Will the Staffing Industry Be Outsmarted by Artificial Intelligence?

Few assets impact a business as much as its staff, yet few tasks are as dreaded by most managers as recruiting and hiring new employees. That intersection of high value and high cost is where the staffing industry fits. It’s also where artificial intelligence may be most disruptive.

In Westchester, personnel firms range from branches of multinational behemoths to one-person boutiques that specialize not just in recruiting for a given industry but for certain positions in that industry. Typically, full-service firms divide their operations into three areas: temp labor, temp-to-permanent hires, and recruitment for permanent positions. All suffer from one overwhelming misconception: that their job is easy.

“It’s very costly to hire someone,” says Karen Vasconi, owner of Career Connections in Tarrytown. “Let’s say you are an employer and put an ad out there. You may get 750 résumés. You have to pay someone to read those. You have to whittle them down to 100, then to 20, then interview five people once, and one person again. It’s very time-consuming.”

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Technology doesn’t make hiring easier, either, at least according to Laura Loughlin, owner of Loughlin Personnel in White Plains. “Anyone can say anything they want on their résumé,” she says. “They can say they have advanced computer skills or that they have a degree. You need someone to do the legwork to check those things.” Her firm looks in the deep weeds to find the right person for each position. “We meet all of our candidates,” she explains. “We test them; we do background checks; we check references. We don’t just send our clients a bunch of résumés.”

“Right now, the challenge is finding qualified candidates, but that’s why we exist.”

—Rich Greenwald, CEO, Concorde Staffing Group

When the economy expands as it has in the past months, demand for job candidates can exceed the supply, which is both good and bad for the staffing industry. “Right now, the challenge is finding qualified candidates,” according to Rich Greenwald, CEO of Concorde Staffing Group in White Plains. “But that’s why we exist.”

As Allison Madison, owner of Madison Approach Staffing in Elmsford, explains, “It’s a seller’s market for job candidates. They have more negotiating power in choosing where they want to work, especially if they have in-demand skills.” That negotiating power impacts staffing firms in other ways, too. Because many firms are compensated on a contingency basis, the time and money they have invested in vetting a candidate and shepherding them through the hiring process is lost if that candidate takes another position or accepts a counter-offer from their current employer.

The temporary employment side of the staffing industry doesn’t have that problem, but it certainly faces other challenges. For temps, the staffing firm pays the employee an hourly rate and bills the employer weekly. The temp is actually on the staffing firm’s payroll, so the firm pays insurance, taxes, and other benefits. “We take all of that off the client’s shoulders,” Loughlin points out.

That can be quite a burden to lift. “If you’re paying someone $40,000, the actual expense to employ them is $16,000 more than that,” according to Vasconi. “It mounts up by the time you pay for workman’s compensation, unemployment insurance, social security and Medicare matching, disability insurance, and mandatory minimum liability coverages. If you pay for that person’s medical insurance or 401K, it’s more. It’s become very costly to employ.”

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Demand for temps stems from a variety of needs. As Madison explains, “Companies have variable workflow issues. They may have busy seasons or need skillsets for a project or a contract and don’t want to hire someone permanently.” Her company, which celebrates its 30th anniversary this year, contracts to provide temps to organizations like Westchester Medical Center and the NY Power Authority.

She expects this year’s change in New York’s family-leave law will have an impact, too. “Medical leaves are also a big deal, particularly for small and midsize companies,” she says. Now that New York State mandates paid family leave, “That will be a big burden on small and midsize businesses,” she notes.

Generally, the firms we spoke to have high praise for the Westchester labor pool. However, as Madison, who serves on the Westchester-Putnam Workforce Development Board, points out, “Westchester is a bifurcated market. On the one hand, it’s highly educated. On the other, companies who need entry-level workers are limited because the cost of living here is so high. If you are looking for highly qualified people, there’s a very good talent pool. If you need entry-level clerical or manual laborers, it’s a real challenge.”

Innovation may well be a key to success in the staffing industry. One firm that’s trying something new is Classic Westchester in White Plains. Director of Sales Chelsea Wendlinger says her company will be introducing a new service this year: “We are going to roll out a new division that will help candidates with extra guidance and coaching,” she says. “We will focus on career coaching. It may be for a recent college graduate who needs some help on what type of position or industry they want to work in, or for a person who just got laid off or is re-entering the workforce and doesn’t know what their next step is.” The firm will charge on an hourly basis for this particular service, since it is so labor-intensive and goes deeper than the normal candidate relationship.

Specialty recruiting firms have their own set of challenges. Eric Berger, of EB Executive Search in Rye Brook, who has been recruiting senior-level partners in law firms in the tri-state area since 1991, points out, “The cost of entry into this business is low — a computer and a phone. So there are a lot of new people trying to do this and that creates a lot of noise. I have to distinguish myself through the quality of service and knowledge and contacts I have.”

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“Many states are passing laws that restrict us from talking about compensation with a candidate,” adds Matt Schwartz, who runs MJS Executive Search in Mount Kisco and Scarsdale, which specializes in filling transformational jobs like chief digital officers, artificial-intelligence leaders, and media specialists for companies like PepsiCo, Honeywell, and American Express. “That can be challenging when a candidate is highly compensated, perhaps out of our client’s range, and we don’t want to waste their time.” Salaries for the jobs he fills can go as high as seven figures. (Westchester County Executive George Latimer signed a bill in April that makes it illegal for companies to require an applicant to reveal previous salaries.)

Looming on the horizon for all types of firms is a set of tools that may either revolutionize or decimate the industry. “Artificial intelligence is becoming more prevalent,” Schwartz observes. “There is an opportunity to identify potential candidates quickly and efficiently, and for jobs that require specific functional expertise, AI is going to be a game changer. It will remove some of the lower-level searches that go to search firms today.”

AI may affect higher-level recruitment, too. “For example,” he says, “today we put parameters into LinkedIn and get a long list of candidates.” With AI, Schwartz explains, he’d be able to add sample résumés or profiles and the program would access many other sources to come up with not only qualified candidates, but identify those most likely to make a move to a new job.

Madison views the AI glass as possibly half-empty. “Artificial intelligence is going to weave its way into the industry,” she admits. “Many large corporations have had job portals for many years now, and I have seen the issues with the algorithms. If your qualifications don’t match it, your résumé goes into the abyss. I suppose you can hope that AI will make the algorithms better, but I have reservations.

“People have forgotten that we are in the people business,” she adds. “Innovation doesn’t come out of a box; it comes from human beings. I don’t know that you can algorithm that. Algorithms seek sameness. Ultimately, ideas come from difference. Our goal as recruiters is to get companies to look at people who don’t necessarily check all the boxes.” Madison also believes algorithms that are modeled on previous job holders are inherently biased against women and minorities.

Greenwald takes a middle position on AI: “Artificial intelligence may be disruptive in our industry, but we’re still a very people-intensive business, and I don’t know how accurately a computer can predict someone’s actions. To some extent, it could have an effect either negative or positive,” he explains.

Challenges notwithstanding, the future of the staffing business in Westchester looks good. As Greenwald says, “The staffing business is always going to be there because companies will always need good people. If you don’t invest in your people and find the right person, your company won’t run effectively.”

Dave Donelson lives and writes in West Harrison and has no fear of algorithms.

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