10 Tips for Picking The Best Staffing Firms

On April 13, 2020
10 Tips for Picking The Best Staffing Firms

In the April 14, 2020 Ask The Headhunter Newsletter a reader questions the wisdom of working for staffing firms.

Question

staffing firmsI had a contract job with a staffing firm that officially ended a couple of months back. The firm said that they were still looking for other clients to send me to, but just now told me that I’m released.

Do you think it’s even (or ever) worthwhile to get involved with staffing firms like this to look for jobs? I’m also asking because, since a lot of them have “presented” me to their potential clients, my reputation may have been “poisoned” from that. They may have been (probably actually were) “dialing for dollars,” and I never hear anything back from them.

I respect your take on things and I’d like to hear what you think, and what other folks on the discussions think, too.

Nick’s Reply

Staffing firms can be a dicey proposition. You’ve no doubt noticed a trend in the past decade. Companies seem eager to off-load (“outsource”) hiring to “staffing firms” that recruit and hire workers, then rent them to real employers. I have strong opinions about the effects of the staffing industry — also known loosely as the consulting industry — on the overall economy, and I make no bones about it: Consulting: Welcome to the cluster-f*ck economy. But my opinions should not stop you from exploring ways to profit from getting a gig through a good staffing firm — so let’s discuss this.

Why staffing firms?

It seems the key motivation for companies to use rented, or “contract,” or temporary workers is to eliminate certain overhead costs of actually hiring employees directly. The staffing firm handles recruiting, payroll, benefits and HR functions, among other things. When the worker is technically on the payroll of a staffing firm, the employer also avoids certain risks and costs of firing people, because the employer isn’t “firing” anyone. It is merely “sending them back” to the staffing firm.

In my opinion, the biggest risk to companies that use staffing firms is that they relinquish their most important competitive edge — expertise in finding and hiring the very best workers.

The problem with staffing firms

There are so many shady, boiler-room “staffing” operations that the few good ones suffer from the overall poor reputation of the business. The odds are high that any staffing firm that solicits you is indeed dialing for dollars, or to use a more technical term, “throwing spaghetti against the wall.” They are simply not good at matching workers to jobs and companies.

The worst operate massive overseas call centers and are clueless about the work you do. Along with scads of random resumes, they’ll throw the kitchen sink at a client and let it pick the candidates. If someone the client chooses isn’t working out, the worker is quickly replaced. This “churn” practice is supposed to substitute for careful, appropriate placements.

And you’re right, an unscrupulous staffing firm that scraped your resume from the Internet probably distributed it without your knowledge — possibly indiscriminately. That makes you look bad.

Can staffing firms hurt you?

As you suspect, an HR department that receives your resume for the wrong job could tag your record in its database with a big fat X. That could make it harder for you to get in the door later. That’s one reason to work only with reputable staffing firms you trust — not just those that solicit you.

Should you worry about this? You really can’t do much about it. When you post your resume online, it’s fair game. Anyone can forward it to any data dumpster anywhere. But don’t fret. Even if your reputation is thereby “poisoned” at some companies, all it really takes is one very good reference or personal referral to fix that. (This is precisely why personal contacts are so important. Please see Skip The Resume: Triangulate to get in the door.)

I think the worst thing a staffing firm could do to you is put you into a series of wrong short-term assignments over a lengthy period of time. This makes a mess of your work history. Good luck explaining your resume to a real employer.

How should I vet staffing firms?

There are good staffing firms out there. They might be very big and they might be very small and specialized. If this is how you prefer to work — as a consultant — it’s up to you to perform due diligence to identify them. A friend of mine in the staffing business shared some excellent advice many years ago. These 4 tips are still valid today.

  1. Always check references. When you’re deciding on a staffing firm, try to work with people you know and trust who are reputable. They can help you through this whole process. If you have to go to someone you don’t know, check their references. And don’t just use references they’ve given you; use your own contacts.
  2. Talk to your peers. As a potential employee, it may seem weird to ask a company for references, but it’s very important. If I were considering a job with a consulting firm, I’d like to talk to other employees, especially employees who are in a similar role to what I’d have.
  3. Understand the contract. Make sure you read your agreement with the staffing firm (and any subsequent agreement you must sign with the company you get assigned to) carefully and make sure everything you agreed to verbally is documented and signed. It doesn’t matter what the consulting firm is telling you if the contract says something else. Contracts vary all over the board. Make sure you know what you’re signing up for. (Please don’t miss: Bait & Switch: Games staffing firms play.)
  4. Expect the unexpected. Even the best consultants (that’s usually how the staffing firm will refer to you) will encounter problems. Take for example the consultant who didn’t get paid for two months by the staffing firm they’d been with for 20 years. The firm suddenly changed management, and lost its ethics. That kind of horror story can happen to the most experienced consultants. That’s why it’s so important not to become complacent.

How can I find the best staffing firms?

If you want to work through staffing firms, invest a little time to find the best ones. Here are 6 steps to follow.

  1. Select employers. Make a list of the 5 best companies in your line of work, in the geographical areas where you want to live — the actual employers where you would be working every day.
  2. Make a call yourself. Call the HR VP or, better, the head of the department you want to work in.
  3. Introduce yourself. Explain very briefly what kind of work you do; maybe just mention your job title. (Do not turn this into a pitch for a job.)
  4. Get a referral. Then ask, “May I ask you what is the best staffing firm in [IT, for example] that you use for your company’s contract hiring?”
  5. Select, don’t settle. Don’t settle for staffing firms that solicit you out of the blue. Pursue the ones whose clients love them. If the person you speak with names their preferred firm, ask for the name of the representative that handles their account. Thank them and end the call. Now you have (a) identified a reputable staffing firm, (b) you know they work with a company you might like to work for, (c) you have a name to drop (the manager you just spoke with), and (d) you know whom to call next.
  6. Take the initiative. Call the rep at the staffing firm. Introduce yourself very briefly, say that “Your client, So-And-So, recommended that I call you. They said your firm is one of the best in the [IT] field. I’m looking for a new position. Would you like to talk?” When the rep hears that their client sent you, the rep hears dollar signs.

Not everyone you call will tell you which staffing firm they use, but this approach is probably usual and disarming enough that some will. Likewise, not every staffing firm you then contact will help you. But this approach beats fielding calls from fast-talking recruiters at questionable staffing firms you know nothing about. So keep at it.

