The Low Quality Trap: Why Manufacturing Employment Agencies Often Fall Prey

Did you ever wonder how manufacturing employment agencies got their less than stellar reputation? The industry’s biggest offenders did not wake up and decide, “Starting today, we are going to be terrible.”  It’s a gradual process, but a process that is typical enough across the industry that it is important for you as a manufacturing hiring manager to be aware of the forces that cause it, so you can do your best to avoid staffing agencies that are in the process of falling prey to this “low-quality trap.”

In this blog post, we will examine what the “low-quality trap” is, two great ironies of low-quality hiring strategies, and why manufacturing employment agencies fall into the “low-quality trap.” Lastly, we will look at two ways you can make sure that you, as an employer, avoid the perils of the “low-quality trap.”

What is the “Low-Quality Trap?”

The “low-quality trap” is an irreversible spiral experienced by businesses that weaken their standards in order to adapt to market conditions. In doing so, they cause the quality of their service to degrade to a point, where they can no longer charge a sufficient amount for their services, let alone, return to their original standards.

Two Great Ironies of Low-Quality Hiring Strategies

Quality Matters in this Hiring Market

Manufacturing is as competitive as ever. Most companies and their competitors have taken steps to claim the low-hanging fruit of operational efficiencies and upgraded technology in their businesses. Branding, business models and process can all be copied, but the quality of your employees represents one of the few competitive advantages that cannot be easily replicated by your competition. So, if we are determined to win in this market, we should be sure to maintain high-quality hiring standards. Then why are staffing agencies choosing to pursue low-quality hiring strategies?    

Quality Matters to an Agency Business

Agency businesses are only as valuable as the talent that they represent. To provide an extreme example, imagine if basketball player LeBron James’ sports agent, Rich Paul, was getting some flak from the Cleveland Cavaliers, because LeBron costs too much. As a sane person, Rich Paul is likely to make an argument about LeBron’s talent, leadership and the championship he just won them. What he is not likely to say is “Hey, listen, you’re right. LeBron is pricey, but I’ve got this other guy, Mike, that I represent. He plays JV hoops for a local community college. Why don’t you give him a try instead?” If he made that suggestion, Rich Paul would have massively lowered his standards and drastically reduced the value of his agency, which provides elite professional teams access to extraordinary talent. While staffing agencies may not be able to access talent that is quite the caliber of LeBron James, they are, like Rich Paul’s agency, only as valuable to their clients as the quality of their people. Once they drop those standards, their ability to earn value for their work is drastically diminished. Then, again, why are staffing agencies choosing to pursue low-quality hiring strategies? 

Why Staffing Agencies Fall into the “Low-Quality Trap” 

Hiring is tough. The unemployment rate in the United States is low and EXTREMELY low in certain markets. We utilize Illustration 1.1 with clients to express how finding great people is actually harder than the unemployment rate explains.

In many cases, the people that are unemployed or available are not necessarily the people that you want to hire. 

What happens with many manufacturing employment agencies is that they see this major challenge and, instead of devising improvements to their service to find great quality people, they conclude the solution is to lower their screening standards. This “solution” solves the problem right away (not getting enough candidates), but it creates a whole new set of problems.

Downward Spiral

What happens next is what we are all familiar with: poor quality placements, headaches and turnover. Because all the other local, mediocre employment agencies are probably doing it too, the employment agency that makes this shift instantly becomes generic and undifferentiated from all the others. Once undifferentiated, these employment agencies are forced to drop their prices to compete against all the other undifferentiated employment services in town. They have no choice, but they also believe in their hearts that with lower prices they can get more business, shifting into higher volume accounts.

The next step is permanent and transformative to the employment agencies. As the quality of the placements decrease, turnover increases and the employment agencies and their recruiters begin to spend more of their time replacing workers compared to placing workers. Combined with the move towards lower prices and higher volumes, the recruiters now need to place more people each week in order to generate the same amount of income for the company. 

This is the point when quality gets EATEN ALIVE. Now under pressure to deliver on greater placement goals, recruiters find themselves having to increase the speed in which they are moving candidates through their office. High speed recruiting is a prescription for producing low-quality placements and extremely risky administrative mistakes.

As this cycle continues, the employment agencies become less valuable to their clients and the price for their service eases downward to match, creating what many of you have grown accustomed to: cheap and bad staffing services. The final nail on the coffin is when these decreased prices and lower margins force staffing companies to no longer hire and retain skilled recruiters, but instead a team of low wage employees whose job task is to corral bodies through their offices at high speed – not a great recipe for success.    

Two Ways You Can Avoid the “Low-Quality Trap”

• Work With High-Quality, Niche Employment Agencies – Not all manufacturing employment agencies fall into the “low-quality trap.” There is a class of specialized staffing agencies that consciously recognize the destructive force of weakened standards. Generally, the type of positions they focus on demand high quality (skilled trades, engineering, executive search, etc.). As we have shown above, the decision to preserve high standards must be made at the beginning of the agency’s business and maintained continuously. Search to see if any staffing agencies of this kind (like our own company) operate in your market and can service your hiring needs.
• Follow Best Practices To Optimize Your Outsourced Staffing Agencies – As we have interviewed clients in the current hiring market, we have recognized a clear trend. Those companies that are having the greatest success hiring are those companies that have taken several predictable steps internally to take charge of their staffing agency resources and create a proactive “hiring engine” that delivers quality results. For your benefit, we have compiled some of those best practices in an easy-to-reference free eGuide titled “10 Steps To Optimize Your Outsourced Staffing Services” that you can download [here].   

By understanding how employment agencies fall prey to the “low-quality trap,” our hope is that you will be better able to identify who it’s happening to and who is managing to avoid it. In that sense, we want you to recognize that not all staffing agencies are the same and, in fact, this issue is one of the major differentiators. We encourage you to be selective because the success of your company is likely to depend on the quality of your employees.

Are you interested in taking charge of your staffing agency resources and creating your own high-quality “hiring engine?” Download our free eGuide: “10 Steps To Optimize Your Outsourced Staffing Services” and learn how you can outmaneuver the challenges of a tight labor market and succeed in hiring great people!

About Industrial Trades Pros

Xemplar provides career resources as well as recruiting services to top industrial trades professionals and the companies that employ them in manufacturing, transportation, energy, automation/robotics and industrial services. We enable machinists, mechanics, welders, fabricators, electricians, installers, quality control techs, service techs and other related tradespeople to find great opportunities and achieve their greatest potential in their fields.