Human Resource Functions at XYZ Staffing, Inc.

Introduction

Following periods of economic downturn, companies of all sizes and types frequently turn to staffing agencies to help them refill vacancies that resulted from previous downsizing initiatives. In some cases, such staffing agencies provide suitable candidates for companies on a temporary basis, while in others candidates are provided for consideration for permanent employment. Some agencies provide both temporary and permanent placements. Since staffing agencies are intimately involved in the human resource function, gaining a better understanding of how a successful organization competing in this industry achieves its goals represents a valuable and timely enterprise.

This paper analyzes XYZ Staffing, Inc.'s human resource functions and how they relate to the organization's strategic initiatives using the results of a telephonic interview with the owner and a review of the relevant literature. A summary of the research and important findings that emerged from this analysis are presented in the conclusion.

Background and Industry Overview

XYZ Staffing, Inc. was founded in 1996 as a sole proprietorship in a midwestern state in the United States. The company's origins trace back to 1980, when it operated as a secretarial service under the name "Flying Fingers Secretarial Service, Inc." This enterprise was initially a home-based operation, but its early success resulted in the leasing of a suite of offices in a nearby office complex where the company provided a wide range of administrative support services.

The widespread introduction of desktop computers and printers during the 1990s forced a revision of the business model to reflect the changing marketplace and its effects on traditional employment practices. The transition to a temporary staffing agency occurred during a particularly fortuitous period in the country's history when more and more workers and businesses alike turned to these agencies for temporary employment assistance (Eberts, 2005).

According to Gainey, Barnett, Davis, Bell and Curvino (2004), the temporary employment industry has experienced dramatic growth. They report that "The number of temporary agencies increased from about 100 in the mid-1980s to almost 1,500 in the mid-1990s. While temporary staffing agencies placed just under one million workers in 1990, 10 years later the industry had grown to just over 2.5 million workers. In fact, the temporary staffing industry experienced double-digit revenue growth throughout most of the 1990s" (p. 11). A study conducted by the Federal Reserve Bank of Kansas City indicated that a growing number of companies have opted for temporary staffing alternatives because of the cost savings that can be achieved in fine-tuning their workforce to satisfy fluctuations in demand without long-term employment commitments on the part of the employer (Kliesen, 2004).

Although the focus is on providing employers with flexibility in their staffing, there are advantages for employees who work for temporary staffing agencies as well. Gainey et al. (2003) note that "Temporary employment may allow graduates to experience different occupations without making permanent commitments. Graduates in many fields today are faced with an extremely limited job market where competition for positions is intense" (p. 11). Working for temporary staffing agencies can provide a means by which new entrants into the workplace can gain valuable on-the-job experience while drawing a paycheck.

Given these benefits, many college graduates are using temporary staffing agencies to evaluate potential employers. Flynn (1999) reports that "Traditionally people took a job with a temporary service with the objective to find a permanent job. But you are starting to see more people now saying that they would like to have greater control over when and where they work and in essence becoming a temporary as a career" (p. 51). This perspective is reinforced by McBride, who emphasizes that "Permanent and temporary staffing agencies are becoming increasingly popular. They give you a chance to 'try out' different employers, jobs and work environments. They also can result in full-time and part-time permanent jobs, excellent networking contacts and valuable work experience" (2001, p. 52).

The growing popularity and double-digit growth in the temporary employment industry over the past several years is attributed by Burgess and Connell (2004) to several factors:

First, temporary staffing agencies provide the temporal flexibility needed to accommodate daily, seasonal, and cyclical fluctuations in the quantity of labor inputs required. Second, they provide functional flexibility—a means of accessing specialist skills and capacities on a selective and discontinuous basis. Third, temporary staffing agencies provide companies with human resource support for the temporary employees assigned to them.

Since its transition to a temporary staffing agency in 1996, the company has enjoyed modest success despite the lingering effects of the Great Recession of 2008. The company has grown to include the owner and four other full-time employees, a part-time employee, and dozens of temporary "staffers" that are dispatched on assignments of varying lengths to companies in need of temporary employees. A growing number of companies have turned to staffing agencies such as XYZ for short- and long-term temporary employees in recent years (Laband & Mcclintock, 2001).

While XYZ continues to provide clerical-type workers—including secretaries, administrative assistants, bookkeepers, and data entry specialists—for temporary assignments, the company has increasingly targeted professional positions as well. This trend is consistent with larger industry patterns. Gainey et al. (2004) report that "No longer is temporary work primarily secretarial or administrative; professional positions are increasingly available" (p. 10). Professional positions at XYZ have included advanced practice nursing positions and paraprofessional assignments with law firms.