While I’d advise you to pursue full-time, direct jobs first, I would not tell you to rule out staffing firms. Many employers rely on them heavily. Just know what you’re getting into. In any case, when you make those calls to HR or to department heads, you might end by asking, “By the way, do you also hire direct?”

Get ready

This is hardly an exhaustive discussion about staffing firms and how to deal with them effectively. I expect other readers will share very useful information and raise issues I haven’t even touched upon. But get ready. This is an important topic because the employment world is about to change again dramatically.

The coronavirus crisis has eliminated a lot of jobs — that’s plenty of drama. But as the downturn subsides, the healthiest companies will be desperate to re-fill many of those jobs. It will be a time of opportunity — but also opportunism. Many unscrupulous staffing firms will suddenly appear, trying to capitalize on the new drama. You’ll get a lot of calls. I expect a lot of “churn” as people who are understandably desperate for jobs take positions they should not accept.

Before the lousy staffing firms contact you, find the best ones and contact them.

What’s your experience with staffing firms? What advice would you give this reader?

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I think they expect me to work for free

On October 14, 2019
I think they expect me to work for free

In the October 15, 2019 Ask The Headhunter Newsletter a reader wonders whether he’s being asked to do a job interview or to work for free.

Question

work for free

I’m interviewing with a large start-up co-working company. The position is in part a strategy role. They asked me to create a fairly involved business plan for a product launch that they are planning to offer in a few months. I am concerned that this is an effort to get free analysis out of me. They’ll take my plan and then leave me in the cold. Do you see a way to move forward without providing free consulting services?

Nick’s Reply

I think it’s actually a good sign when an employer asks you to “do the job to win the job.” In fact, I teach job candidates to offer to do the work during the interview process, to show they’re worth hiring. (See The shortcut to success in job interviews.)

But I draw a clear line between a demonstration and working for free.

Start doing the job

I suggest you take them up on their request. Tell them you’re excited about the opportunity.

How to Say It

“I’ll prepare a plan and show you what I can do. And by the way, if I can’t demonstrate how I can do this job in a way that will bring more profit to your bottom line, you should not hire me.”

That’s a very unusual, powerful position to take that will make you stand out. It also requires that you are prepared and know what you’re doing — or why attend such an interview?

Stop doing the job

Then deliver a skeleton of a plan — just one or two powerful pages — that will leave them wanting more. Yes, tease them. Leave plenty of room to hang details on the bones later. Don’t explain why you cut it short. Let them call you to say they want the rest.

When they ask you where “the beef” is, chuckle, then say the following.

How to Say It

“I love you guys and I think I could make a big impact on your launch. I’ve got the rest of my plan outlined and I’d be happy to flesh out the details for you when I start the job. Of course, I’d be glad to complete the plan in any case if what you really want is a consulting engagement. My daily consulting rate is $2,000 remote and $2,500 on-site.”

Say no more than that. Don’t quote an hourly rate. The best consultants quote daily. Then let them decide what they want to do.

Now wait for it

What’s important about this approach is that you’re not saying “No” to their request. You’re saying, “Yes, BUT.” Yes, you’ll produce what they asked for, but it’s not free.

Then wait for it, because it’s their move.

My guess is you’ll hear nothing back. If I’m right, I’d forget about them. They know you’re smarter than they’d guessed, and they’re cheapskates who aren’t going to pay anyone fair value even if they make a hire.

If they’re really interested in your ideas and willing to do business with you on the up and up, they will respond. They may not want to use you as a consultant, but they may suggest an alternative, fair way to proceed — as you just did.

Work for an offer but don’t work for free

Never work for free. I’ve seen this “put a plan together for us” gambit from unscrupulous employers many times. It doesn’t turn out well.

But give them a chance to appropriately explore with you the possibilities of working together. Determine whether they’re ready to pay you, one way or the other. Maybe they have integrity. This is how you find out.

Have you gotten burned by employers that want free work? How did you handle it? Do you agree that it’s a good idea to actually demonstrate how you’ll do a job? How do you tease without giving it all away for free?

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B.S. on the jobs numbers euphoria

On July 9, 2018

In the July 10, 2018 Ask The Headhunter Newsletter a reader asks whether the news about jobs creation isn’t a load of crap.

Question

jobsEvery month the Department of Labor issues the “jobs numbers” and the “unemployment numbers” and everyone goes gaga about how great things are. There are loads of jobs to apply for! There’s a shortage of talent, so that’s good tidings for us job seekers! You’d think simple market economics would mean higher salaries and job offers.

But it’s not true. I don’t see higher pay or even higher job offers, not at any meaningful level. Employers aren’t hiring any faster or acting more competitive. Taking two months to decide to make a job offer isn’t the sign of a tight labor market. And demanding my salary history so they can low-ball me on a job offer doesn’t look like companies are struggling to fill jobs.

What’s your take? Am I missing something or is the jobs euphoria in the news just B.S. cranked out by stoned experts?

Nick’s Reply

The jobs euphoria is B.S.

Since last year I’ve been collecting samples of the reports you’re talking about, and there’s a dirty little secret that the pundits and politicians keep trying to bury in the news — but like a nasty case of the hiccups, it’s impossible to hide.

Politicians, the U.S. Department of Labor (DOL) and the media have been reporting on exciting gains in job creation. The U.S. created 213,000 new jobs in June (MarketWatch, July 6, 2018) and monthly jobs growth has been positive for the past several years. That seems to be a good sign, but for what and to whom?

According to the DOL’s Bureau of Labor Statistics (BLS) JOLTS report (Job Openings and Labor Turnover) issued June 5, there were 6.7 million jobs open in the U.S. at the end of April. On July 6 the BLS reported that 6.6 million people were unemployed. That means there are more jobs that need to be filled than there are unemployed people.

It’s a 5-alarm fire!

With every new report, economists say they’re flummoxed. With labor in such short supply, the surfeit of demand to fill vacant jobs suggests employers would bid up salaries and wages to get the workers they need — especially if they expect to lure people with jobs away from other employers.

By no stretch of the data is that happening. In a bluntly cynical July 5 Forbes article, Byron Auguste reports that “Three decades of stagnating wages—rising just 0.2% annually since the early 1970s, adjusted for inflation—means an economic five-alarm fire.”

While economists, analysts and politicians struggle to explain wage stagnation by blaming a “skills shortage” (improperly skilled workers are not worth higher wages) and a failure of workers to “re-educate” themselves, Auguste refers to the “skills gap narratives” as “the usual suspects” in the never-ending rationalizations about why companies aren’t paying salaries commensurate with market demand.

