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Opinion: Why employment agencies have more cons than pros for regular job seekers
By Infometrics economist Gareth Kiernan Recently released figures showed the unemployment rate surging to 7.3% in the December 2009 quarter, the highest level in over ten years. The number of unemployed people has risen by 88,000 since December 2007, more than doubling over that two-year period. Three years ago the number of applicants for vacancies was low and the average quality of those applicants was even lower. The balance of power in the labour market has now definitely shifted in the employer's favour, so for those people who've been made redundant over the last 24 months, finding a new job is currently a tough slog. Some people see enrolling with an employment agency as a good way of boosting their chances of getting back into work. And in a developed society, experts and intermediaries play an important role in many facets of everyday life. Real estate agents have wider networks and greater marketing skills to help sell your house. Mortgage brokers know the ins and outs of the banking sector and can potentially get you discounted interest rates. And given that it's the job of investment advisers and money managers to monitor financial markets, they should have the expertise to provide good financial advice "“ at least, that's the theory!
However, one of the oldest economic maxims is that "there is no free lunch". In the above examples, the costs have varying degrees of transparency. Real estate agents obviously charge a commission. It's well-known that mortgage brokers receive a commission from the lender, a cost that must be recouped by the banks somehow "“ most likely through charging slightly higher rates across the board than would otherwise be the case. Financial managers charge fees or commissions, while investment advisers have come under fire over the last couple of years for not adequately disclosing their interests or what payments they were receiving. In the case of the latter, the lack of transparency and tainted advice has seen many investors discover that the "lunch" turned out to be very expensive indeed. From a candidate's perspective, employment agencies may appear costless at first glance. They help tart up your CV, they reduce the time and effort you have to spend searching for jobs, and they can help set your expectations about what vacancies are suitable and what is an appropriate salary level. But someone still has to pay the employment agency. If a firm chooses to hire you, your new employer will have to cough up the equivalent of around 10% of your first year's salary to the agency. As an employer, if I'm faced with two candidates of more-or-less equal stature, I'll pick the one who hasn't come through an employment agency, on the simple basis that the cost to my business is less. If I do hire someone who's come through an agency, I'll be looking to recover that extra up-front cost where I can, possibly through paying a lower salary over the first couple of years than might otherwise have been the case. Choosing to job hunt through an agency can also raise questions in an employer's mind. If you're keen to get a job, why aren't you doing the searching yourself? Don't you have the initiative to search out vacancies and prepare applications? Have you turned to an agency in desperation because you've already been turned down by numerous other employers "“ and if so, why? Given that the interview and hiring process is fraught with uncertainty, employers are looking for any clues that may help their decision-making in choosing the best person for their business. On that basis, the small benefits offered by using an employment agency may easily be outweighed by the negative effects on your perceived employability. I say "perceived employability", because in reality, whether you use an agency or not has no effect on your ability to actually do a job. But first impressions, and the perceptions created in an employer's mind, are important. Employment agencies have a role to play, but usually in a process initiated by an employer. Agencies can act as a useful intermediary when a business is "headhunting" or looking to fill a high-level executive position. Specialist fixed contract positions can potentially be filled easily if an agency has a range of appropriate candidates on its books. And agencies specialising in temporary staff cover have a clear market niche that they are filling. If you're after a run-of-the-mill full-time position, I'd suggest keeping your head up and your eyes open for opportunities, and doing the searching yourself. The advent of online advertising has made the search process a lot less arduous than in the past. And in times when jobs are hard to come by, employers are more likely to take notice of an applicant who shows both perseverance and innovation in their approach to finding a job. * Infometrics is an economic information and forecasting company based in Wellington. To find out more, see its website here. This piece first appeared in the Dominion Post.
21 Comments
What a load of codswhollop!
What a load of codswhollop!
This is why I used employment agencies, and was happy to pay the fee ( commonly up to $10k at a time): (1) I didn't have time to sort thought the 1000 odd applications I got for each job I needed to fill (2) I accepted the fact that a professional agency did a better job of sorting through those candidates than I could. That was their sole job; mine was otherwise (3) If the candidiate didn't work out in 1 month; I got another one-free, and so on until I got the right fit (4) I didn't have the time or expertise/contacts to do the initial reference check of candidiates- they do.
Ergo: I used recruitment firms more, but not exclusively, to direct search, and didn't discriminate against either group. Time is money, as they say.
"Employment agencies have a role
"Employment agencies have a role to play, but usually in a process initiated by an employer."
You call it codswhollop but then go on to reveal you didnt actually read the article. The sentence above makes your comment pointless. You might as well have said, "Thats rubbish! I only eat cheese on Tuesdays!"
