Waste Management Inc. turned to a staffing company, Seaton Corp., to recruit 5,500 permanent employees this year, cutting annual hiring expenses for the trash hauler by $1.9 million.
Using Seaton has been “much more scalable and flexible for me than to have to find recruiters and get them on board, which may take weeks, if not months,” said Brent McCombs, Waste Management’s vice president of talent. It’s a “relatively risk- free way” to expand.
While U.S. hiring by private companies last month was the weakest since January at 50,000, the staffing industry is experiencing a boom in demand as employers retool their workforces to be more flexible and reduce expenses. That’s helped stocks of these businesses outperform the broader market, with the Standard & Poor’s Supercomposite Human Resources & Employment Services Index rising 47 percent since August 31, compared with 19 percent for the S&P 500 Index.
Some employers who shrank their human-resource staffs during the recession now lack the recruiters to ramp up hiring even modestly, said Tobey Sommer, a staffing analyst at SunTrust Robinson Humphrey, a unit of SunTrust Banks Inc. in Atlanta. He recommends buying Robert Half International Inc., Kforce Inc. and Korn/Ferry International.
“What we are seeing right now in HR departments is a microcosm of the shift to a more flexible labor force” and “more variable cost structure,” said Sommer, who is based in Nashville, Tennessee.
John Silvia, chief economist at Wells Fargo Securities LLC in Charlotte, North Carolina, agrees.
“There is a fundamental change under way in the hiring habits of companies, who are not very sure about the strength of final demand and the strength of the economy,” said Silvia, who predicts the unemployment rate will reach 10 percent early next year compared with 9.8 percent in November, even as he has raised his forecast for fourth-quarter growth to 3.5 percent from 2.6 percent. “This certainly suggests more caution.”
Revenue from permanent job placements rose 33 percent in the third quarter at Menlo Park, California-based Robert Half, 50 percent at SFN Group Inc. in Fort Lauderdale, Florida, and 61 percent at Tampa, Florida-based Kforce, according to the companies.
Such outsourcing may expand 40 percent overall next year, said Elliot Clark, chief executive officer of SharedXpertise Media LLC, which held a trade show Dec. 7-8 in Las Vegas for companies interested in contracting out recruiting. The event attracted 270 attendees, up 23 percent from a year earlier, said Clark, a former staffing-industry executive.
‘Wheeling and Dealing’
So many people were “doing deals around the tables,” it was difficult to get them to attend the formal meetings, he said. “There was a lot of wheeling and dealing going on.”
Houston-based Waste Management, which has more than 45,000 employees, cut hiring and employment-advertising costs by consolidating recruiting through Chicago-based Seaton starting in 2008, McCombs said. Openings have been filled in less than a month compared with more than 50 days in 2007, thanks partly to the new process and the weaker economy, he said.
“We have shown a massive improvement,” especially in finding drivers, a career field with continuing strong demand, McCombs said.
Staffing companies are gaining clients even as the unemployment rate remains near a 26-year high. The labor market may not return to normal for five years, Federal Reserve Chairman Ben S. Bernanke said in an interview broadcast Dec. 5 on CBS Corp.’s “60 Minutes” program.
“The economic recovery is continuing, though at a rate that has been insufficient to bring down unemployment,” the Federal Open Market Committee said in its Dec. 14 statement.
Fourteen percent of U.S. employers plan to add to their staffs in the first quarter, while 10 percent anticipate reductions, according to a survey released this month by Manpower Inc. While the survey shows that demand is the highest since 2008, the pickup in hiring will be “slight,” Manpower said.
The jobless rate is likely to average 9.4 percent in 2011 and 8.7 percent in 2012, according to a Bloomberg News survey of economists this month.
Some businesses that are adding employees say outside recruiters may not be able to find people who are the best fit. While Intel Corp., the world’s largest chipmaker, is testing a “pilot program” of outsourcing, the Santa Clara, California- based company has maintained most hiring responsibilities, spokeswoman Gail Dundas said.
“Intel is a complex company with a unique culture, and we have found the best model for us” is “retaining our internal recruiting staff,” she said.
Tarrytown, New York-based Regeneron Pharmaceuticals Inc. has had a more positive experience with staffing firms. The biotechnology company wasn’t “particularly efficient at hiring,” so it turned to Kenexa Corp. to help it find 500 people this year, more than doubling its staff to 1,500 since 2008, said Ross Grossman, vice president for human resources.
“We have reduced the cost per hire by about half,” Grossman said. Kenexa, based in Wayne, Pennsylvania, also designed a program to help recruit scientists who “really fit into the Regeneron culture,” where researchers are urged to shun bureaucracy and come up with new approaches.
The ad campaign, “Five Reasons You Do Not Want to Work for Us,” has been a hit with scientists, Grossman said. “It is about more than cost savings.”
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