Pairing a VMS with a traditional MSPâand its many benefitsâis nowÂ possible for organizations with lower spend.
By Brandon Vogel
Consider this scenario: An organization and a handfulÂ of other vendors are sharing a client with an establishedÂ budget. Each vendor gets a small piece of the pieâenough for them to stay interested, but not enough to beÂ truly invested.
This type of scenario is happening in the world ofÂ contingent workforce management when companiesÂ with less than $30 million in annual spend engage in mid-market,Â vendor-neutral managed service programs (MSPs).Â Financial modeling indicates that this type of approach isÂ not sustainable.
Low-volume, vendor-neutral MSP budget = $20 million
Average MSP fee = 3 percent
Typical MSP provider earnings (after costs) = 1 percent
The very nature of the program prevents MSP providersÂ from helping organizations make the most of theirÂ resources from an overarching strategic perspective.
Instead, what results is a barely profitable program,Â yielding under $200,000 annually. These kinds of programsÂ are transactional in nature and offer the most basic levelsÂ of support and engagement, providing little value to theÂ talent function and overall organization.
The unfortunate impact of this on an organization is a lackÂ of MSP provider service, investment, dedicated resources,Â and innovation. In this situation, the organization andÂ talent experience are compromised and the overallÂ adoption and success of the program are in jeopardy.
An Alternative Approach
In recent years, companies with smaller contingent laborÂ spend have begun to see the value of capturing andÂ managing this spend using a vendor management systemÂ (VMS) combined with an MSP. There are many benefits toÂ be realized from this trend, including:
- process control through defined workflows
- efficiency supported by automation technology;
- access to talent through an established supplier network;
- transparency and visibility via talent analytics; and
- value creation, including cost savings and cost avoidance.
For these benefits to be maximized, however, theÂ program must be intentionally designed with technologyÂ in mind. The accessibility of and advancements in VMSÂ technology have opened the door for many organizationsÂ with non-employee labor spend under $30 million. VMSÂ technology allows talent leaders to examine the way theyÂ procure these resources. By providing data on virtually allÂ phases of activity throughout the contingent workforceÂ lifecycle, the VMS delivers the insights needed to makeÂ data-driven decisions about the way talent is deployed toÂ realize business goals. Many seek a managed solution thatÂ leverages the benefits of both a VMS and MSP to achieveÂ process control and vendor/rate rationalization goals.
Moving away from a vendor-neutral approach to MSPÂ solves the math problem above. Using an integrated MSPÂ model, in which there is direct delivery of contingentÂ talent, allows organizations to benefit through moreÂ strategic allocation of program resources and deeperÂ value-driven relationships. With stronger relationships andÂ greater efficiencies in an integrated MSP model, the MSPÂ partner has the bandwidth to be a true contingent talentÂ advisor to the organization, finding ways to improve talentÂ quality and program results, and enhance talent andÂ hiring manager satisfaction.
This translates into a more strategic partnership thatÂ enables the organization to receive additional investmentÂ in the form of resources and value-added services.Â Organizations that take this approach can benefit fromÂ talent retention and engagement programs, specializedÂ hiring initiatives, and best-in-class internship managementÂ programs.
For example, a Fortune 500 energy company has seenÂ greater value from this approach. As an organizationÂ that relies heavily on its contingent workforce of IT,Â administrative, and professional talent, the companyâsÂ talent leaders hoped to transform its existing vendor-neutralÂ MSP program to a more holistic and integratedÂ model.
With a high-touch, direct-fulfillment model, the MSPÂ partner is able to add greater value to the program.Â The program provides extensive and ongoing support,Â including workflow design, change managementÂ processes, staff training, talent analytics, and more.
Under the new model, the energy company has gainedÂ access to high-quality talent, has better visibility into andÂ control over spend, and is able to deliver a consistentlyÂ positive experience for its talent and hiring managers. InÂ the 2018 fiscal year, the company saved $4 million whileÂ achieving exceptional satisfaction all around.
Managers consistently (99 percent) rate the MSP programÂ an eight out of 10 on average, and 70 percent ofÂ contractors who are submitted for consideration receiveÂ an offer. Time to fill averages 12 days, with a 97 percentÂ average retention rate over the course of 2018.
Additionally, the staffing performance of an integratedÂ MSP typically exceeds the rest of the supply chain,Â with a faster cycle time. This is particularly true inÂ specialized disciplines, such as IT, engineering, and lifeÂ sciences. Companies can also look forward to increasedÂ talent satisfaction scores and a reduction in contingentÂ workforce turnover.
Now itâs time to do the math. HR and procurement needÂ to challenge their talent function and MSP partner toÂ collaborate on ways that allow them to be more strategic.Â How can they gain greater value in the contingentÂ workforce management program? Where are efficienciesÂ that donât compromise talent quality? What businessÂ challenges could be better addressed through contingentÂ workforce strategy? If a vendor-neutral approach is justÂ filling talent gaps, then thereâs an opportunity to do soÂ much more.
Brandon Vogel is director of solutions design of contingent laborÂ programs for Randstad Sourceright.