Do I need to spell it out? I suppose so. Look, the article wasnt about employment agencies from an employers point of view but that of a regular job seeker. FFS man! It was in the damned title!
I long for the good old days when guys like you would send unprintable letters to the editor about articles you didnt understand rather than cluttering up the internet.
Nicholas Arrand, Agree with what
Nicholas Arrand,
Agree with what you say though I believe employment agencies can have some downsides for job seekers not mentioned in Gareth Kiernan's article.
Do we now have neoclassical economists considering themselves competent in industrial pyschology? Maybe their old skill set isn't cutting it anymore.
Ah, but you see I
Ah, but you see I did read the article, Kimble. And as it is captioned "Why employment agencies have more cons than pros for regular job seekers" my response was to refute the arguement. It is irrevevant who initiates the process of employment. It is the outcome that is important; to the candidate and the employer, equally. It's probable that you have engaged the talents of recruitment firms as often as I have. In which case you may, or have not have, a different opinion to me.
Employment agencies are only interested
Employment agencies are only interested in one thing - the money. My experience has been that they don't really know what they are doing, are only looking for a person who fits the criteria that match what the client wants, and not necessarily the best person. They will offer from their "database" of prospective employee's, and if one matches the clients criteria will offer them. They may be a good prospective employee, but not necessarily the best. It also relies on the professional employment agent knowing what they are doing. Sorry a number of people I have seen are not that good. Their desire to "fill" the vacancy (ie get the fee) sometimes, but not always, seems to be the driving force. The whole process seems very perfunctory - having said that many employers are just as bad.
Back in Wellington, I was
Back in Wellington, I was in the process of getting away from a workplace. I organised a meeting with the agency that placed me there to air my annoyance at how over sold the role was in my interview (being with the workplace itself). Statements of how mature business processes currently were, onto the next steps etc were obviously rubbish. There was still a lot of basic remedial stuff to be done. I was pretty annoyed. Even more so to find out from others in the team that the previous person to me had left for pretty much the same reasons I was walking.
The agency just wasn't interested. I was trying to give them a heads-up so that if they were to place the next candidate in there after I left, they would be well advised to find a more junior person who might still find some challenge in the menial hacking around that needed to be done to bring that particular team up to speed.
I've always viewed them as a necessary evil, from an employee view point.
Don't we all 'do it
Don't we all 'do it (any job) for the money', Edmund? ( except gareth Morgan, of course. Wakey, wakey, Kimble).
Isn't it just their brief to '(find) a person who fits the criteria that match what the client wants'? It's up to interparty negotiations after that.
"They may be a good prospective employee, but not necessarily the best". How does that alter in not using a recruitment agency?
I'm not here to defend the recruitment agency business at all. It's often said that any commission based industry is fundementally flawed; as all the 'sell' is the deal. But my opinion is that they statement that there are more cons than pros for regular job seekers is incorrect. It is simply another tool for them to use. As Hamish puts it, 'a necessary evil'.
"It is irrevevant who initiates
"It is irrevevant who initiates the process of employment."
Of course it matters whether the job applicant is applying for a specific job from an employer who commisioned the agent or if they are hiring an agent to pitch them to a range of different companies who didnt initiate contact with the agency.
How can you not see it? The end result might be the same but that doesnt mean the entire process, and therefore the economic game, is the same.
It is very simple, there is a cost to dealing with an agent. Nobody can deny this. If the employer hired the agent then they are obviously willing to take on the costs and may view it as a sunk cost or apply the cost proportionaly to all applicants. If they didnt hire the agent, then they arent necessarily willing to take on the cost and in this case the cost will count against the agents client. Other non-agency applicants will be cheaper to employ.
It is actualy a very simple economic concept that has little to do with industrial psychology.
Or the employer may see
Or the employer may see it ( the agents fee) as an opportunity cost to be recouped from increased earnings/production, Kimble. If one assumes that all costs are sunk/non-recoupable, then why would one expend any monies at all? Your right that it is a very simple economic concept. One that is based on mutual advantage. If 'the regular job seeker' has chosen to ustilised the service of an intermediary, then it is an affirmative personal action. At worst nothing comes of it; at best, employment. My view, in that context, is that the pros' outweigh the cons'.
Of course they charge a
Of course they charge a fee , this is a business , not a social service . If you want someone to hold your little petal soft hand and too whisper sweet nothings in your ear , whilst doing absolutely nothing to assist your career prospects..........Go to WINZ . That is what they do best .
And some firms , ours for instance , now only employ through an agency . You cannot get into our factory to knock on the door .
