Personnel Staffing Agencies
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Industry Overview
In the US, over 40,000 personnel staffing offices generate total annual revenue of more than $130 billion. Large firms include Adecco, Manpower, Randstad, and Kelly Services. The average agency has one office, $2 million in annual sales, and 15 employees. Despite strong consolidation in recent years, the industry remains fairly fragmented: the 50 largest firms hold about 40 percent of the market. Agencies with multiple offices may have agency-owned branches, independently owned franchise offices, or licensed area-representative offices.
Competitive Landscape
Job growth drives demand for the personnel staffing industry. The profitability of individual companies depends on good marketing. Large companies enjoy economies of scale in marketing and back-office operations. Small companies can compete successfully by specializing in an industry or by job function.
Products, Operations & Technology
The industry is divided into three major segments: permanent placement of workers, temporary placement of workers, or leasing of full-time workers. In terms of revenue, the temporary and leasing segments dominate, with about $70 billion and $55 billion of annual revenue, respectively, while permanent placement produces only $5 billion of annual revenue. However, these figures are misleading because temporary and leasing agencies count as revenue the wages and benefits they collect from employers and pass along to workers, while revenue for placement agencies only includes placement fees.
Placement agencies find workers to fill permanent positions at customer companies. These agencies may specialize in placing senior managers (executive recruiters, headhunters); midlevel managers; technical workers; or clerical and other support workers. Temporary help agencies provide workers for customers for limited periods, often to substitute for absent permanent workers or to help during periods of peak demand. These workers, who are employees of the temporary help agency, may be clerical, technical, or industrial. Employee leasing agencies, sometimes known as professional employer organizations (PEOs), provide workers on long-term or permanent assignment. While working under customer management, leased workers are employees of the leasing agency.
The two major activities of personnel agencies are recruiting potential employees and potential employers. Agencies advertise for and solicit workers through networks of contacts, newspaper advertising, and increasingly on the Internet, and interview, test, and counsel workers before sending them to the customer for approval. Ninety percent of staffing agencies provide some sort of training, especially data entry and basic computer skills. They also provide pre-employment screening, which can include skills tests, drug screenings, and criminal checks, to ensure that applicants are qualified.
Temporary help agencies recruit workers who want a succession of part-time assignments, and often provide extensive training in specific skills such as word processing and spreadsheet use, and other specific computer applications. PEOs have greatly expanded their scope in the past decade by contracting with customers to run entire functions for them, typically complicated ones like HR, but they also work in accounting, manufacturing, and production. In many cases, the PEO hires the customer's existing workers and leases them back to the customer. As employers, both temporary agencies and PEOs are liable for withholding taxes, unemployment and social security payments, worker compensation, and other liabilities.
The personnel placement industry has been radically changed by the Internet. Many companies list available positions with one or several Internet personnel sites like monster.com or jobs.com, and on their own site. Personnel agencies operate their own sites and often still work as intermediaries by helping employers accurately describe job openings and screening candidates who submit applications. However, as sophisticated automated job description and candidate screening tools become available, many traditional functions of personnel agencies will become obsolete.