The Pros and Cons of Implementing Vendor Management Systems

128013403Recently there has been a significant increase in larger companies turning to vendor management systems and managed service providers in order to manage their contingent labor force. According to research from Staffing Industry Analysts, VMS and MSP spend under management was $100 billion in 2012, up from $84 billion in 2010. This makes sense given that a VMS can streamline the recruitment process, track candidates and set strict limits on billing rates for staffing companies. Utilizing a VMS can increase accountability by enabling the client company to track all of staffing company’s progress. Through these tracking measures, a company can better compare firms. One might think that this necessarily increases competitiveness and drives up productivity, but this largely depends on what type of staffing company that they work with.

It is not a secret that the VMS is notoriously unpopular from a staffing company’s perspective. One of the intended goals of a VMS is to separate staffing company account managers from building strong relationships with the client hiring managers in order to avoid favoritism. I remember being on the conference call when a client of ours had just brought on a VMS and the administrator told us we could still reach out to the client managers, but we had to let the VMS know ahead of time.

PREMIUM CONTENT: VMS/MSP Customer Experience Report

This level of interference has unintended side-effects:

1. Reducing the level of relationship between account managers and hiring managers undermines the account manager’s ability to understand more of the intangible qualifications that the company is looking for.

2. It decreases the confidence that recruiters have in their account manager’s ability to pre-market candidates and get them interviews. Depending on the nature of the staffing company, this can result in lower a quality submittal or even a reduction in submittals altogether as recruiters will allocate their time to higher quality requirements.

There are problems other than decreased incentives and lower bill rates. VMSs treat all staffing companies the same and this one-size-fits-all approach can be counterproductive. The problem is that not all staffing companies are the same; they have differing strengths, weaknesses and service offerings that are better or worse depending on the client. Some firms are inclusion-based, they are more numbers-driven, submitting all candidates that look good on paper, but don’t necessarily take into account the cultural fit. Eexclusion-based firms are far more relationship-driven, ruling more candidates out and looking for the ideal fit. Both approaches are legitimate, but they are meant for different types of customers.

The inclusion-based approach works better for customers that are more transactional, where the labor force doesn’t necessarily need to be highly specialized, whereas the exclusion-based approach works better for customers that have a focus on cultural fit. In this latter case the account managers really ought to have close relationships with hiring managers so that they can better understand the culture. These types of companies are not just looking for X number of years programming in VB.NET; they are looking for a specific sort of person across many dimensions, such as personality, communication, attitude, philosophy and methodology.

In companies where the intangibles and soft skills matter more, it may be better to pass up on using a VMS and partner with staffing firms that have a relationship-driven, exclusion-based recruiting approach. On the other hand, a company that is just looking for someone who can do the job, should take advantage of a VMS and utilize staffing companies that take a numbers driven, inclusion-based recruiting approach.

MORE: You’re only as good as your data


Matt Jeffers
Matt Jeffers is an IT staffing consultant at Beacon Hill Staffing Group. He can be reached at Jeffers.matt7 (at) gmail (dot) com.

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