They say timing is everything. I had been thinking about following up on my earlier post about companies (especially those in Europe) experiencing funding issues, when we got word that a fairly prominent company was ceasing to provide managed staffing programs (MSPs) right here in the U.S.
"No big deal," you say? No big deal unless you are one of the customers who currently uses their MSP services and got the announcement saying you have 60 days to find another provider. Thanks for your business. Have a nice day.
Unfortunate, but timed perfectly to help illustrate my current and previous point: The game has changed and your staffing partner (MSP, VMS, IT supplier, or whatever) is not the same company it was two years ago.
One particular point I promised to make in my earlier post was about the challenges of vendor neutral programs, particularly in this economy. For the moment, let's set aside the discussion of what's good and bad about a vendor neutral model and focus on the business side.
When a company runs a vendor neutral program, they are typically getting a percentage of the contingent labor transactions they are managing. Sounds pretty good, huh? Kind of like an agent. In a supplier funded model, they typically take this percentage from the suppliers they manage, and as long as everyone makes money, it works.
Well, back in the late 90s and early 2000s, it would have been like being an agent for the Spice Girls: lots of money rolling through and plenty to go around. There were economies of scale, suppliers motivated by volume, and good margins. Quick: What's 5 percent of $50 million?
The past few years have been more like being an agent for Kevin Federline. Not so many offers (orders) coming through, and your back-up singers (suppliers) won't return your calls. Quick: What's 3 percent of $1 million (minus expenses)?
(I apologize if you were told there would be no math on this blog.)
But this is where we are today, and why many MSPs and staffing companies have had to scale back programs, reduce staff, and find alternate sources of funding. And as we've been saying, unfortunately, there's likely more to come in the form of consolidation, bankruptcies, and closures.
So whether or not you are considering vendor neutral or any flavor of MSP to manage your contingent labor spend, here are a few things to keep in mind when choosing or evaluating your workforce partner.
Financial stability. I think it's worth saying again, especially if you didn't get my K-Fed reference. Making sure an MSP or VMS is on good financial footing is critical. Think about the number of vendors, payment terms, and people on the payroll. How long do they have to pay contractors and vendors before you pay them?
Other lines of business. Being a specialist has its advantages, but right now, it's likely better to have a partner with diversified offerings or businesses. It's good for them and can be good for you if you can leverage additional spend or bundle services.
Domain knowledge. This includes more than experience, but actual working knowledge of the staffing industry, the dynamics of workforce management, and associated lines of business. A good partner should already be talking to you about how workforce management is changing.
Ability to fill jobs. Even a vendor neutral model shouldn't preclude a good supplier from participating, even if that supplier is associated with the MSP. But on a more realistic level, it provides motivation, additional margin, and more of a cooperative feel, especially in lean times.
The bottom line is the bottom line here. The past few years have changed the ability of many companies to run and support MSP programs efficiently, effectively, and profitably, and many were set up a few years back (before the recession).
If you're thinking about it (which you should) or already have a managed program, it may benefit your organization to take a close look at your MSP model, your provider, and your current and future needs.
"Show me the money," is a good start, but don't stop there. What makes a good partner is the complete package. So, does your workforce partner complete you? More on this in part two ...