Temporary and contract workers have been used by governments, private companies, and other organizations for thousands of years, but the origins of the modern staffing industry can be traced to the mid-1800s when the Industrial Revolution created demand for a large number of skilled and unskilled workers to process raw materials and assemble finished products in factories. During this time, the economies of England, United States, and other countries shifted from agriculture toward mechanized processing of raw materials, such as iron and steel, and mass production of finished goods. Many people were needed to produce these materials and work on major construction projects (such as the expansion of cities, railroads, etc.), and individuals and firms emerged to identify and organize skilled and unskilled laborers to work in factories, on building projects, and in other workplace settings.
The first private, for-profit staffing agencies were founded in the 1890s. The Engineer Agency, founded in 1893 by the mechanical engineer Fredrick Winslow Taylor, is one of the first staffing companies on record. Several staffing agencies also were created specifically to provide workers to the construction industry after the devastating San Francisco earthquake of 1906.
The staffing industry grew quickly during World War II. Many men were serving in the military and stationed overseas, which created a shortage of skilled workers on the home front. Staffing companies were founded to help companies locate workers. Russell Kelly Office Service, one of the first modern staffing firms, was founded by William Russell Kelly in Detroit in 1946. The company was renamed Kelly Girl Service in 1957, and it became Kelly Services in 1966 to reflect the expansion of its services. In 1948, attorneys Elmer Winter and Aaron Scheinfeld founded the staffing firm Manpower in Milwaukee, Wisconsin. During the early 1950s, Manpower began opening offices across the United States, and in 1954 it began offering franchise business opportunities in addition to operating company-owned branch offices. In 2011, Manpower Inc. became ManpowerGroup. Today, both Kelly Services and ManpowerGroup are among the top largest staffing agencies in terms of revenue and market share.
The executive recruiting industry developed as an outgrowth of the field of management consulting. Firms such as Booz, Allen & Hamilton (which was founded in 1914) and McKinsey & Company (1926) were hired by companies to solve management problems, which sometimes involved hiring new executives. Management consultants at these and other firms can be considered the first executive recruiters. In 1926, Thorndike Deland founded the first retained executive recruiting firm. According to the Association of Executive Search Consultants (AESC), the firm “focused on retail executives and charged clients a retainer plus a commission of 5 percent of the hire’s first-year compensation.” Many early retained executive search firms were founded by alumni of Booz, Allen & Hamilton and McKinsey & Company, and these firms also operated their own executive recruiting departments.
The largest executive recruiting firms today were founded in the 1950s and 1960s—decades during which the number of U.S. multinational corporations grew and the concept of executive recruiting spread overseas as U.S. companies sought qualified executives to help run their foreign-based offices. These companies include Heidrick & Struggles (1953), Spencer Stuart (1956), Egon Zehnder (1964), Korn Ferry (1969), and Russell Reynolds Associates (1969).
The executive search industry grew quickly in the 1960s and 1970s as international trade increased, competition between companies intensified, and changing business strategies reduced company and worker loyalties, creating a large group of business executives who needed placement assistance after being fired or leaving their employers voluntarily. In the 1970s and 1980s, demand for executive recruiting services continued to grow in the United States, and the industry expanded even further in Europe, Latin America, and Asia. The AESC reports that the industry has “flourished in spite of setbacks during recession, and by the late 1980s, even nonprofit organizations, higher education institutions, and government agencies had started commissioning searches to fill positions.”
Today, an increasing number of Fortune 500 companies and other employers have in-house recruiting departments, which has led to reduced growth in the industry. Retained executive search firms are still in demand—especially to identify candidates for top positions such as CEOs and board members.
Companies have provided advice on staffing, human resources management, and other employment-related issues ever since the first business or government department was founded. In the early 20th century, management consulting firms began providing guidance to large businesses regarding staffing, wages, management, workplace efficiency, and other issues. More recently, professional employer organizations have emerged to help small businesses manage their human-resources departments and provide business-related advice.
Technology is changing the face of the staffing and personnel management industry. Most staffing and recruiting firms have Web sites, which makes it easier for firms to interact with clients and job candidates. There’s also a negative aspect of technology for the staffing/recruiting industry. Online-only employment agencies have become popular, and these firms usually employ fewer job counselors and administrative staff than traditional staffing firms do. Additionally, many people are using job-search sites independently to look for more information on employers and apply for jobs. These developments will limit growth to some extent in the industry.