“The U.S. has arrived at an inflection point in our economy, technology and demography that demands a reality check on the sorry state of our labor market, and the – i.e., our – institutional practices that produce it,” writes Auguste.

Remember that phrase: institutional practices. We’ll come back to it. But first, I want to throw some spaghetti against the wall, and I hope you can help me read something useful in the patterns it makes.

Where’s the money?

Virtually every new report about “more jobs” includes an embarrassing parenthetical gotcha. It goes like this:

Along with a lot of good news, the all-important wage numbers again disappointed, with average hourly earnings up just 2.7 percent year over year, one-tenth of a percentage point below expectations.
— CNBC, July 6, 2018: The five most important numbers from the June jobs report.

This hand-wringing about the wage numbers in the face of unprecedented jobs growth isn’t new. On December 8, 2017 USA Today reported:

The labor market remained healthy in November, adding jobs at a strong clip despite a shrinking pool of available workers. Still, there were some potentially troubling trends for employees, most notably persistently sluggish wage gains.

“Some potentially troubling trends?” Oops! For months, little side notes like this have appeared in report after report (I think this is what the news media mean by “full disclosure”), then these afterthoughts get buried under the euphoria of politically stoned economists and pundits, and beneath the proclamations of “good times are here!”

“The June ’18 employment report showed a drop-off from May in both the rate of hiring as well as the wage increase year over year,” said Paychex president and CEO Martin Mucci. “We saw for the first time that the annual wage increase dropped below 2.5 percent, which is pretty surprising given the tight labor market. That seems to be the big question out there. Small businesses have a little bit of a harder time hiring workers in a tight labor market so you’d expect that to be going up.”
–Accounting Today, July 3, 2018: Paychex sees wage and job growth slowdown at small businesses in June

Lousy wage increases are “pretty surprising,” eh? “So you’d expect [wages] to be going up,” eh? No kidding.

Typically, wages pick up at this point of an economic cycle because a low jobless rate forces companies to boost wages to find workers… Wage growth in Ohio and the U.S., tepid for the most part since the end of the Great Recession, is starting to show signs of getting weaker… It’s a trend that has baffled economists and others. “Everybody is really perplexed about why that is,” [said Frank Fiorille] vice president of compliance, risk and data analytics for Paychex].
–The Columbus Dispatch, July 3, 2018: Bad sign for workers — wage growth getting weaker for many

Everybody is really perplexed!

ZipRecruiter says everything is cool!

Here’s my favorite. CNBC calls it exactly what it is in the title of this July 6, 2018 article: The jobs “conundrum” continues: “How are we not getting higher wages?” But then CNBC lets an economist from ZipRecruiter (economist or marketer?) spin it to keep perplexed job seekers searching for temp jobs that pay less than, well, an economist-cum-marketing-manager makes at ZipRecruiter:

“While the wage growth rate didn’t increase this month, having it hold steady is a good sign,” said Cathy Barrera, chief economist at ZipRecruiter, an online employment marketplace.

Lousy wage growth is a good sign! ZipRecruiter couldn’t care less what wages are, as long as jobs remain unfilled and employers keep posting them, and job seekers keep clicking them. That’s how Zip and other job boards make money. It’s all good, folks!

Does it matter that there are more new jobs every month? Probably. Unless you’re a middle manager who just lost her job making $95,000 with good benefits, and now you’re looking down the barrel of a fly-by-night recruiter’s job posting for a contracting job that pays $23 an hour — and the guy ghosted you after you filled out 9 pages of online forms and sat for a nerve-racking video interview with an algorithm.

It’s a good sign there are loads of jobs out there for you to apply for on ZipRecruiter, dontcha think?

CEO jobs pay well!

Let’s put all this euphoria into some context. People are starting to ask questions about all that job growth.

If companies need more skills, can’t they just pay people more?
–Forbes, July 5, 2018: Skills And Tomorrow’s Jobs Report: The Usual Suspects

Must be the skills shortage — it seems not enough blue-collar workers are getting the re-education they need to apply for a job that pays better in today’s new world. Like CEO.

CEOs of America’s 350 largest firms made an average of $15.6 million in 2016…or 271 times more than a typical worker in 2016…While the CEO-to-worker compensation ratio of 271-to-1 is down from 299-to-1 in 2014 and 286-to-1 in 2015, it is still far higher than the 20-to-1 ratio in 1965 or the 59-to-1 ratio in 1989.
–Economic Policy Institute, July 20, 2017: Top CEOs took home 271 times more than the typical worker in 2016

Oops. Where, indeed, is the money going in this booming economy?

Are consulting jobs sucking wages out of the economy?

Okay, I’ll stop. I’ve got loads more, but you get the point.

The euphoria is generated to keep you down on the farm. While economists and analysts blame pathetic wage increases on workers who are too lazy or too stupid or too complacent to re-educate themselves for today’s modern jobs, I’ve got another explanation. I think this is part of what Byron Auguste is referring to when he cites “the sorry state of our labor market” and points to the “institutional practices that produce it.”

Temporary, part-time, contracting jobs that companies are substituting for full-time, permanent jobs are sucking the wages out of our economy.

We’ve discussed it here before: Consulting: Welcome to the cluster-f*ck economy. Contracting gigs are one of the institutional problems that shift profits to CEOs, investors and employers and keep wages low. Why’s that so hard for economists to understand?

BenefitsPro spills the beans to the folks who manage corporate benefits programs in a July 6, 2018 article: Stagnant wage growth driving worker dissatisfaction:

Another culprit is an increase in temporary or part-time work, an issue that’s come to a head in Italy, with businesses clashing with the new government over plans to restrict temporary contracts.

Is supply-and-demand dead?

BenefitsPro includes a tasty graph whose blue lines put the U.S. on the same side of the world economic story as Italy. (Source: Organization fro Economic Cooperation and Development.)

oecd

Economists might have an Aha! moment if they study that graph side by side with this graph from the BLS, which is cited in a July 10, 2018 JOLTS news release:

bls

How could “real average annual wages” be lower in 2017 than over the past 10 years when there are more jobs vacant than there are unemployed people? Is the relationship between supply and demand really dead?

Where does the money go?

