our customers. Those who do not are stuck in the past…

    We have an 80% retention rate on our clients. They sign a contract, and usually sign antoher one after. This is very high for this industry, where some shops are lucky to see 15% repeat business. I have strong, professional, and enjoyable relationships with the majority of my clients.

    We did hear quite a bit of talk about these “bottom feeders” and how lousy they seemed. However, I have changed my opinion on this to some degree. If someone can provide a service for less because they are more efficient, or have less overhead, they should be congratulated. Sure, they may provide a bad service, but I’ve seen too many 30% fee headhunters lie and cheat as well…talking up the candidate and client back and forth only to have the whole thing fall apart two months later after the fee has been paid and whatever guarantee lapse.

    Don’t get me wrong…the service done right can be worth every penny. But let’s not automatically dismiss those in the industry who are creative enough to do it for less. History is full of examples. There were those who hated Henry Ford for being able to produce a cheaper automobile.

  4. I have to speak up here as the owner and president of a firm that does things a little differently.

    I worked for a staffing firm for several years and saw many “unethical” things go on that finally made me go off on my own. We charged big fees, and our owner pushed us to be aggressive and to “defend the business” etc. etc. We were well trained, but we were trained to be salespeople, first. Because of the structure of the business, no relationship really belonged to us, but rather to the firm. After awhile, I felt like I was being “pimped” — for lack of a better term.

    I believe that “sales” should not be part of the hiring process, as in love, politics, religion. The pressue we were under to both feed our own families, as well as our boss’s, had us saying all sorts of things, from “If you don’t hire Bill by Tuesday, he’ll go and work for your competitor” to “This guy walks on water.” We all know that nobody can really know what another person will do, and past success does not always predict future greatness. So let’s not say these things.

    In our case, we provide candidate resumes for review, and then try to stay out of the hiring process as much as possible, because if you look at it objectively, many companies would rather handle this themselves, in many (although not all) cases.

    I used to have prospective clients tell me that they always felt an inherent conflict of interest when working with search consultants/headunters, etc. I always brushed this off, until I stopped to think that perhaps, if they were feeling this, I had to listen. Our mantra at the search firm was to “always control the process” — because to lose control of the process means that the deal will probably fall apart. But in the end, I believe that the process should be controlled by the hiring company and the candidate.

    The technologies of today can allow us to offer services at a lower price. My firm charges less, but I keep more; it is a fact that many of the tools we use today don’t cost what they did 2o years ago. It is not wrong to pass these savings on to our customers. Those who do not are stuck in the past…

    We have an 80% retention rate on our clients. They sign a contract, and usually sign antoher one after. This is very high for this industry, where some shops are lucky to see 15% repeat business. I have strong, professional, and enjoyable relationships with the majority of my clients.

    We did hear quite a bit of talk about these “bottom feeders” and how lousy they seemed. However, I have changed my opinion on this to some degree. If someone can provide a service for less because they are more efficient, or have less overhead, they should be congratulated. Sure, they may provide a bad service, but I’ve seen too many 30% fee headhunters lie and cheat as well…talking up the candidate and client back and forth only to have the whole thing fall apart two months later after the fee has been paid and whatever guarantee lapse.

    Don’t get me wrong…the service done right can be worth every penny. But let’s not automatically dismiss those in the industry who are creative enough to do it for less. History is full of examples. There were those who hated Henry Ford for being able to produce a cheaper automobile.

  5. Fair comment … we have seen Tata innovate in the auto industry to produce a $2,500 car and in the hospitality industry to be able to offer a $50 per night hotel room! Its hard to fight that kind of innovation!

    Having said that, our industry is being driven to become a transactional, technology driven solution … and I am a huge fan of technology as a tool, but we are in the people business and no two people are alike. A faceless resume fired off through a tool will result in lower costs … but far lower quality.

    When it comes to pricing I have seen National suppliers offering their clients contractor margins from 10% to 30% (same supplier, similar size clients). That same supplier will offer payrolling to clients at $1 or $5 depending upon what they can get away with.

    I have no problem with innovation and progress, I do have an issue with unethical, unprofessional organizations who seem to make their business decisions based on what they smoked today!

    Congratulations on your successful business and more power to you. You sound like you have a plan, that’s a good thing!

  6. Fair comment … we have seen Tata innovate in the auto industry to produce a $2,500 car and in the hospitality industry to be able to offer a $50 per night hotel room! Its hard to fight that kind of innovation!

    Having said that, our industry is being driven to become a transactional, technology driven solution … and I am a huge fan of technology as a tool, but we are in the people business and no two people are alike. A faceless resume fired off through a tool will result in lower costs … but far lower quality.

    When it comes to pricing I have seen National suppliers offering their clients contractor margins from 10% to 30% (same supplier, similar size clients). That same supplier will offer payrolling to clients at $1 or $5 depending upon what they can get away with.

    I have no problem with innovation and progress, I do have an issue with unethical, unprofessional organizations who seem to make their business decisions based on what they smoked today!

    Congratulations on your successful business and more power to you. You sound like you have a plan, that’s a good thing!

  7. Thank you for your response. Most people aren’t unethical…we all want to do the right thing. I find myself concerned sometimes when the buisness model forces us, to some degree, to be less then ethical…or to push the envelope, as it were…to doing/saying things that aren’t exactly true.

    Many industries do this…the creative spins in real estate…for example…saying that a house with a big hole in the roof has a “ventilated skylight giving easy access to night-time star gazing” … Would an honest used car salesman be successful?

    The job boards and other technologies…dirt cheap long distance phone service…etc. have changed things, for sure. Companies have always looked for ways to improve their bottom line…sending production to China. We can’t blame them for wanting to save money.

    My old boss used to say that the staffing industry was recession proof, because companies will always be hiring. Well, people will always be eating, but the restaurant business is certainly not recession proof.

    I have always had the utmost respect for the search consultant who really understands the business, and who can earn his/her fee. I’d like to see a way where both models can compliment each other, and I have tried to approach some traditional staffing firms with some win-win situations, but there is a lot of resistance. Any industry, when it feels threatened, will respond this way. Ten to fifteen years ago, travel agents were telling us that we shouldn’t risk buying a plane ticket without them. Now look where we are…

  8. Thank you for your response. Most people aren’t unethical…we all want to do the right thing. I find myself concerned sometimes when the buisness model forces us, to some degree, to be less then ethical…or to push the envelope, as it were…to doing/saying things that aren’t exactly true.

    Many industries do this…the creative spins in real estate…for example…saying that a house with a big hole in the roof has a “ventilated skylight giving easy access to night-time star gazing” … Would an honest used car salesman be successful?

    The job boards and other technologies…dirt cheap long distance phone service…etc. have changed things, for sure. Companies have always looked for ways to improve their bottom line…sending production to China. We can’t blame them for wanting to save money.

    My old boss used to say that the staffing industry was recession proof, because companies will always be hiring. Well, people will always be eating, but the restaurant business is certainly not recession proof.

    I have always had the utmost respect for the search consultant who really understands the business, and who can earn his/her fee. I’d like to see a way where both models can compliment each other, and I have tried to approach some traditional staffing firms with some win-win situations, but there is a lot of resistance. Any industry, when it feels threatened, will respond this way. Ten to fifteen years ago, travel agents were telling us that we shouldn’t risk buying a plane ticket without them. Now look where we are…

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