Why I Think “Eleemosynary” (Non-Profit) Staffing Doesn’t Work

It’s not every day that one gets to use the word eleemosynary, but it probably got the attention of a lot of readers. “What the heck is that?” “Could I be one of those without knowing it?” Better check it out.

Eleemosynary is a fancy word for organizations that are non-profit, charitable, or otherwise idealistic in their goals and activities, as contrasted with organizations that are commercial, market-driven, and for profit. But here’s the thing. If you are thinking that you should do a not for profit staffing firm, think again. Here’s why.

Now and then, governments or private charities and foundations devote some of their spending money, which they call funding or investment, to the establishment and operation of governmental or private non-profit staffing firms. Some past examples were projects in Bergen County in New Jersey, Southern California, and the more aggressive versions of the “one-stop” agencies sponsored by some state governments.

The theory and strategy of these organizations is based on the assumption that the profits earned by commercial staffing firms could be and should be diverted to more socially productive uses — including recruitment of the hard-core unemployed, above-market wages for the temporary employees, extensive free training, comprehensive free benefits, longer-term assignments, and job security. That sounds noble and reasonable, but it usually doesn’t work in practice. Such offerings add greatly to normal expenses, making these staffing firms uncompetitive in the marketplace, and none of the admirable goals can be achieved without revenue from competitive sales.

When I entered the staffing industry, I took my company’s branch management training course to learn the business. One key axiom that we learned was that, although staffing produces a wonderful social product — employment for people when they need it most — staffing is a sales business driven by practical business people. If you hire people with “social worker” points of view, they will pay high, bill low, avoid tough personnel decisions, and eventually cause the business to fail, preventing it from helping anyone in any way.

Eleemosynary staffing firms are started by people with that debilitating point of view, and they tend to hire people like themselves to staff those projects. That same philosophy prevents them from offering the incentive compensation that is essential for attracting and retaining the kind of staff people who make staffing firms successful.

So the next time you hear that you will be competing with a more efficient, non-profit staffing firm that will fix all of the problems that it perceives in the contingent workforce, don’t worry. You are not at a disadvantage when it comes to these firms. The only way to keep that kind of organization going is continual subsidies from government or other generous sources. Those sources tend not to last for long periods of time, as economic and political circumstances change.

George M. Reardon

George M. Reardon
George M. Reardon is an attorney whose practice is focused on the staffing industry. He can be reached at georgemreardon (at) aol (dot) com.

George M. Reardon

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