Let’s go back to one of the precious quotes above, from The Columbus Dispatch:

“Typically, wages pick up at this point of an economic cycle because a low jobless rate forces companies to boost wages to find workers…”

Well… you’d think so, when corporate profits are up and employers are paying their CEOs 271 times more than the typical worker. You’d think so, when Congress passes tax breaks that are supposed to trickle down to everyone that works. So WTF is going on?

Let’s go back to the BLS. I love this little graph, based on BLS statistics and published by Bloomberg last April. It shows the employment cost index — what companies spend on compensation:

The accompanying text bemoans that “employment costs rose more than expected in the first quarter and a measure of private wages had the biggest annual gain since 2008.” What Bloomberg doesn’t note is that way over on the left side of that graph U.S. companies were sharing a whole lot more with their workers. What companies spend on compensation today is still way down from a 2003 high, and current compensation costs still have not “recovered” to even 2007 levels. (Yah, I can see — there was a recession around 2007-2008 but, hey, do I look like an economist?)

(The share of profits that companies spend on workers varies by industry. See my column on PBS NewsHour: Which industries are being too greedy to pay you fairly?)

When the economy is booming, profits are up, and companies are so awash in cash that they demand the freedom to invest it in elections — why is anyone at a loss to explain why we’re not seeing higher wages?

The White House promised ’70 percent’ of the tax cut would go to workers. It didn’t… the Republican tax reform package that was supposed to raise wages and spur hiring has instead funded a record stock buyback and dividend spree, benefiting investors and company executives over workers.
–NBC News, June 26, 2018: What did corporate America do with that tax break? Buy record amounts of its own stock

If you can’t re-tool your skill set to be a CEO, you could try one of those online investment courses, so you could make a living at your PC — as an investor!

What was your question?

When I can’t figure something out, sometimes I give myself room to rant. I cut out articles, data, graphs — and I spread them out on the floor, hoping I can puzzle them up into an answer that makes sense to me. Forgive me if I’ve ranted too long.

But if I threw one or two bits of information up on your screen that give you pause to think about this strange economy and job market in a new way, maybe it’s worth it.

Let’s go back to the question in this Q&A:

“You’d think simple market economics would mean higher salaries and job offers… Am I missing something or is the jobs euphoria in the news just B.S. cranked out by stoned experts?”

Wages and salaries are basically stagnant, and more people are admitting it. Employers are spending less on wages and salaries because they’re renting temporary workers from “consulting firms.” But the bucks are there.  They’re just going to somewhere (and to someone) other than the labor pool.

So I think the euphoria about “jobs creation” is indeed B.S. because more new jobs during a labor shortage without higher wages is not good news — it tells us something is very wrong. It’s B.S. because what’s being created is a phantom industry of middle-men that suck value out of our economy. (See The Job Monopoly: How companies keep pay low.)

Where will it end?

How long can the economy — which is people, after all (and there are more workers than CEOs) — withstand this scenario?

I dunno. There’s an old saw about profits: Pigs get fat. Hogs get slaughtered.

Billionaire Nick Hanauer, a staunch advocate for higher minimum wages, says it best: “The pitchforks are coming.”

Do the “jobs creation” numbers and stagnant wage growth make sense to you? Are workers really so incorrectly skilled that it explains why they’re not getting the jobs employers say they’re dying to fill? I blame some of it on our “consulting economy.” If you study the spaghetti on the wall, what do you see? Is the jobs euphoria justified?

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The Job Monopoly: How companies keep pay low

On January 22, 2018

In the January 23, 2018 Ask The Headhunter Newsletter, we take a look at the job monopoly that keeps a lid on pay.

Question

job monopolyYou’ve probably already read this on Slate. Three economists conducted a study that asks, Why Is It So Hard for Americans to Get a Decent Raise? (The paper is only in draft form so Slate includes no link to it.) I think your readers might have some interesting things to say about whether there’s a job monopoly that controls their pay.

Here are the key points:

  • “Workers’ pay may be lagging because the U.S. is suffering from a shortage of employers.”
  • “A lack of competition among employers gives businesses outsize power over workers, including the ability to tamp down on pay.”

In other words, in areas where there are only one or two companies posting a certain kind of job (e.g., delivery van drivers in Selma, Alabama), pay for those jobs has stagnated or declined. They call this monopsony. Like a monopolist that controls prices because it controls supply of a product or service, a monopsonist company controls pay unfairly because it controls the supply of certain jobs.

But I think it’s far worse. (You’ve already touched on this before in your article Consulting: Welcome to the cluster-f*ck economy.) I wonder if those economists are taking into account all those “consulting firms” — middlemen who provide, say, most of the computer programmers to several employers in an area — that create further aggregation of hiring entities who would otherwise be competitive.

What do you say about this? What does everyone on Ask The Headhunter think about it?

Nick’s Reply

Wow, that’s one cool new word for our vocabulary: Monopsonist. It opens up a whole new world of worry!

Consulting firms and the job monopoly

I don’t think there’s any question that a handful of “consulting firms” that funnel workers to lots of companies in a particular industry, field or discipline constitute a job monopoly that kills competitive pay. I suspect your insightful guess is correct: The consulting industry is aggregating jobs and labor, thereby controlling — and depressing — pay. It wouldn’t surprise me if those economists totally miss the consulting-firm factor. (See Will a consulting firm pay me what I’m worth?)

The economists should ask workers who get their jobs via these aggregators, what is the difference between what a consulting firms pays them, and what the firm charges an employer for them. That’s never disclosed, and that’s the dirty little secret of the corporate world — and our economy. (We’ve looked at another topic that economists seem to view with blinders on: What the Federal Reserve doesn’t know about recruiters.)

But there are other issues and questions, too.

While I could ruminate for pages about what this means to workers and job seekers, and to our economy, I’m going to respect your request and roll this out to our community, in the form of a bunch of questions the article raises for me. Let’s see how everyone views this — and what questions and answers they’ve got.

I strongly suggest that everyone reading this column stop right here, and please read the Slate article before proceeding. It’s a worthy read — and I think it’ll get up your ire after it raises your eyebrows!

Are the data legit?

The Slate article by Jordan Weissmann raises a lot of questions, and not least of them is one about methodology.

  • The economists’ data set comes from CareerBuilder, “which publishes about one-third of all online job ads in the country.” Talk about an aggregator! What assumptions are those economists making about the validity and reliability of a major job board’s data, which comprises job listings that we all know are corrupt in more ways than we can count? (E.g., duplicate jobs, out of date jobs, fake jobs, composite jobs, inaccurate job descriptions, and so on.)

