Manpower Firms Are Setting Up Shop in Israel at a Record Pace

A man wakes up one day and decides he's an employment agency.

Data compiled by the Central Bureau of Statistics for the first quarter of 2011 provided relief to job seekers, heads of human resource departments, senior Finance Ministry officials, and directors of employment agencies. Unemployment was at 6%, a low not seen in years.

katabi - David Bachar - June 10 2011
David Bachar

The immediate implication: The market has transformed from an employers' market in which executives can choose between hundreds of candidates for each post, into a workers' market where job seekers can be much more selective. For the employment agencies, which were hurt badly by the high unemployment of recent years, current circumstances are an opportunity for growth.

But there's a catch. Since the 1970s, hundreds of employment agencies have operated in Israel. Government officials estimate that during the past year and a half, when the economy has been on the rebound, dozens of new employment agencies have emerged, most of them small ones run by two or three people, sometimes fewer.

"A person wakes up one morning and decides he's an employment agency," says Dror Katabi, managing director of International Executive Search Federation, an employment agency that operates in Israel and 40 other countries including Italy, Britain and Hong Kong. "Most of the companies active today don't provide adequate service for organizations looking for suitable workers," he says, adding that the companies operate as fax machines, sending out candidates' resumes. They don't provide added value to employers who pay for their services.

How did this happen, exactly?

Katabi: "Until 20 years ago, there was a clear separation between three types of entities: employment agencies such as Manpower, which served as temporary employers at the bidding of clients. Then there were employment agencies that did labor mediation [between employers and workers], and there were evaluation agencies that classified workers' skills and potential.

At the end of the 1990s, these distinctions became blurred. The boom in demand for workers in the economy, which was led by the high-tech industry, created a great need for temporary workers hired by hungry companies. This situation propelled the employment agencies forward. 'Send us quickly resumes of professionals in a particular area, because we need them desperately' - that was the message sent by company executives."

If there's demand like that, what's wrong?

"That deflates the role played by the agencies. A few years ago I counted 700 employment agencies. I stopped counting, but I imagine that the number has continued to rise [government officials cite a figure of 450 to 600]. The new agencies sometimes consist of a worker sitting on the porch of his house. Anyone can set up an employment agency, without having to prove any level of professionalism in the industry, or prior experience with workers."

How can the situation be changed?

"I would expect employment agencies, including the larger ones, to provide added value to employers. Employment agencies continue to dwell in an old world where they operate as factories for the dissemination of resumes, rather than being perceived as a professional consultant for the client. The added value comes from the agency knowing the client, its competitors, the challenges it faces, and market realities faced by the client. The agency ought to be a trusted consultant to an employer, until the right worker is hired."

cv - Marina Zlochin - June 10 2011
Marina Zlochin
The employers are guilty

Manpower Israel Managing Director Orna Segal agrees that employment agencies mostly send out faxes. "The question that arises is who really needs employment agencies in the age of the Internet," she asks. Unlike Katabi, she blames employers, for the most part. "In Israel, the client is prepared to pay the minimum fee to an employment agency, equivalent to the worker's first month's salary, and pay this fee on a five-month installment basis, without interest. It's no wonder that at these prices the biggest service he usually gets is to receive a ton of CVs."

According to Segal, in Western countries, the situation is very different. "In France, as in Britain, Germany and Holland, the employer pays the employment agency a commission equivalent to two or three months of a worker's salary," Segal says.

"In exchange, the employer receives an array of services including a description of the labor market, an analysis of the market the client wants to penetrate, classification and rating of candidates for work in various departments, an analysis of the organizational culture and selection of candidates based on this analysis. Employment agencies in other countries serve as a permanent filter leading to the selection of workers for a precisely defined job. Employment agencies' employees brainstorm with client executives so that they refer to the client the right workers at the right time."

As Segal sees it, Israeli employment agencies provide virtually none of these services, and companies waste valuable time in search of the right workers. "Under the system that's materialized with us, a large portion of the workers who are sent to organizations via employment agencies are simply not suited for the job," she concludes.

Lowering the entry bar

Yaron Lubinsky, deputy director general of the Ortal employment agency, says an agency that wants to thrive must be involved in every process linked to recruitment, rather than limiting its function to sending out resumes. He claims that allegations about a lack of professionalism among agencies apply mainly to the smaller companies.

"It's true that the bar for entry standards to this branch is low, and anyone who knows how to chat can set up an agency and run it from his porch," Lubinsky says. "It's also true that 30% to 40% of workers sent by agencies to employers turn out, after a few weeks or months, ill-suited for their jobs. The larger agencies do better work."

Would raising the entry bar to the branch help? In all probability, yes. Katabi points out that officially a new agency must obtain a license from the Industry, Trade and Labor Ministry, and a new agency must comply with requirements such as deploying a trained staff, and not accepting payments from job seekers.

"Actually, these laws aren't enforced," Katabi says. "Anyone can establish an employment agency; the proof is the huge number of agencies that receive licenses. In a different situation, in which requirements were enforced, far fewer agencies would receive operating licenses, and that would turn this into a sector for professionals."

In response, Rivka Makover of the Industry, Trade and Labor Ministry, responsible for employment agency licenses, said: "In contrast to human resource companies, where license procedures are strict ... monitoring of employment agencies is soft. I agree that requirements for establishing an employment agency are not stringent. For instance, it is stipulated that the person who establishes such an agency must have expertise in branches of the economy, but no definitions for this have been set."

segal - Eyal Toueg - June 10 2011
Eyal Toueg