Like many staffing agencies, XYZ's contract stipulates that temporary employees may be hired on a permanent basis if appropriate notification is provided and a placement fee is paid. The owner reports having placed approximately 10 temporary staffers in permanent positions with various companies over the years but emphasizes that permanent placement represents a relatively undesirable outcome because it means a loss of ongoing revenues despite the one-time placement fee. Nevertheless, many companies prefer to have the opportunity to evaluate temporary employees' performance and use staffing services specifically for recruiting permanent employees. Flynn (1999) notes that "The temp-to-perm approach has many benefits for the employer. It is a good chance for a manager to really take a look at a person and know that the person is a good performer" (p. 51).

The employees at XYZ Staffing, Inc. are organized into two categories. The first category consists of in-house employees. Three full-time employees provide support for day-to-day operations, including answering telephonic and email inquiries from customers and applicants and administering testing regimens to new employees. Another full-time employee is assigned to XYZ's marketing activities, including maintaining the company's website, conducting cold calls, and conducting follow-up on-site visits to existing and potential clientele. The part-time employee works after hours and handles janitorial responsibilities as well as any copying or other work remaining from that day's activities.

The second category includes temporary assignment employees—all other XYZ employees who are dispatched to assignments of varying lengths at customers' business locations. On occasion, one or more of the company's qualified in-house employees is also assigned these types of temporary duties depending on the level of demand. These employees are paid the higher of their base hourly salary (if the assignment pays a lower hourly rate) or their base pay plus the differential (for assignments where the hourly pay rate is higher). The owner has noted reluctance to assign in-house employees for temporary positions because in several cases, this has resulted in carefully recruited and groomed talent being "scalped" by companies willing to pay XYZ's placement fee.

Human Resource Functions at XYZ Staffing, Inc.

XYZ provides the full range of traditional human resource services for all employees, including payroll, hiring, firing, and performance counseling. Although no timesheets or time clocks are maintained for in-house employees, all temporary employees receive an "assignment package" that includes a copy of the company's employee manual, timesheets completed by the temporary employee as the assignment proceeds and signed by the employers, tax-related documents, and other information that employees may need depending on their area of expertise.

This paper-based system has worked satisfactorily over the years, but the company has been investigating a digital version that would eliminate the need for paper-based accounting. A customized or off-the-shelf digital system would allow employees to record their hours per day and week, with information authenticated using electronic signatures. Despite the benefits of such a system, the company's owner speculates that the paper-based system will continue for the foreseeable future given its proven track record and the significant stock of forms on hand.

The following table compares XYZ's human resource function with industry leaders Manpower and Kelly Services:

Table 1: Comparison of XYZ Staffing, Inc. versus Manpower and Kelly Temporary Staffing Agencies

This comparison must be qualified by the fact that Manpower and Kelly have hundreds of thousands of temporary employees working nationwide and globally, while XYZ has just four full-time and one part-time employee and a few dozen temporary employees available for assignment on a city-wide basis only.

The company's business model remains firmly focused on the ongoing fees that XYZ's temporary employees generate. This approach has enabled XYZ to achieve and sustain a competitive advantage over time. Although XYZ serves a core set of businesses that provide fairly reliable assignments, this segment of the company's business has far outpaced its permanent placement activities. The owner envisions an ultimate goal of franchising or licensing her operation in the same fashion as industry leaders such as Manpower and Kelly. Burgess and Connell (2004) report that "Manpower pushed out from its base in the Midwest primarily through the sale of local franchises across the country, while Kelly pursued a similar strategy through licensing agreements, the two companies expanding their sales volumes almost five-fold" (p. 27).

In the meantime, XYZ continues to directly compete against larger counterparts such as Manpower and Kelly Services by focusing on high-quality, personalized customer services and forging long-term relationships with the companies it serves. This approach aligns with industry best practices. Flynn reports that "Many temporary staffing agencies have developed partnerships with the companies they serve, so that if there is a problem they can be ready to solve it. As these relationships are formed, both parties get comfortable with sharing planning information and looking at ways to improve the productivity and quality of the work being done by the flexible work force" (1999, p. 51).

Conclusion

The research showed that XYZ Staffing, Inc., a midwestern small corporation, has taken advantage of the growing temporary staffing industry in recent years by offering both administrative support and professional employees on a temporary basis, but who are also available for permanent hire in those cases where companies are willing to pay a placement fee. The number of companies competing in the temporary staffing industry was shown to have increased significantly in recent years in response to growing demand, and XYZ Staffing, Inc. faces fierce competition from Manpower, Kelly Services, and other larger organizations that can provide their associates with superior benefits and training opportunities. Despite this competitive disadvantage, the company has gained market share by focusing on customer service and specialty areas such as law, finance, and health care, and by offering pay rates that are slightly higher than those of larger counterparts.