7 Common Issues & Challenges Facing Staffing Agencies

Staffing firms face change constantly: new technology, a limited supply of talent, economic uncertainty, diversity and inclusion incentives, the push to work from home, high turnover rate, etc. We hear all about these issues from our staffing firm clients, so here are some of the biggest challenges that staffing professionals firms and hiring managers face year to year.

We recently sat down with the Staffing Industry Analysts (SIA) editorial staff to talk about those pain points. In this blog, we will summarize the key points and offer our thoughts about staffing problems and the industry specific pain points that staffing firms go through as well as how to craft your recruiting strategies to manage them.

What are the biggest challenges in the recruitment industry?

1. CANDIDATE-DRIVEN MARKET

Right now in the US when it comes to labor, the supply and demand is simple: There are fewer quality candidates available than open jobs. We see it all the way from high-end engineering or technology recruitment firms to those filling blue-collar jobs. There just aren’t enough folks with the right skills and expeience to fill all the open positions. Additionally, candidates have more control than ever when it comes to technology that connects them with potential jobs. This includes online marketplaces, human cloud work and the tools that facilitate communication between the traditional staffing firms and their database of candidates.

All this to say, candidates hold all the cards right now, which is a change from the past. If you’re not focused on creating the best experience possible for your candidates, they will take their business elsewhere.

2. MSP TRENDS

One thing we have been hearing a lot lately from our clients is what may be the leading edge of another trend: The pendulum swinging away from MSPs while unemployment remains low and few local employees are available. Some of our midsize clients have told us that a large client that used to depend solely on an MSP has approached them directly. Namely, because of their expertise in the local market and good contacts in the area.

To capitalize on this trend, consider reaching out to larger clients who may be feeling the pain of shortage of employees. You can sell this as a unique advantage over a more generalized MSP approach.

3. TECHNOLOGY

Figuring out which technology can help you make more placements that are going to stick is an overwhelming challenge. But it is also one you need to spend time on this year, because if you don’t, you’ll soon be left behind.

Most of our clients are small to midsize firms who grew up as traditional staffing firms and are now trying to figure out how to use online sources of candidates such as Indeed or LinkedIn. It’s like everyone has a database of 2 million candidates — but now they need the ability to query and qualify the candidate pool for the right fit.

4. “GHOSTING”

You may have heard this term in reference to dating apps, but it’s a problem during the interview and hiring process too. We’re talking about employee no-shows, or “ghosting” — people starting assignments and then leaving after a day or two. Why is that? They know there are other jobs waiting for them. And it is very costly for the staffing firm. Not only does it hurt your relationship with your client, you also lose the investment you made finding, recruiting and training the worker.

Ghosting in the current COVID-19 staffing market has become an even bigger issue. According to a study conducted by Indeed, “it’s become clear that the disappearing act is no longer quite so one-sided: more employers are now ghosting job seekers, too.”

Unfortunately, there is not a whole lot you can do about it other than try your best to do your due diligence and match your candidate’s expectations.

5. OWNER TIME PRESSURE

Staffing firms owners can easily become bogged down by the guts of the business — spending time on back-office functions such as invoicing, payroll and tax, or pulling information from various systems to get basic metrics such as fill rate and time to fill for recruiters. It’s painful and can take hours. Plus, none of those functions drives your revenue.

Consider finding partners or investing in systems that are more efficient. Owners’ time is better spent with the recruiters and salespeople — coaching, developing and measuring — than on back-office work.

6. SPECIALIZATION

In a highly competitive environment, one thing staffing firms can do to help themselves improve time to hire or “speed to candidate” is to specialize. If you have a specialized niche, what gives you speed is your expertise rather than the technology you’re using. Although technology can help everyone, specialty players have more leeway.

If you have the best database for a very specific sort of NICU nurse, let’s say, you are likely to be able to survive even if you don’t have every hot, new tool. You know how to find the candidates with these skills and experience, qualify them, and the hospitals that need those folks are going to call you. At the other end of the spectrum, if you’re placing semi-skilled labor, it’s more about how fast you can get them to show up and get the drug tests completed. That’s hard to do when you’re leaving voicemails.

7. FINANCIAL UNCERTAINTY

Rising interest rates, historically low unemployment, a predicted slowdown in GDP, and possible trade conflicts are all factors that are contributing to an economically uncertain future with a possible recession on the horizon.

A big part of managing financial survival in a recession is doing what you would always do, but doing it better. For example, analytics are more crucial during a recession. Which recruiters, which offices, and which vertical lines are generating the most profit? You may need to tighten your belt, and you need to know when and where to tighten.

These are just a few of the many stresses and issues that staffing firms face daily. If your staffing firm is facing these problems but wanting to grow, we can help. Contact us anytime for a free consultation about our specialized payroll funding and back office services.