Need to know MSP/VMS?

Of late, I have interviewed many recruitment professionals across the hierarchy levels. During my conversation with them, I felt these applicants are earnest but callow professionals. I noticed, they do not present themselves as SMEs but act as a Telesales. As a part of recruitment sodality, I am overwhelmed with guilt that these applicants have no clue that there is a difference between an MSP and VMS systems, how does these model work, how mark-up is being calculated, what are the loaded cost when a staffing firm onboards  W2 contractor.  

Small help from my end to my fraternity

 US staffing world has changed drastically and there is a burgeoning demand of MSP and SOW model in this arena. Since, MSP model has pummelled the concept of walk the hall or direct communication with hiring manager therefore the recruitment strategies should also be changed accordingly especially in the companies those run the show with system integrators or on C2C Model.

VMS and MSP programs are now said to exist in 60-80% of Fortune 1000 companies. They have been shown to increase efficiency, reduce cost, and increase compliance and spend visibility and companies have adopted them rapidly. Staffing agency supporters of the new MSP/VMS programs argue that the playing field is level and that the most competitive vendors are winning. 

On the other hand, MSP/VMSs are despised by some staffing agencies who feel commoditized by the new system. Hiring managers are on a ‘do not contact’ list which means the recruiters can’t call the manager to seek feedback. This relegates staffing agencies to a commodity role of just collecting, screening and submitting resume

The Problem VMS and MSP were supposed to solve

The problem was that there was no consolidated requirements list from the client company and no way to predict who might have the next requirement. If the company was large, there might be hundreds of such requirements every day making this process inefficient.

So the staffing agency's sales executives would be roaming the halls of the company- hunting for prospects, dropping their cards, meeting potential client managers, taking them out to lunch or golf to generate business. There was also no way to objectively measure the quality of service that staffing agencies were providing or if the cost was justified as the buying was so distributed or required a lot of procurement overhead that slowed the hiring process.

The problems would manifest as

• Hiring managers working with their 'favorite' staffing suppliers
• Staffing agencies with aggressive sales people knocking doors annoying managers that had no need for staffing

The emergence of Managed Service Provider MSP program for Staffing

In the mid-90s, some of these largest companies decided to make this process more efficient by outsourcing the management of temp worker program to an outsourced agency in exchange for a little extra cost. Thus the Managed Services Providers (MSPs) were born.

A Managed Services Provider was the company (not a software) that specialised in managing these temp worker programs. They worked for the client and acted as an independent and unbiased program management interface between the client's hiring managers and the staffing agencies. MSPs also started leveraging software like the Vendor Management Systems (VMS) for automating transactions and to keep track of performance metrics.

MSPs managed the procurement process like umpires and coaches which typically included

• Obtaining the requirements from the client's hiring managers through the VMS
• Transmitting the requirements to the staffing agencies
• Ensuring the candidates are selected and onboarded
• Collecting timesheets, getting approvals, payments and paying the agencies
• Managing supplier performance with periodical scorecards

Oftentimes the MSP would conduct a joint clarification call with the manager with all the staffing agencies listening in to enable all the staffing agencies to get the same information from the client.

A number of the earlier MSPs were divisions of staffing companies as they were born out of staffing agencies that had the expertise to manage such programs. However most are vendor-neutral these days which means they are not allowed to favor their sister or mother companies in any way.

Some of the large MSP companies today are Agile-1, Allegis, Bartech, KellyOCG, Pontoon, Randstad SourceRight, ZeroChaos and Workforce Logic.

Vendor Management Systems for Staffing (VMS)

Vendor Management Systems (VMS) systems are software systems (mostly cloud based these days) that allow the MSP to run the client's temp worker program. It may or may not be owned by the MSP provider. The reason for this is that clients look at these two things differently. MSPs are selected for their Services and the VMS is selected for the software’s features. It is common to see a combination of a different MSP and VMS in companies.

 A VMS system typically performs these tasks

Interacts with the client’s HR system to pick new reqs

Blasts these reqs out the staffing agencies

Tracks metrics like- how many days staffing agencies take to submit candidates, what their rejection rate is, if selected- do the candidates back out, whether the agency's rates are in the ballpark of the agreed to rate card, etc.

These metrics are reviewed often by the MSP and the badly performing agencies are warned/booted out and new agencies are brought in to replace them

The most common VMS systems these days include Tapfin’s Econometrix, Agile- 1’s Acceleration VMS, Beeline, Pro Unlimited’s Wand and Fieldglass’s Insite