Noncompliance carries costs. Here’s how to avoid it.
By Matt Rivera
Today, many companies use a managed service program (MSP) to consolidate their contingent labor spend and achieve more visibility into it. As a human resources or procurement professional, you might have been responsible for implementing an MSP within your organization, only to see the promise of overall control and visibility hampered by an ongoing reluctance or outright refusal by hiring managers to use the MSP.
Why? Because no one likes change.
Many hiring managers might believe that they can find and assess talent better without a corporate initiative like an MSP program. Managers who have relied on tried-and-trusted vendors might not like the prospect of having to use new vendors or processes. You also might hear managers say that their department is “different,” and so an MSP program won’t meet their unique needs.
The result is that managers work around the MSP to use unapproved vendors, or worse, negotiate their own deals with vendors that might not be cost-competitive. This can result in increased cost and risks for the company.
The Effects of Noncompliance
One of the primary drivers for implementing an MSP is cost savings. While this should not be the only driver—or even the primary one—it certainly plays a part, especially for companies that use a large number of contingent workers. If your MSP has implemented a rate card or standard mark-ups, the noncompliant manager typically pays more than compliant managers within the program. In some cases, this can be as little as 10 percent—the average savings achieved through an MSP, according to Staffing Industry Analysts. In other cases, costs can extend as high as 25 percent to 50 percent above standard rates.
Less obvious is the risk associated with using vendors outside of a program. An MSP standardizes processes for screening candidates, submitting candidates, and placing them on assignment. In addition, your MSP partner serves as an additional set of eyes and ears, and is likely responsible for the compliance of all suppliers within the program.
By going outside the program, the rogue manager invites various risks: required screening that has not been performed; suppliers that do not have mandatory insurance; and suppliers who pay contractors well below competitive wages. All of which can contribute to turnover or poor performance.
Lastly, by not fully integrating the MSP, the organization loses visibility into the size and scope of the contingent labor spend. The irony is that one of the most common areas where rogue spend occurs is in the IT departments, which are typically the most costly in terms of wages and bill rates. While these are certainly compelling arguments to get buy-in from senior management, what will really help an MSP reach its full potential is getting hiring managers on board.
In reality, most contingent labor processes are similar to one another: There is a requirement, candidates are submitted and interviewed, and someone is hired. But like most things in life, the devil is in the details. To get managers to stop hating and start using the program takes attention to detail.
Here are some suggestions to help turn program haters into program lovers—or at least program users.
Executive Support From the Start
This should be a top priority. Programs fail when they don’t have executive buy-in and support from the start. This means that an executive sponsor with influence must sell the program internally throughout the organization and monitor compliance. No ones like to say (or hear) it, but this means that the executive must demand compliance with the program—no exceptions.
The essence of an MSP partnership is just that, a partnership. Managers should understand that as part of a strategic decision to engage an MSP, the company expects them to use and support the program.
In addition, make sure that the MSP is visible and seen as a valuable resource, not just another vendor or corporate initiative. Value is the operative word here. If the manager can see no value, he or she will not put any time or effort into the relationship.
This is often a cultural stumbling block. If your company does not view the MSP as a valuable partner and will not provide an executive sponsor who will demand compliance, you should seriously reconsider your decision to use an MSP.
Make It Easy
Tailor forms and procedures to match the type of skills being requested. For common or recurring positions, or those with few skill requirements, make the process short, sweet and repeatable. Also make the program accessible through a vendor management system (VMS) tool or an intranet site, and provide adequate support through the MSP partner or staff.
Some managers prefer automated or online interaction, while others would like to speak to someone directly. Know what type of managers you have, and make the process as easy as possible for them. Provide training to managers on the value of creating accurate and standardized job descriptions, as well as the value of the MSP to the entire organization.
Speak Their Language
One of the most common complaints from managers is that many don’t believe the HR department or an MSP will understand the complexities of their department or processes. First, as noted above, tailoring the process to help communicate requirements in a structured fashion is essential, not only for the success of the overall program, but to meet hiring managers’ specific needs.
In addition, provide templates that have predefined requirements that can be further customized to meet specific department or process needs. Lastly, allow the MSP on-sites or account managers to meet and discuss openings with managers directly.
Many MSPs also allow suppliers to have direct contact with hiring managers so that recruiters get first-hand knowledge of a manager’s requirements. Since recruiters often have technical backgrounds, managers might feel more comfortable talking to them directly. It’s true that managers know their department, equipment, and processes better than anyone. However, that does not excuse managers from following corporate standards and best practices during the hiring process.
Managers won’t have a reason to believe you when you say their preferred vendor charges too much or doesn’t perform unless you have the metrics to back it up. In addition, if their favorite vendor really is a top performer, shouldn’t they be leveraged throughout the organization? To compare statistics, create a vendor scorecard that you can share with executives.
During the transition to an MSP, it might be worthwhile to include some of the regular preferred vendors and benchmark them against other suppliers. In the end, some suppliers may lament their loss of freedom in dealing directly with managers. But top-performing vendors will benefit from greater exposure across the customer’s operations.
Don’t forget about niche vendors either. MSP programs can fail when the MSP starts hoarding jobs or uses only the largest, big-name suppliers on the approved list. Niche players can help place specialized or hard-to-find skill sets, which in turn can increase response time and manager satisfaction.
A major complaint from managers is that they don’t understand the process or their role in it. A VMS tool can help with this, but good communication from the MSP is essential in getting executive buy-in.
Giving visibility will help them show how long the process can really take, or when there is a bottleneck. Many times, the MSP takes the blame for long cycle-times, when in actuality, the cause might be an executive who travels or does not provide timely feedback.
Open communication should not be the responsibility of only the MSP, but also of key stakeholders within the company. A top performing MSP should provide business reviews, metrics on the program itself, and supplier metrics throughout the engagement. Then it’s the responsibility of the program owner within the customer, typically a procurement or HR professional, to work with the MSP to make changes and communicate the value of the program throughout the organization.
Most MSP programs report some level of noncompliance or rogue spend. By working with your MSP to address these areas, you should be able to limit this and decrease your overall risk.
In many cases, hiring managers have valid arguments against using an MSP. By helping to address their concerns and showing them the true value of an MSP, you can help ensure their compliance, and ultimately, the success of the program.