2 December 2013 | Jamie Horton
In my last two posts (here and here), I explored practical tips on how to better manage the costs of supply and demand for temporary labour. The next step is to explore some practical ways to assess your managed service options.
What is clear is there is a growing demand for managed service providers (MSPs) to give business a better way to manage the need for a flexible workforce. If you’ve already outsourced to an MSP, you’re certainly not alone. According to Staffing Industry Analysts’ 2012 Contingent Buyer Survey, 73 per cent of buyers have deployed a vendor management approach to temporary labour and a further 22 per cent are considering doing so in the next two years. Plus, 52 per cent of businesses have implemented an MSP for temporary labour and a further 33 per cent are seriously considering it for 2014.
As managed services continue to grow, businesses are faced with a wider range of providers and options to choose from. If you’re about to embark on a review of your current MSP, considering the following questions will help you review your approach. If you don’t have an MSP, then answer the questions from the perspective of your current approach to managing temporary recruitment spend.
- Does your current MSP contract work?
Unless an MSP goes badly wrong, it’s unlikely to be replaced before the end of its contract length. But there are some fundamental areas to review when considering the effectiveness of your current arrangements.
Complete visibility: With any MSP, you should have complete visibility and control of what you are spending and with whom. This should include complete transparency on what part of the hourly charge rate is paid to the worker, what elements are statutory costs, what part is agency fee and how much is paid to the MSP.
Risk and reward: ‘Gain share’ or risk and reward mechanisms are very useful pricing tools through which to introduce an MSP, but often cost you more in relation to MSP transactional fees. If you have this visibility, review the current pricing model and benchmark against other providers. If you don’t have visibility, you may wish to consider why, and seek to address the situation.
Review fulfilment: The MSP’s supply chain should be shaped around demand and there should not be a problem with fulfilment. If there is, it must be addressed as a matter of priority.
Review process: It’s common for MSPs to be implemented to provide control of spend, use and hiring process. Yet from my experience, it is almost as common to find problems with the hiring manager population, who may feel the hiring process wasn’t built with them in mind. A telltale sign is off-contract spend, such as purchases made within a business that are not in line with the contract terms. You either need to reinforce the mandate to use the MSP, or revisit the hiring processes and make it easier for hiring managers to interact with recruitment agencies.
Review Quality: Your MSP should provide statistics outlining the quality performance of its supply chain. This applies to both master vendor and neutral vendor MSP models.
- What does your business need in the future?
If your MSP arrangement meets the operational needs of your business, there should be little need to fix something that isn’t broken. But it is important to revisit why an MSP was appointed in the first place. This is because a significant amount of change will have taken place since their appointment and you need to assess if your future needs will be met.
Key areas to consider relate to workforce planning and demand management. An expected output of hiring an MSP is to deliver visibility and control of temporary agency staff use. Once this has been achieved you should be working with your MSP to manage demand more effectively and plan your temporary workforce better.
- What’s happening in the market?
Benchmarking with peers in your industry and reviewing competitors of your MSP is an excellent way of understanding how effective your current MSP arrangement is. But before you begin this process, make sure you fully understand your current MSP provision. Ensure all parties, including procurement and the department assigned to contract manage the MSP understand how the current MSP service provision works. Otherwise you will not be able to benchmark effectively and will be more vulnerable to being sold a solution that does not meet your requirements. This is particularly important if you are working on a contract basis. If it sounds too good to be true, then it probably is. When reviewing the market, ask for references from clients - because your interpretation of a statement may be completely different to that of the MSP’s.
- What does your current supply chain of recruitment agencies think?
It’s sometimes forgotten that a key part of an MSP, especially those that cover a wide range of locations and job categories, is an extensive recruitment agency supply chain. Their thoughts and opinions are important, especially those of local SME or niche recruitment agencies that are hugely important in meeting your fulfilment needs. A review and potential change in MSP will have an impact on them so it is important to ascertain their thoughts. This needs to be done with sensitivity.
- What’s the right long-term decision?
You should consider what the needs of the business are now and what they may be, and assess your MSP’s ability to evolve its service. If your current arrangement delivers operationally but does not have the capacity, capability and most importantly the desire to meet your future strategic aims and objectives, then it may be time to change provider. Invariably there will be a cost of change associated with this so make sure that you carry out a full and thorough cost/benefit analysis.
In following these five steps you must also remember that:
- Managing people in any capacity is a tricky business, so make sure you fully and objectively understand your current MSP’s strengths and weaknesses, and you must carry out the same level of due diligence with any new providers that you are benchmarking
- Varying customer demands, intensifying global competition and an increasingly disperse and mobile workforce in continued economic uncertainties is driving buyers of temporary labour to increasingly adopt MSP solutions across their entire business
- The UK recruitment industry is also incredibly diverse. With almost 150 job categories and thousands of sub categories, supplied by over 10,000 agencies in the UK, it is inevitable that MSPs will vary in the way they operate.
Therefore, when considering using an MSP, every business should put sustainability, capability and cost at the top of their list of criteria, or risk your MSP not delivering against your future temporary workforce requirements.
☛ Jamie Horton is managing director at Comensura
☛ If you are about to embark on a review of your MSP, this ‘how to’ guide will give you more information