“We stay independent and able to disagree, regardless of the popularity of our views or their effect on our fees. We have the courage to invent and champion unconventional solutions to problems.” — McKinsey & Company, About Us | Our Values
“The Deloitte U.S. Firms are deeply committed to acting with integrity. One of the most visible demonstrations of our integrity is our ability to be independent and objective in providing services and advice to our clients. In order to render such unbiased (or independent) judgments, we must each be free of perceived or actual conflicts of interest with our clients.” — Deloitte LLP, Professionalism and You: A Commitment to Excellence
These are the values of two of the most recognized consulting firms in the world. I could easily repeat these types of quotes from nearly any consulting firm of any reputation – the commitment to independence, the removal of any conflict of interest from a relationship. Managed Service Providers are supposed to be workforce and contingent labor supply chain consultants. But why do we, the staffing industry, remain alone in allowing consultant MSPs to claim vendor neutrality when they have an easily identifiable conflict of interest?
Conflicts of interest, by definition, alter the decision-making priorities of the consultant away from client benefit toward their own financial gain (thus the conflict). When have you seen an organization hire SAP to provide neutral advice on their Oracle application? Is it common to hire UPS to optimize your FedEx relationship? If you did, what would you anticipate the result to be? Would you expect honest, agnostic advice? Probably not.
True strategic buyers understand that conflicts of interest stifle innovation. In our industry, these conflicts prevent the introduction of alternative sourcing channels (e.g., crowdsourcing), or lowest-cost channels (e.g., private talent pools). These innovative solutions tend to either introduce competition or cannibalize the MSPs staffing parent or sister company.
But what if the staffing division of the “independent” MSP isn’t allowed to fill positions? Doesn’t that eliminate the conflict? No. It turns out, the client (perhaps you) is but one of many staffing clients, and an innovation introduced at one client could potentially spread to others, reducing profits across the board and threatening their “core” business.
McKinsey, in its statement of independence, has it nailed. Follow the money, and you’ll find the conflict. Typically, for every $1 of spend acquired through an MSP model, the staffing-affiliated firm earns 83 percent less gross profit than on a dollar acquired through its core staffing. So a company that states: “Our MSP operates separately and independently from our staffing division” is saying, in essence “We place equal priority on a revenue stream that adds less than 20 percent of the value to our business.” I don’t believe the Boards of Directors (or shareholders) of these firms would agree.