Questions about monopolistic pay practices

Nonetheless, the study raises provocative questions whether or not the data are legit.

  • In what other ways do employers monopolize a job market?
  • How do employers that are rolling in new-found profits explain this quote from the article?

“Since 1979, inflation-adjusted hourly pay is up just 3.41 percent for the middle 20 percent of Americans while labor’s overall share of national income has declined sharply since the early 2000s.”

  • What other employment practices “[cut] into labor’s share of the economy?”

Questions about anti-trust

  • Should the Department of Justice and the Federal Trade Commission investigate monopsony like it routinely investigates monopoly?

“Then there’s antitrust… This paper’s findings suggest that Washington needs to think more carefully about how mergers can impact the job market.”

Questions about minimum wage policy

  • Does the following assertion turn our entire political debate about wages on its ear?

“Take the minimum wage. The classic argument against increasing the pay floor is that it will kill jobs by making hiring more costly than it’s worth. But in a monopsony-afflicted world where companies can artificially depress wages, a higher minimum shouldn’t hurt employment, because it will just force employers to pay workers more in line with the value they produce.”

Is hiring no longer competitive?

Weissmann closes on this point:

“We’re living in an era of industry consolidation. That’s not going away in the foreseeable future. And workers can’t ask for fair pay if there aren’t enough businesses out there competing to hire.”

I’ll bring it back around to the insight (offered by the reader who kindly brought all this to our attention) about “consulting firms.” (I put that in quotation marks because most of these firms don’t consult at all — they merely rent workers for profit.)

  • To what extent does consolidation of hiring by a relatively small number of body shops (I think body shops is the more accurate moniker) result in manipulation of pay?

And who’s going to do anything about it?

Okay, folks: Have at it! Is there a growing monopoly on jobs that affects pay? How does it work? What do you think about all this? What questions do you have that we can all try to tackle?

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Consulting: Should I trade my fledgling business for a real job?

On September 25, 2017

In the September 26, 2017 Ask The Headhunter Newsletter, a reader asks whether it’s worth trading a budding consulting business for a “real” job.

Question

consultingI’m an avid follower and have found Ask The Headhunter positively inspirational. I especially enjoy pushing back on senior executives for their lame hiring practices and nonsensical rejection methods.

Anyway, here’s my situation. I set up my own consulting practice while job hunting. It’s been 15 months and the business is growing, but I’m also finally getting close to a job offer. The role is in my field of expertise and it’s as full-time internal consultant for a huge multinational.

I’m toying with the idea of pitching an outsourcing (consulting) arrangement for my firm in place of taking the job they’re interviewing me for. It makes sense as they would gain extra manpower, and I know we could do a better job for the same cost. But I’m concerned this proposition might derail the process. What do you think?

Nick’s Reply

Ask The Headhunter is largely about helping people get jobs, because few people are capable of doing what you’re doing – starting and running their own little business.

I make no bones about preferring to see people run their own show rather than get a job, but it’s not for everyone. Neither option is very secure, and when you work for yourself you usually come to realize you work for a slave driver who’s often a jerk. (Believe me, I know!)

But when things go perilously wrong in either scenario – having a job or a business – it’s only when you’re your own boss that you get to make the critical choices. You always have the chance to right the ship.

There’s a twist on this “job vs. self-employment” issue that some readers might like to consider: Want a job? Threaten to start a business!
Only you can judge whether suggesting a consulting arrangement will jeopardize the hiring process in this case. Because your question seems to be about making a choice, I’m not going to get into how you might make your pitch to this company. I’m going to offer some thoughts about how to approach the choice.

Consulting yourself

It sounds like you have some employees in your little firm, and you may be willing to let them all go. But regardless, I think  the bigger question to ask yourself is, Does it really matter if turning your interviews into a sales presentation does derail the hiring process?

This leads to more good questions. So start consulting yourself:

  • If you pitch a consulting option to the employer that turns them off, can you replace the lost job opportunity with other new clients?
  • Even if you try to switch this to a consulting gig and fail, will you learn enough from the experience to make you a better salesman the next time you try?
  • Can you afford to give up this job opportunity and continue what you’re doing on your own? That is, do you need the kind of security a job offers more than the benefits your own business provides?
  • Is this job opportunity worth giving up the progress you’ve made with your own biz?

What’s the risk?

You’re worried about the risk of losing a job offer which, by the way, you did not say is a sure thing. All I see is an expected bump in the road for someone who is growing a little consulting business.

It’s hard to shake the idea that you need a job. If you accept a job offer, will you be able to shake thoughts of what you might have accomplished with your own business?

I offer you no advice. I just don’t know enough about you and, besides, this is a choice you must make. If you need the salary and “security” a job offers, I’m the last guy to criticize you if you decide to accept it.

Songwriter Paul Williams wrote during the Viet Nam War that, “Peace is just the impossibly high first step.” So is taking any risk if you have a worthy goal.

I wish you the best, and I’d love to know what you decide and how it turns out. Thanks for your kind words about  Ask The Headhunter!

Have you traded a job to start your own business? What questions would you tell this reader to ask? Has anyone out there made the move to start a business, and then gone back to a regular job? What did you learn that might be instructive for this reader?

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Consulting: Welcome to the cluster-f*ck economy

On April 24, 2017

In the April 25, 2017 Ask The Headhunter Newsletter, a reader deals with modern employment: consulting.

Question

I’ve accepted an offer for a job at a company, but technically I’ll be an employee of the Consulting Firm that recruited me and is billing me out. There’s a third company involved, the Screening Company.

consultingToday I received an e-mail from the Screening Company, asking for W-2s from the employer I worked for between 2005-2011. I happen to know that companies verify prior employment electronically, so I asked the Consulting Firm why they needed W-2’s. He said the Screening Company couldn’t confirm my employment. This made no sense to me. I said I would call the Screening Company to work this out, since there was a number on the e-mail for customer service. The recruiter at the Consulting Firm said not to do that, and that I should download the W-2s from the IRS.

I called the Screening Firm anyway, and asked a customer service rep why they needed W-2s to confirm prior employment when I know they can do it electronically. She said the Screening Firm didn’t need W-2s for employment verification, and that it was the Consulting Firm that required W-2s.

