Labor Market Intermediaries and the New Paradigm for Human Resources

Abstract

Labor market intermediaries (LMIs) are entities that stand between the individual worker and the organization that needs work done. They include well-known operations such as executive search firms that act as brokers to fill jobs and temp agencies that lease labor to clients but also less familiar entities such as professional employer organizations (PEOs) that take on the legal obligations of employment for clients. LMI's mediate between individual workers and the organizations that need work done, shaping how workers are matched to organizations, how tasks are performed, and how conflicts are resolved [Autor, D.H. (2009). Studies of labor market intermediation: Introduction. In D. Autor (Ed.), Studies of labor market intermediation (pp. 1–26). Chicago, IL: University of Chicago Press]. They essentially disintermediate aspects of management that had been performed by employers. The growth and increasing prominence of LMI's is important for all research associated with the workplace because we can no longer do a study of “workers” in an organization and assume that they are all employees: Some may be temps under contract to an agency, some may be “employed” by a PEO, some may work for vendors. The reason that matters is because LMI's appear to alter attitudes and behaviors on all sides. For example, they change the bilateral, employee–employer relationship into a three-way “triangular” relationship. They may well create “dual allegiance” issues, where individuals feel ties to the search firm that placed them in their current job and their employer or the agency that employs them and the client on whose behalf they are currently working. Most fundamentally, they challenge the existing paradigms we have used to understand the workplace: Does “attraction–selection–attrition” have any relevance, for example, when employers hire temps placed by agencies into permanent jobs? What does career development mean when the person with the most influence over your next job is a search consultant? There is already an extensive literature on LMIs, but it is spread across disciplines and fields and mainly examines the labor market outcomes associated with the use of LMIs. The literature lacks a management voice. We know relatively little about the effects of LMIs on workplace attitudes and behaviors, the central focus of organizational behavior; about how LMIs and the associated rise of outside hiring change how we should think about topics such as recruiting and selection, a central concern of personnel psychology; we know even less about how LMIs change the way firms think about competencies and boundaries of the firm, central topics in strategy, when the firm's workforce is actually employed by another organization or when it can be reshuffled very quickly. We develop a taxonomy of LMIs and use it to classify the burgeoning but disjointed literature on LMIs across the social sciences. We classify LMIs in terms of three main attributes of human resource (HR) practices that they perform: Information Providers, Matchmakers, and Administrators. We describe first how LMI activities differ from HR management practices performed by employers in the traditional relationship. Second, we outline the existing research about how LMIs affect employment outcomes, such as access to employment, wages, work-related attitudes and behaviors, working conditions, and skill development. Finally, we highlight the implications of LMIs for management research, especially new, understudied research questions that need to be addressed.

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