SI Review: November 2012

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Profits for You

How to make money from (low-quality) VMS/MSP accounts

By Allen Cash

Anyone familiar with vendor management systems (VMS) overseen by managed service providers (MSP) can tell you that not all VMS/MSP accounts are created equal. There are some that utilize a limited number of staffing vendors whose recruiters are allowed access to hiring managers. These high-quality accounts are an excellent way for companies to better manage and track their staffing vendors at reasonable costs.

But then there are “low-quality” accounts — those that have numerous approved staffing vendors you must compete with, low margins from predefined markups or from extreme price competition among the many vendors, communication that is limited to the MSP administrator (who often does not even have access to hiring managers and knows little about the job), job orders that require very fast submittals (sometimes in less than a day), and little or often no feedback on submitted candidates.

It is very difficult for staffing firms to make much money on such accounts. So what can be done with them? There is little point in using experienced recruiters, whose advanced skills will be largely wasted. Further, forcing experienced recruiters to work on low-quality VMS/MSP accounts may lead to high turnover, and because the margins on such accounts are so thin, staffing firms cannot pay the compensation expected by experienced recruiters and still make a profit.

All Is Not Lost

There are two ways staffing firms can still make money on low-quality VMS accounts: By using junior in-house recruiters (often hired fresh out of college) or by outsourcing the VMS account to an offshore recruiting firm.

Each has its benefits and drawbacks. In favor of offshoring: the time and expense to hire and train recruiters is lower than the in-house model, and it is easier to ramp up or down the number of recruiters than the in-house recruiter model.

Further, offshore recruiters are typically 50 percent to 75 percent less costly than in-house recruiters, and it is easier to terminate poor performers in the offshoring model. However, you’d need to consider that you might encounter cultural and accent issues with offshore recruiters. In-house recruiters have the potential to grow and move up to your high-quality accounts, while offshore recruiting relationships can be expanded. As you can see, there is much to consider when deciding between the models.

Staffing firms that outsource their low-quality VMS accounts should look for a firm with a proven track record of success in VMS recruiting. The goal should be to have the offshore firm handle the VMS account end-to-end with minimal involvement from the staffing firm. If the staffing firm has to provide much oversight the cost advantage of using an offshore firm will be significantly reduced. Therefore, success requires an offshore firm with professional management and highly trained recruiters.

Prescribed Process

In either case, recruiters should follow a recruiting process specific to low-quality accounts. The steps are:

  • Set decision rules so that recruiters spend most of their time on the most desirable job orders. Factors to consider include bill rates, contract durations and practice areas for which the most consultants have been hired in the past.
  • Use tools that enable many candidates to be contacted quickly, such as web crawlers and mass mailings.
  • Conduct a qualification interview that is focused on matching the candidate’s skills with the required skills in the job order.
  • Conduct a very aggressive rate negotiation. Submitting candidates at low rates is critical to success.
  • Have candidate approve a right-to-represent form and confirm the agreed-to rate.
  • Submit large numbers of candidates quickly and cover as many positions as possible. Speed and quantity often trump quality.

VMS/MSP relationships are not going away, but even the lower-quality accounts can be profitable for staffing firms, if approached appropriately.

Allen Cash is a marketing lead at iPlace USA. He can be reached at allen@iplaceusa.com.

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Project One

Gary Zander 06/11/2012 11:48 am

Allen's article offers great advice for suppliers who want to "make money from low-quality accounts."
Low-quality accounts = lots of vendors, low margins, pre-defined markups, extreme price competition, limited communications, and little or no feedback.
How do suppliers make money...? Lower recruiting costs, aggressively lower consultant pay costs, submit large numbers of candidates, and make sure speed & quantity trumps quality.

BUT... BUYERS/CLIENTS - be careful what you wish for, it may come true!

There are 2 types of buyers - those who buy on price, and those who buy on value (ROI)

To check if you're buying on price or value, read the article I wrote a few months back - "Be the A client To Get Your Supplier's Full Attention"
http://www.staffingindustry.com/Research-Publications/Publications/CWS-3.0/May-9-2012/Be-an-A-list-Client


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