But then she said they do call prior employers, in addition to doing electronic verification, and that my former employer did not respond to their request. “Would it be sufficient if my former employer called you?” I asked. She said, “Sure.” So I called the HR department at my former company and asked if they had any outstanding requests to confirm my employment. The answer: No. (Say what??) I asked if they would call the Screening Company on my behalf and they said they would only respond to a faxed request with a copy of my consent, and gave me their Employment Verification fax number.

Fair enough. So I forwarded the fax number to the rep at the Screening Firm and then e-mailed the recruiter at the Consulting Firm to keep him in the loop. I said if they had any other concerns to please contact me.

I already have the offer in hand. I never disclosed my salary history during the hiring process. Why would the Consulting Firm want my W-2s? What exactly is the Screening Company’s role? Why did the Consulting firm claim the Screening firm needed the W-2’s and then tell me not to communicate with the Screening Firm? I have more questions, but can you help me with these?

Nick’s Reply

I don’t see how your prior W-2 (salary) information is anyone’s business. If the Consulting Firm does its job right, it knows you’re qualified to do the job its client needs you to do. Otherwise, what’s it charging its clients for? What does it matter where you worked in 2011 or what you were paid? Just sayin’.

You’re asking good questions, but there’s a bigger question: Why are there so many middle-men involved in this?

A cluster of companies

You’ve got:

  • The Consulting Firm that recruited you. That is, your actual employer that will sell your work.
  • The company where you will actually be working. That is, the Consulting Firm’s client.
  • The Screening Company, which processes the hires that its client, the Consulting Firm, makes. The Screening Company seems to be handling the Human Resources tasks for the Consulting Firm.

I’ll hazard a guess that there’s a fourth entity — yet another firm that will process payroll, taxes, and benefits.

There’s a term for the amalgamation of arm’s-length client relationships and consequent finger-pointing that make up this employment game: Cluster-F*ck.

I have no idea how any of these entities can even stay in business with so many hands in the till. You’re not hired to work; you’re rented out to do work. The price being charged for your work far exceeds what you’ll see in your paycheck. Everyone’s getting paid for your work; everyone’s getting a taste of your pay. Good luck figuring it out, because I wouldn’t even start trying to. All I see is a hole in the economy, where money goes without the creation of any value. (See Consulting Firms: Strike back and stir the pot.)

This is not consulting

You’re not being hired by a consulting firm to help it consult to its clients. You’re hired by this Consulting Firm so it can rent you to another company. That’s not consulting. (And don’t confuse what your Consulting Firm is doing with headhunters. See They’re not headhunters.)

Real consulting is an honorable business that creates value. One company turns to another for specialized help: a consulting firm. The consulting firm employs experts in its field that are organized, usually as a team, to solve a client’s problems. Day-to-day work is not the product. A solution, delivered to the client, is the product.

The consultants report to a manager at the consulting firm, not to a manager at the client company. The consulting firm’s employees likely work on multiple client projects at a time. They’re never not working. They’re never “on the beach,” as modern rent-a-worker companies like to call unemployment. (See Will a consulting firm pay me what I’m worth?)

The deal you’ve signed up for is not consulting. None of the companies you describe seem to be responsible for you — or to you. One hires you. You work for another. A third handles the transactions. (I still think yet another will handle HR tasks, like processing payroll and taxes, and administering benefits, if there are any.) When you have a question, each points a finger at the other.

Work for your employer

You’re asking good questions. I don’t have any answers. You’re being forced to deal with middle-men whose roles are questionable. In a well-organized, well-managed business, the functions of all those middle-men are functions of the company itself. A competitive enterprise leverages its expertise with all those functions to produce profit. Beware employers that you don’t actually work for.

consultingMy advice is, work for your employer. Avoid any drain of economic value from your work. Don’t let middle-men interfere with the employer-employee relationship. The risk you take when you participate in this kind of cluster-f*ck economy is that you are not the worker. You are the product. You become an interchangeable part. Worse, you become a returnable interchangeable part.

If the Consulting Firm is paying a Screening Firm to confirm who you are and to handle other transactions with you, so it can charge its client for those services, then what value is the Consulting Firm delivering to its own client?

The employment industry has become one of the biggest rackets going. It really is a clusterf*ck. With workers like you in the middle. But as someone advised a long time ago when a dangerous political entanglement could not be unraveled, “Follow the money.” The real problem here is with the company that’s paying multiple entities so it can rent you. Are you comfortable with this arrangement?

Who do you work for? Who pays you? Are you being paid for the value you create in the economy, or are middle-men draining your value?

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Consulting Firms: Strike back & stir the pot

On April 3, 2017

In the April 4, 2017 Ask The Headhunter Newsletter, a reader doesn’t like what some consulting firms serve up. What happens when we stir the pot?

Question

consulting firmsMy old consulting firm offered me the chance to interview for a full-time position in a smaller city over three hours away from where I am right now. My last contract ended a month ago, and just today I started a part-time job to slow the bleeding from my savings account.

The employer — the consulting firm’s client — refuses to do a phone screen, and insists that I drive over three hours, do a group interview, then drive home. Let’s see: mileage, wear and tear on my car, and losing an entire day where I have a lot of important things to do locally, all to interview for a job that (a) I don’t know if I would want, and (b) I don’t know if they would want me.

All that could be resolved (or at least mitigated to some degree) with a simple 30-minute phone conversation that they refuse to have. All right then, Company X, you decided for me — it’s not worth it! If you’re not going to respect this candidate, who not only has to spend an entire uncompensated day to interview, but also has to relocate if I did manage to get the position, then I’m walking away with my head held high. And no, even paying me mileage to get me to interview wouldn’t help. It’s more than the mileage. It’s the respect.

Am I being unreasonable?

Nick’s Reply

“Consulting” jobs seem to have changed the calculus of the job market — but not always for the better, and especially not when middlemen are involved. When you deal with an actual employer (your Company X) at arm’s length via a consulting or contracting firm, well, you call up the old saw about trying to wash your hands with rubber gloves on. You’re just not feeling it — and you’re at an enormous disadvantage.

The first question to ask is, who’s the jerk?

Is the consulting firm a jerk?

The “gig economy” recruiting practices of consulting firms create new problems — not just for workers like you, but for the employers that use them. Company X relinquishes its reputation to the intermediary consulting firm and its recruiters. Company X has no idea what that recruiter is saying to you or how it’s portraying Company X. This employer may be losing out on great candidates because the consulting firm is doing a lousy job of engaging with them.

