Low-margin VMS Work – Friend or Foe?

ThinkstockPhotos-503622145As staffing and recruiting companies continue to get squeezed on margins – particularly with their VMS work – many look to a cost-effective alternative. Why, for example, would a recruiting company have their senior recruiters work on low-margin job orders? Furthermore, why would the recruiters want to work on jobs that bring them less commissions?

Typically these jobs are left untouched, or these companies are ‘leaving money on the table.’ I spoke with a client of ours recently that piloted a partner program with our offshore staffing service for three months. It started with five of our recruiters, and he recently added five more PSG recruiters to his team, giving him 10 of our people.

This client couldn’t be more ecstatic. When I asked him why he doubled his PSG workforce, his answer was simple: our recruiters are low overhead (particularly when you consider that our clients don’t pay commission, payroll taxes, benefits, etc. for the recruiters we allocate for them), which allows this low gross margin work to be as profitable as the rest of their business at the net income level.

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This client, however, didn’t decide to utilize PSG purely because of the cost savings. There has to be a return on investment.

To ensure ROI, this client has steadfastly followed a few important guidelines:

Pay Close Attention to Cycle Time. When setting up the process with your vendor, pay close attention to the time that elapses from when you receive a new job order to the time a candidate is submitted. The key time buckets are:

  1. Your receipt of job order until it is sent to your vendor
  2. Vendor’s receipt of job order until you receive the candidate
  3. Your receipt of candidate until it is submitted into VMS

Don’t Start With a New Relationship. When starting with your vendor, use our recruiters to support a client you’ve successfully worked with before. This will ensure you have a clear sense as to expected productivity levels. Once your relationship with your vendor is established and our capabilities are well established, it will be more appropriate to use our services with greater flexibility.

Push for Feedback. While feedback is typically limited in a VMS environment, wherever appropriate / possible work to get input from the client and VMS provider on what is and is not working for the work PSG is supporting. This feedback should cover how much you are being helped or hurt by the bill rates, overall quality, and timing of the candidates you are sending over.

Low-margin VMS work doesn’t have to a necessary evil! If outsourced to the right partner, it can be profitable business.

MORE: Food for thought when considering a VMS

Brett Williams

Brett Williams
Brett Williams is vice president of business development for PSG Global Solutions.

Brett Williams

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