What is a Managed Service Provider (MSP) and Vendor Management System (VMS) in temp staffing? If you work as a recruiter, contractor or hiring manager in staffing, you are bound to come across these terms. This article is meant to be a primer.
If you are looking for the list of Top MSPs in staffing
A Managed Service Provider (MSP) is an outsourced agency that manages the contingent worker program (temporary staffing) of a client company (typically a Fortune 1000 company like Coca Cola or Citibank) by managing its preferred staffing agencies. It consists of a team of program managers and coordinators that help the client company source and manage temporary workers from their preferred staffing agencies.
PS: The term MSP is also used in other fields which leads to confusion. For example- Some companies that outsource a significant portion of their IT and support operations to an outsourced provider also call those agencies an MSP.
A Vendor Management System (VMS) is merely the software/website that the client company purchases or licenses to enable the MSP to run the contingent worker program by allowing all transactions to happen online. This involves distribution of temp requirements (reqs) to staffing agencies, collection of candidate submissions, interview scheduling and coordination, job offers, billing and timecards, etc.
Large Fortune 1000 companies have always hired part of their workforce as contractors or temps. The process of bringing these temporary workers onboard was very cumbersome and inefficient. The process would typically work something like this
· A hiring manager (Sue) would get approval from her boss to hire a temp
· Sue would search for a staffing agency by calling different agencies her friends or colleagues recommended or she found in the Yellow Pages
· Sometimes, the company may have approved suppliers
· The staffing companies would then source candidates and start sending Sue resumes
· Sue would pick a candidate from those submitted
· If the staffing agency was new, she would sign a Master Services Agreement (MSA) with them, and cut a Purchase Order (PO) to the new staffing vendor and contractor could start work
On the Sales side, staffing agency sales reps would be roaming the halls of her company dropping of their cards, meeting potential client managers, taking them out to lunch/golf. There was no consolidated requirement list at the company and no way to predict who might have the next requirement- so the best way was to ‘spray and pray’.
If the company was large, there might be hundreds of such requirements every day making this process inefficient for the buyers and the sales people. There was also no good way to measure the quality of service that staffing agencies were providing. It also took a lot of effort from the client-side to manage the hundreds of staffing vendors the big company was using.
Some of the common problems arising out of this were
- Hiring managers being influenced and sending requirements to their favorite staffing suppliers
- Staffing agencies that had more aggressive sales people would be knocking doors annoying managers that have no need for staffing.
- Some staffing agencies would never hear back about candidates they proposed or
- Managers would be barraged by calls from staffing agency’s recruiters requesting meetings to discuss their requirements.
- Managers complaining that the staffing agencies did not provide candidates on time, charging very high rates or submitting poor quality candidates- none of them backed by any facts
In the mid-90s, some of these largest companies decided to make this process more efficient and reduce costs by outsourcing the management of this onboarding and management of temp workers to an outsourced agency in exchange for a few percentage points in cost. Thus the Managed Services Providers (MSPs) were born. A Managed Services Provider is a company (not a software) that is a specialist in managing such temp worker programs. They work for the client and act as an independent and unbiased management interface between the client's hiring managers and the staffing vendors. Leveraging the VMS for automated transactions, they manage the procurement process like umpires and coaches which typically means overseeing the following activities
· obtaining the requirements from the client managers
· transmitting the requirements to the staffing agencies
· ensuring the candidates are selected and onboarded
· collecting timesheets, getting approvals, payment and paying the agencies
· managing supplier performance with periodical scorecards
Oftentimes the MSP may 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 lot 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, Bartech, KellyOCG, Randstad SourceRight and Workforce Logic.
Figure: Client's managers input their reqs into the VMS system- which are passed on to the staffing agencies. Clients and Staffing agencies talk with the MSP (program team) only if they have any issues.
VMS systems are software systems (websites) that allow the MSP to run the client's temp worker program. This may or may not belong to 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.
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- if the candidates back out, whether the agencies 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, Workforce Logic, Agile- 1’s Acceleration VMS, Beeline, PrO Unlimited’s Wand and Fieldglass’s Insite
VMS and MSP programs are now said to exist in 50-60% of Fortune 500 companies. While they have been shown to increase efficiency, reduce cost and increase competition, they are often despised by some staffing agencies who feel commoditized by the new system. Critics say hiring managers are often on a ‘do not contact’ list for recruiters (meaning the recruiters can’t call them to clarify or seek feedback) which reduces the ability of a good staffing agency to find the best candidate by focusing only on speed and cost. Supporters say everyone has the same information so the playing field is level and the most competitive vendors are winning.