Company X may be a great place to work, and it may treat people respectfully. It may have no idea what you’re being told.

A good headhunter or third-party recruiter manages the client company and helps it recruit and hire effectively. No recruiter worth his or her pay would use one-size-fits-all rules to recruit good workers. If the recruiter in this case can’t get the client to see the wisdom of a short phone call to establish mutual interest, then the recruiter and the consulting firm are jerks.

Is the employer a jerk?

The consulting firm and its recruiter, meanwhile, are so beholden to their clients that they’ll do anything clients want  — like making ridiculous, counter-productive demands on candidates they’re recruiting.

Drive six hours round-trip without reasonable due diligence and without pay? (See Why employers should pay job applicants.) If that’s what this employer expects from the talent it’s trying to recruit, imagine what it expects from its employees. We already know what kinds of consulting firms it deploys. What kinds of people do you think it hires?

Should you just say no?

When an employer asks you to invest time to discuss a job, it’s got an obligation to invest in respecting your needs and requirements, too — or it’s not worth working for.

You just said no, and I can’t fault you for that. But you can also strike back — which I recommend you consider. Just because the contracting firm or the employer are behaving like jerks doesn’t mean you should let it slide. Raise your standards, and maybe you’ll raise, theirs, too. If you want to try this, strap on a rubber apron, because it can get a little messy.

Stir the pot

consulting firmsNow that you’ve already said no, you can stir the pot. I love stirring pots. We never know what the result will be, nor does it really matter. What matters is stirring the pot, because that makes both the scum and the good stuff rise to the top so everyone can see what’s really in there. The fun starts if someone skims off the scum and it splatters. A mess like that usually triggers change. No mess, no change.

I don’t know how much you want to stand on principle, but even if both the recruiter and the client (Company X) are acting like jerks, my guess is that Company X’s top management has no idea how you were treated. It’s reasonable to assume the company’s leadership wants to hire good people fast without alienating good candidates.

You can strike back at consulting firms that act like jerks by stirring the pot. If I were you, I’d place a call to Company X’s CEO. Help the CEO see what’s in that pot. Leave a brief message that inspires the CEO to call you back.

How to Say It

“I just had a troubling transaction with your company. If it were my company, I’d want to know about it. My number is… Feel free to call me if you like.”

Avoid leaving any more details, even with the CEO’s assistant, who is likely to channel you to HR if you say any more. Don’t even hint it had to do with a job. Politely insist that your message is for the CEO. If the CEO cares enough to call you back, you may be able to make a difference.

Show the CEO what you found

I’d calmly explain what happened without betraying any anger, frustration or rancor. Pretend the CEO is your best friend and you just want to be helpful. Don’t dwell on how you feel. Keep it factual. Keep it brief. Close by saying you’re sorry the HR department and the consulting firm’s recruiter weren’t willing to save you a six-hour drive by doing a phone call. Explain that you admire the company and would have seriously considered a job there.

Then end the call — don’t let the CEO end it. This puts you in the more powerful spot.

How to Say It

“I didn’t call you to resurrect a job opportunity or get a phone interview. I called you because if it were my company, I’d want to know someone who works for me is squandering good job candidates in the middle of a talent shortage. If this helps you in any way, I’ll be glad. I wish you and your company luck.”

It’s up to the CEO what to do next.

Strike back for higher standards

This kind of call accomplishes a few things.

  • First, it demonstrates you’re a responsible business person and you care about your professional community — for the talent and for companies that need talent. This will come across to a good CEO if you keep the emotion out of your call.
  • Second, it can help the CEO. A smart CEO will go clean up the company’s own HR practices or the contracting firm’s behavior. The CEO won’t let the company keep getting splattered. (See Why do recruiters suck so bad?)
  • Third, you might just make an incredibly good contact that you’d otherwise never make. Handle this right, and you’ve got a new CEO friend.

Of course, you might wind up splattered, too — if the CEO doesn’t care about what you’ve revealed. Wipe yourself off and move on.

My compliments for keeping your standards high. Anybody who won’t take half an hour to talk with you to save you a six hour drive isn’t worth thinking about. If the CEO cares, you’ve just helped improve Company X.

Reconsider the consulting game

The other issue here is your “consulting firm.” I think I’d give them the heave-ho. While there are some good contracting firms out there that respect both their client companies and people they recruit, I think there are far more questionable practitioners of this corporate pimping game. (See Will a consulting firm pay me what I’m worth?)

Many people rely on contracting jobs and contracting firms to make a living, but I encourage you to re-think how you get your work. Find some good companies that will employ you directly. Take off the rubber gloves and make real contact. (See Pursue Companies, Not Jobs.)

The more I observe the mechanics of washing hands with rubber gloves on, the less I like it. Too many players in the consulting industry are acting too much like the second oldest profession in the world. Pimping workers and skimming cash out of the economy — while treating those workers disrespectfully and disdainfully — without adding any real value is a questionable business model at best. (See What the Federal Reserve doesn’t know about recruiters.) The talent starts to behave — and feel — an awful lot like the oldest profession in the world.

It’s not hard to recognize the good consulting firms. You know them from their reputations and from their behavior. But the talent seems to have become so accustomed to poor treatment that the bad players thrive. It’s up to you to know the difference.

Some will chide me for saying this, because the analogy might not seem fair. Maybe there’s something good in hiring a firm to hire your employees. But there seems to be an awful lot of scum floating in this pot. So pardon me if I stir harder — because I think we need to see what floats to the top.

Do you work for consulting firms? Do you prefer gig work, or do you take assignments because you feel you have no choice? What’s the good stuff about contracting? And what’s scummy about it? How do the recruiters treat you?

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Will a consulting firm pay me what I’m worth?

On January 28, 2013

In the January 29, 2013 Ask The Headhunter Newsletter, an underpaid consultant keeps trying to get more raises:

I am a computer consultant working at a company that assigns me to work at other companies. My salary is less than average in the region for people with comparable skills. I went to my boss and got an increase that’s still less than I’m worth. I think they just tossed me a bone to quiet me.

I like this company even though they’re underpaying me. What else can I do, apart from getting another offer and proving to them that the market values me more than they do?

Nick’s Reply

pay-me-moreFirst, if you’re relying on salay surveys, know when to fold them. Generalized surveys are okay to give you an idea of salaries in a particular field, but they are not a good place to start negotiating your own salary.

