MSP/VMS Is GOOD for Your (Boutique) Staffing Firm

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The world of contingent staffing is black and white. There is no gray. There are staffing firms that embrace managed service provider (MSP) programs (such as those managed by companies like IQNavigator, Pontoon or Randstad Sourceright, for example) and there are those that loathe the thought of ever working within an MSP program.

I understand how the loathing side feels. I felt that way for the first half of owning my staffing business (1999-2003). The thought of giving up my precious client control and gross profit margin for the promise of larger billing volume ran against everything I knew as a recruiter and staffing business owner. I was convinced that the “evil” MSPs would one day ultimately fail, and when they did the end-clients – those large corporate gems – would finally see the light and come running back to me for the great value-added service I offered. There was no way that I was going to take lower margins, give a percentage of my billings to the MSP and agree to NOT talk to the hiring managers. The fact of the matter was that I was delusional, close-minded, stubborn and WAY behind the times.

I ultimately came to the other side – not the dark side, but rather the side that gets it and embraces the MSP program. How did I change? Perhaps a more important question is WHY did I change? I changed because I finally realized that the better our company became at developing a business model to service MSP programs, the better we became as an organization overall. I’ll detail more below, but let me share one more point.

The MSPs flourished rather than failed. Over time I saw our large accounts – those prized Fortune 500 companies like Yahoo!, Clorox, VISA, Pacific Gas & Electric – sign on with Managed Service Programs utilizing proprietary software known as Vendor Management Systems (VMS). Yes, the MSP/VMS model of contingent staffing was here to stay and I had to get with it or get left out in the cold. Below I offer you 7 reasons why EVERY staffing firm – from large to boutique – should look to jump in and embrace this model.

1. Follow the money. More than $100 billion of revenue is managed through MSP programs. That’s a billion with a B folks. If you just were able to slice off one tenth of ONE HALF of a percent of that market (that’s 0.005 percent), then you’d instantly become a $50 million company. Hello? McFly? This fact alone should make you stand up and take notice. Especially since most single-office independently owned staffing firms struggle to go much beyond that elusive $10 or 20 million sales mark. The money is going to the MSP programs. Always follow the money. ALWAYS!

2. You will become extremely proficient at managing by the numbers. How many calls does it take to connect with a candidate? How many connects to get a qualified candidate? How many candidate submittals do you need to make to the client until you get an interview request? How many interviews to get an offer? What percentage of offers get declined? What percentage of placements never start? How many don’t pass a Background or a Drug Test? Don’t know your numbers? How are you going to manage your team, your business and add value to your bottom-line? The MSP programs taught us that we had to manage our business by the numbers – and that was a blessing. Because when you manage by the numbers it’s no longer personal – its just business. Staffing is a PEOPLE business – but its MANAGED by the numbers. Formulas, ratios and accurate numbers make you money. Know your numbers and manage to them.

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3. You see the value in specialization and segmentation. You may be an “Old School Recruiter”; that is, a recruiter that works “both sides of the desk.” You manage the client and recruit the candidate… you bring home the bacon and fry it up in a pan… source your own candidates, screen them, prep them for interviews, and manage the client’s expectations through the entire process. Newsflash: Having one person doing all the work functions that are required to make a placement in the MSP space is a sure fire way to fail. It’s too slow, too expensive and you cannot scale it. Working with the MSP programs teaches us to BREAK DOWN every recruiting function into its smallest activity. It’s the same model that allowed Henry Ford to deliver automobiles to the masses. It’s called the value-chain. It’s why baseball teams bring in the middle-reliever and closer to pitch the later innings of a baseball game. By breaking down each function into it’s simplest activity we could assign lower skilled work to lower wage workers. The staff with the highest level of skill – the interview coach and the offer negotiator/candidate closer – only worked at his/her highest level of skill. You don’t need Michelangelo to paint your fence – you just need a guy with a paintbrush.

4. You learn to quickly adopt and leverage technology. Since the time to submit a candidate – and get coverage on all jobs – is of paramount importance on the MSP scorecards, we must find a way to adopt and leverage technology to beat our competitors in two ways: 1) Reach the candidate before our competitors, and 2) Submit the resume before the order closed. One of the best ways to do this is to adopt and leverage mobile technology – specifically texting (which by the way is the preferred communication method of the Millennial Generation). By utilizing mass e-mail-to-text technology you can communicate with your candidates while they ignore your competitors’ voicemails. It’s not what you say – but how you say it – and saying it through the appropriate communication channels is what has your message heard.

5. You start thinking globally and leverage economies of scale. When you work out of one office, in one town, and your non-MSP clients are all within an hour’s drive you stay small. The only possibility that comes to mind for you to grow is to open other branches – perhaps within a 2 to 3 hour drive from your “home” office. The MSP programs force you to grow and grow quickly. They allow you to become national and global companies overnight. They shrink the world for you. In 3 years we took our $2 million direct staffing and search firm to a $20 million firm servicing solely MSP programs with employees in 38 states.

6. You are better able to weather recessionary storms. Job orders are the lifeblood of any staffing firm and we always had job openings during the recession. Fortune 1000 companies will always hire and those managed by the MSP’s will have the jobs. Plus, once your company is on a services contract with the MSP there’s a very good chance you’ll stay on it for a long, long time unless you are negligent in performing your basic duties on the contract, which is mostly COVERAGE. Staying on a contract doesn’t necessarily mean placements – but you must cover the openings with quality candidate traffic. And when the economy recovers and you still have that large F1000 account you can start filling and billing again.

7. You become a better manager and build something of real value. Imagine for a moment that you decide to embrace the MSP model of contingent staffing. And you take your $10 million dollar staffing firm to $50 million in three to five years by getting on multiple programs, leveraging technology, managing by the numbers, specializing and segmenting workflows. Imagine too for a moment, that you took those best practices into your RETAIL non-MSP business. How much more valuable would your company be? With multi-year service agreements and stable recurring revenue. With reduced outside sales and entertainment costs because now you have a channel partner (The MSP companies) selling to the F1000 for you? This is how you add value to your business and quality of life. You do it by becoming a better manager and a superior business professional in the $100+ billion MSP staffing market.

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Jeannine Parise

Jeannine Parise
Jeannine Parise is a principal at VMS Accelerators. She can be reached at jeannine (at) vmsaccel (dot) com.

Jeannine Parise

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