Voila! "( Our firm) now
Voila!
"( Our firm) now only employ through an agency. You cannot get into our factory to knock on the door."
Lots of pros' there. You have to be in, to win.
St Nick : We're a
St Nick : We're a grumpy bunch of homophobic misogynistic old farts with bad breath , appalling working conditions and hours ............. and there is a never-ending stream of people on the agency's books trying to land a minimum wage job with us . Go figure !
Agencies are almost worthless from
Agencies are almost worthless from both perspectives. The reality is they know almost nothing about the industries they are supposed experts in, unless they have actual work experience in that industry. All they do is scan CV's for keywords. The last time I visited an agency at around 2pm on a wednesday afternoon they were all drinking champayne and there was almost no one in the office.
<blockquote> Choosing to job hunt
This sounds like an economist who doesn't understand either the reality of typical recruitment processes, or the psychology of employers. No-one ever got fired for buying IBM, and the same motivations often apply in recruitment.
It's the fresh air on
It's the fresh air on Johns Road, RT, and the promise of gummy bears in the company Chrissy stocking. Cheers.
Fresh air was the Xmas
Fresh air was the Xmas gift . First year ever , they gave us nought . And no explanation . " Tell them nothing " is the edict from the palatial head office in Sydney . Basically the poorly performing Australian operations are being bolstered by mega profits hauled out of NZ ( The Dom. / The Press / TradeMe ) .
>As an employer, if I’m
>As an employer, if I'm faced with two candidates of more-or-less equal stature, I'll pick the one who hasn't come through an employment agency, on the simple basis that the cost to my business is less. If I do hire someone who's come through an agency, I'll be looking to recover that extra up-front cost where I can, possibly through paying a lower salary over the first couple of years than might otherwise have been the case.
As an employer you're simply tight, do you avoid giving staff pay rises and rewarding high performance as that also costs money? Bet all the best staff are prepared to work for a lower salary... not.
Look it is very simple,
Look it is very simple, if something costs more than something else which is identical then the something else will be chosen more often than not.
I dont give a shit about all your other reasons for liking employment agencies, all the benefits you reap from dealing with them. If it came right down to it, if you had the same potential employee coming to you directly AND through an agent, you wouldnt hire him through the agent.
From the potential employees position, he is better off going to you directly than through an agent. There is an advantage for him to do it.
If the person coming through the agency is better than one coming to you directly you may be willing to pay the extra cost. No one is arguing otherwise. But that cost DOES affect your decision at the margins, as the hypothetical example above shows, no matter how much you want to ignore the fact.
Just because someone comes through an agency doesnt automatically mean they are the best employee. They might be, but it isnt a certainty.
The authors other point is also valid, that the signalling from direct contact represents some value as well. That value is foregone by going through an agent.
There are benefits to using an agent, but there are also costs. You morons are calling the author stupid for pointing out the costs that are not as obvious as the benefits. You seem to think that because you conceive only net benefits from the agency arrangement that there are no costs, which is just stupid.
And Chris, your comment is
And Chris, your comment is equal parts pointless and idiotic. Lower wages does not mean low wages. A raise of 10% is lower than the raise your boss would have given you of 12% but you dont know that. You cant see the cost because you got your raise. You are happy with the extra money and dont see the lost 2%. But it did cost you.
Economists can see that, people like you lot cant. But you lot continue to sit there smug in your ignorance, insulting people who actually examine 'conventional wisdom'.
Next time you read something by an economist that you instinctively disagree with, try this. Try suppressing your knee-jerk reaction and ask yourself WHY you disagreed with it automatically. What assumptions are you making? Then question those assumptions. That is what economists do.
Why do you dislike door-to-door sales? Why do you go to the butcher instead of buying meat from the supermarket next door? Then, why does the supermarket have a meat section when there is a butcher right next door? Why do you sit in a queue for 2 hours to buy discounted petrol that is only saving you $10?
Maybe have some goddamned humilty and not assume you know everything already without the need to critically examine a thing. And dont assume that the economist doesnt know what he is talking about. Abandon the arrogance that makes you assume that economists are so stupid as to not see the thing that is obvious to you, and you didnt even need to think very hard about it.
Kimble - >Why do you
Kimble -
>Why do you sit in a queue for 2 hours to buy discounted petrol that is only saving you $10?
I wouldn't unless I earned less than $5 / hr.
P.S. At least I wasn't ranting. :)
Just as a matter of
Just as a matter of interest, Kimble. Have you been placed/recruited through the recruitment agency industry? Your posts appear to relate to the process in the third person. I'd be interested to hear your personal experience, especially if you were/ perceived that you were discriminated against.