I would not dangle another company’s offer in front of your boss unless you’re absolutely ready to take that offer. I’ve seen many companies usher people straight out the door for doing that. (It’s not clear whether you did that anyway, or whether you just asked for a raise on your merits. I hope it was the latter.)

Your employer has already agreed to pay you what it thinks you’re worth, and that doesn’t seem to match what you (and the market) think you’re worth. I don’t think it would be wise to approach management again. My guess is that they don’t really care. Without knocking consulting companies in general, it’s my belief that many of these “meta employers” aren’t as motivated as regular employers to treat employees equitably. Unless they’re one of the exceptional firms out there, they may view employees as a commodity.

Perhaps more important than figuring out how to get more money out of this employer is deciding how you’ll handle the next one. Consider How to decide how much you want, and be ready to ask for it before you accept your next job.

Consulting firms are accustomed to pretty high levels of employee turnover, and they’ve got mechanisms for dealing with that. They may pay decently to bring you aboard, then keep your raises low while your market value goes up until you leave. In the interim, they enjoy higher billing rates and increased profits while you decide whether to get up and go. Then the cycle repeats with the next hire. Of course, some consulting firms demonstrate more integrity. I know this sounds cynical, but remember that the consulting business is incredibly competitive. You are the product, and you can be replaced easily because the firm’s projects and clients come and go in fast cycles. (Read Scott Henty’s excellent Consulting Jobs Primer in the Industry Insider section of my website.)

If you don’t know a better consulting firm to work for, my advice is to seek out a regular employer where the future might be a little more predictable and where the compensation program is more oriented toward holding on to good employees. You might find the culture more to your liking, too. The best companies are grappling with the issue of retention, or how to keep good people.

Needless to say, lots of regular employers don’t demonstrate much integrity, either — and don’t guarantee any more job security than consulting firms do.

If you can’t get satisfaction, move on.

Have you ever worked for a consulting firm that farms you out to other companies on assignment? What are the ins and outs you’ve experienced in that business? What should this reader do next?

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Bait & Switch: Games staffing firms play

On October 22, 2012

In the October 23, 2012 Ask The Headhunter Newsletter, a job hunter asks about bait-and-switch contracts used by “staffing” firms.

A recruiter at an IT staffing firm did something that I think is very unethical. I signed a contract with the firm to perform IT duties at a company where I successfully interviewed just days before. It specified the hourly pay and overtime.

I verbally negotiated the rate prior to signing the contract. Unfortunately, I did not ask for a copy of the contract. Yesterday, the recruiter asked me to sign more forms. There was a new contract, and a significant reduction in pay! The overtime was deleted and the pay was stated weekly instead of hourly.

When I pointed this out, the recruiter e-mailed that, “We lost the original contract.” I called the next morning, and the recruiter insisted I sign the new forms and said she would take care of my concerns. When I balked and declined to sign, she said they would redo the forms but it might be a day or two. Meanwhile, I’m supposed to start work tomorrow!

I find this utterly distasteful and unethical. I’m going to wait and see if the recruiter comes up with the correct terms before I contact the staffing account manager or the company I’m supposed to work for.

My question is, why are they stalling with the new contract? Why couldn’t it be immediately corrected? Maybe they are waiting to find something in my background check so they can report to the company that I am “unsuitable” for hire. Then, they can go out and find someone cheaper. What do you suggest?

Nick’s Reply

What you’re describing is, unfortunately, not uncommon in the IT “staffing” or “consulting” biz. (It’s not just the IT field that uses staffing firms.) These companies recruit and hire people, then “rent” them to their client companies at a profit. Things like this happen because overly-eager recruiters get excited when they find a candidate like you. They want to sign you up and assign you to a client, so they promise you a contract that’s to your liking. Later, the sales rep handling the account you’d be assigned to can’t get the rate the recruiter promised you — so the deal changes. It’s a classic bait-and-switch game.

It is crucial that you read everything before you sign, and make sure everything you negotiated is in the written contract.

No matter what you negotiated and they agreed to orally, what matters is what’s in the written contract. Make sure you get the counterpart of the contract — the copy they signed — and tell them you will not report to work until you receive it. Often, a firm will demand that you sign the contract, then they will “forget” to give you the copy they signed.

The games some of these companies play are unethical — but they do it anyway. Your protection is to insist it’s in writing, and to politely but firmly decline to show up for work until the written contract is to your satisfaction.

But be careful. If you sign something without reading it carefully, and then you decide you want different terms, too late — you’re already committed. Be very, very careful. Good contracts make good working relationships.

One tactic they may use is to ignore your requests right up until the last minute, maybe the day you’re supposed to show up for work. This puts you on edge and makes you very nervous. You want the job, but you don’t want the terms. They figure you will cave to get the work, so they will push the envelope hard and far. Unless you have a history of good experiences with them, don’t believe anything until it’s in writing in your hands.

You may really need the job, but you must decide in advance whether you will accept lesser terms or such behavior. Then stay calm, don’t complain, don’t get angry. Just state your terms. Your overriding strategy must be to make yourself highly desirable or indispensable to the consulting firm. Make them need you. Then make your reasonable demands calmly and firmly. Then let them decide, and let them reveal whether they are honest and have integrity.

You’re doing the right thing. This can be risky, but you must decide your tolerance for such risk: If they want to play the last-minute game, you can play, too. Just know what you’re doing in advance, and let this play itself out. If they don’t give you the contract you agreed to, then stop working with them. They’re not honest.

Be careful if you go to the actual employer to discuss this. Do not say nasty things about the firm. Be businesslike. It can be as simple as this:

How to Say It

“I enjoyed meeting with you, and I’d like to work on your team. However, I’m not happy with the way the consulting firm has handled the facts of the project. Is there another consulting firm you use that you respect? Can you recommend someone there that I can talk to?”

Not all companies will answer you — they get nervous. They may even have a contract with the staffing firm that prohibits them from discussing this with you. But you must decide whether integrity is important enough to kill a deal. In the end, you may need to meet a new staffing firm, and a good way to do that is to talk with a company where you’d like to work, and inquire which staffing firm they use. There are some very good staffing firms out there: Get a personal introduction to them, and learn to igore the rest. Get a personal introduction.

As more companies try to avoid the fixed overhead of staff, they’re going to look to hire “on contract.” Do you see this trend in your own business? Have your experiences with staffing firms been good or bad? What would you do in a situation like this? What methods do you use to avoid problems and to get a good deal from staffing firms?

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