The traditional contingent search business model is a risky one in that it is incredibly susceptible to macroeconomics, technological innovation, and population demographics. While many industries can balance their product and service portfolios to survive the most brutal application of the laws of supply and demand, many smaller contingent search providers ride a one-trick pony.9 b2 i- V% _( A4 r0 d1 d! {

8 X4 G* [) ?2 _' zIn 1999, contingent search providers were riding waves of success that made those on the North Shore of Maui look tame. Search commissions were rising steadily, exceeding 45% in some markets, newbies to the profession were pulling down six-figure incomes, and the influx of job orders seemed unending. Then 2001 hit, and one contingent firm after another cut back, laying off thousands. Now that double-digit employee growth is once again a challenge for most companies, you would think that the glory days of contingent search are back. But, as many firms will attest, they aren't.
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8 Z: \0 S8 j  x* P$ K' `1 HRevenue Is There, But Not From the Same Sources
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  W2 [6 G/ E! s9 |+ p. {While industry revenue is forecasted to grow from 10.4% in 2005 to 11.6% in 2006, the industry is deriving the greatest percentage of newly booked revenue from value-added services, namely temporary or contract staffing and professional services. More companies are relying on contingent workforces than ever before. It is estimated that in 2006, as many as two-fifths of newly created jobs are first offered on a temporary basis. That's a fourfold increase in the growth of contract labor in just 10 years.
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While the job orders being placed with traditional contingent agencies aren't drying up, the increased use of contingent labor and a confluence of technology driving candidate visibility is forcing such firms to change or die. With the opportunity to maintain minimum placement volume needed to sustain a business in jeopardy, many contingent search providers are increasing the scope of value-added services they offer, and are finding clients more receptive than ever.+ p" B0 [" }6 ?  ]1 ~: ~1 Q

8 @% ~! `) V1 bThe contingent search industry has long been one that defined success too early, in that it never sought out opportunities to extend the value of its services beyond the initial placement transaction. This lack of prior industry development has made the industry ripe for a series of progressive, qualitative transition cycles. Early leaders embracing this transition are already blurring the lines between temporary staffing, contingent staffing, retained staffing, professional services, and training. With this transition firms like Adecco and Kelly, which had few urban competitors, today have thousands, ranging from local companies of one to foreign companies of thousands.

The Confluence of Technology Driving Candidate Visibility
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Traditional contingent search firms take advantage of their ability to find candidates who have not been found by companies or who have been overlooked. It is, for the most part, a low-volume, high-margin business. However, the confluence of numerous technologies that service the recruiting function and the proliferation of the Internet have made a majority of the world's workforce more visible to corporations and, in the process, eroded the value proposition contingent search providers once banked on.8 z7 N8 `- @$ l

9 W. _5 P$ U% W/ Q2 YIn this new era, contingent search professionals are finding it a lot harder to find a candidate who:
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Doesn't appear on a lock-out list (a list of the agencies' other clients or strategic partners of the client organization);
% t5 b- n$ m4 UHasn't already been introduced to the company via the employee referral program; or. b2 p. M% d: ]5 v7 z- t
Doesn't already appear in one of a multitude of databases that employers have purchased access to; or# R' o  h& m; P/ J' [, ^
Hasn't already applied directly to the company sometime in the past four years; or
' k* _1 ^, @8 |9 j0 I& I7 N3 FPresents a background so stellar that companies don't balk at paying search fees./ U. q% k# u, c, t+ I5 r
In short, the inventory of talent that contingent search providers can trade upon for permanent placement is in extremely short supply.
9 p' ~, Y0 J  `# YNew Services on the Horizon. i: ^" U7 Q7 u* U; `! |( X" c5 w& T

5 H! ^; r8 W2 R& k, T5 u0 S3 g& `As stated earlier, those agencies embracing change are finding more ways to extend the value inside the organization. The most common extension is, of course, the move into supporting temporary labor. While many large service providers like Randstad and Kelly have the market economics to secure the largest companies in a metropolitan area, a number of small- and medium-sized firms desperately need help leveraging contingent staff.
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9 q5 H( `; [$ }& \8 W1 l; sIn addition to temporary staffing, a number of other potential services are on the horizon, some that many large organizations should consider taking advantage of. Those we find most interesting include:+ \. [. b' D8 |1 v- l& Z* T$ \
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Outsourced Referral Program Management9 a$ j. a* e8 h4 D/ T. d  [
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Employee referral programs are quickly becoming the predominate source of hire inside most organizations. Those firms that lead their industries in hires attributed to employee referral can attest that providing world-class customer service to both referees and referrals is essential to maintaining program momentum.
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( j! G' A) I& L0 h. w2 }$ OUnfortunately, most HR organizations are not adept at even spelling world-class customer service, let alone delivering it. For years, HR organizations have focused on containing costs and enabling self-service, two objectives that don't always drive customer satisfaction. Contingent search firms, on the other hand, have built their businesses around customer service, servicing not only the client but the candidate as well.
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By outsourcing the management of the employee referral program to a trusted search provider, the client organization could gain several key benefits, including:
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The search provider could more easily ramp up and down the human resources attached to the client employee referral program to maintain pre-established customer service standards.
. a2 |4 C: w$ z% U: ^+ X5 QUnder a split-type agreement, the search provider could provide referrals with additional placement services should the client organization opt not to hire, thereby creating a revenue source to self-fund the employee referral program.6 X9 s! G; Y* c# F# O" S
The search provider could provide more advanced analytics regarding the success or failure of the employee referral program because traditionally agencies have been more adept than HR functions have been at applying metrics internally.2 J3 o1 ?& w8 z( _9 p
The search provider could leverage economies of scale and build internal staffing proficiencies in marketing and sales skills to support the employee referral program that would not make sense for small- and medium-sized firms to invest in.