SI Review: June 2013

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Get on the Radar

How to sell to an MSP successfully

By Sona Sharma

It’s a brave new world dominated by the VMS and MSP. Buyers are increasingly turning to both vendor management systems (VMS) and managed service providers (MSP) to help them run their contingent workforce programs. Results of Staffing Industry Analysts’ annual Buyer Survey bear this out. Buyers’ top two staffing supplier management strategies are the use of a VMS and an MSP, according to the survey. In fact, 73 percent of the respondents said they have a VMS in place and 69 percent have an MSP to manage their contingent workforce programs. It’s pretty clear by now that these workforce solutions have gained a strong foothold in the buyer community. While these programs are continuously evolving to be more cost- and quality-efficient, it is obvious that in some form or another, these programs are here to stay.

Staffing firms, too, have seen the writing on the wall and many are trying to strategize how best they can work with MSPs, either a customer’s internal MSP or an external one that is managing the VMS. The critical questions to answer for staffing firms servicing these accounts are:

  • How to get on the MSPs’ supplier lists?
  • Once on a list, how to retain their position?
  • Once established, how to climb to the top of the list?
  • And finally, how to build a delivery model that supports this end goal?

In the 2012 Staffing Company Survey, we asked staffing firms how much of their revenue flows through a VMS. The median portion of revenue flowing through VMS for all respondents was 5 percent. Sixty percent of respondents had 10 percent or less of their revenue flowing through VMS. Not surprisingly, IT staffing firms were most likely to have a higher portion of their revenue flowing through a VMS with a median 30 of revenue flowing through a VMS.

Additionally, our survey found larger staffing firms are more likely to have a larger portion of their revenue flowing through VMS. Staffing firms with less than $10 million in revenue had a median of 5 percent, while firms with $250 million in revenue had a median of 25 percent of revenue flowing through VMS. Considering the high usage of VMSs and MSPs among buyers, how do the small-to-midsize staffing firms go about capturing a part of the VMS/MSP business pie? Changing your mindset to seeing the MSP as your customer would be a step in the right direction.

“You’ve got to change who you are selling to,” says Kip Wright, senior vice president, ManpowerGroup Solutions. “You’ve got to change your mindset and recognize that in these clients, your relationship focus needs to be with the MSP and their supplier resources, the procurement teams that are engaging them, the relationship managers that are part of that, the program management leadership that are overseeing it.”

It’s Still All About Relationships

Considering that an MSP has a roster of numerous suppliers, what is its incentive to add another to that list? And even if you do manage to get on the list, how do you ensure that you stay on it? The answer to these questions is not much different from what it would be if you were selling directly to a customer: build relationships. Just as salespeople would walk the halls on client sites, talking to the hiring managers and selling them your technical expertise, in selling to MSPs, you have to do all that and go a step further. You have to convince the MSP that your delivery model is scalable and capable of providing a volume of quality candidates.

So how do you do that? Just as every customer’s needs are different, every MSP, too, has different rules of engagement. It is critical to have a strategic approach for each MSP account. This means understanding what’s most important to the MSP and on what key performance indicators, or KPIs, the supplier is evaluated.

Those staffing firms that have cut their teeth in the MSP business will vouch for the fact that it takes about a year or more to penetrate a brand new MSP account. It takes time to do your homework on each MSP and then present it with your track record on those KPIs in other accounts. If this is an existing account, then use the quarterly business review meetings to demonstrate how you have been performing so far. The idea is not only to point out where you are excelling, but also to recognize areas of improvement and to be proactive in letting them know what you are doing to make things better. This indicates to the MSP that you understand the process and are willing to work with it.

Measure, Measure, Measure

Typically, VMS tools and MSPs track metrics that fall under the following categories: quality, efficiency, costs and risks. Our research shows that quality and cost receive the most weight in terms of importance to the workforce management program.

Candidate performance, bill rates and order fill rates are some of the most common metrics that buyers use to evaluate the staffing supplier’s performance. Some others include involuntary negative turnover (where the assignment was terminated due to performance); voluntary negative turnover (where assignment was terminated by the contractor); number of résumé submissions; number of interviews from those résumés; number of hires from those interviews; time to fill; and ratios related to rate-card compliance. Most VMS tools have the capacity to track these metrics. It really is up to the MSP to decide which ones are more important to it, which in turn is dictated by the client.

Once you have established your credentials with an MSP, there is a high likelihood that it will introduce you to other workforce programs that it is managing within the same client or at other clients.

Restructure Your Delivery Model

This is not to say that a staffing firm should go after every account. You have to create some rules or priorities that guide your sales and account managers to treat the MSPs accordingly. These rules could be based on the customers an MSP caters to, or the margins you expect to make from being on a particular list, or the level of contact that you are permitted with the hiring managers.

“You know, the key is to really identify programs which are not black holes, which are worth working,” says Ben Thakur, principal with eTeam. “The other thing is you need to identify one or two MSPs that really invest in working with their suppliers to grow them. These are the two things that we can do to really bring in clients which are worth working with.”

While, it is true that working with MSPs is a lot about volume, it doesn’t mean the client is not looking for quality. To attain the level of operational efficiencies required to keep the pipeline of résumés full with the right candidates for every account and to track your performance takes investment in technology. It also requires a restructuring of your delivery model to accommodate these requirements. Most staffing firms that generate a substantial amount of their revenue through business coming from MSPs have adopted a more centralized, recruiting hub model. Many either have offshore recruiting centers or are partnering with offshore recruiting firms that lend well to this high-volume business.

“At the highest level it is all about your mindset,” says Jeannine Parise, principal at VMS Accelerators Inc. “You’ve got to absolutely accept the fact that this is a different business. So, if you put the same folks, in the same structure, with the same comp model into it, it won’t succeed.”

Overall, it does take some investment and time to achieve success in doing business with MSPs. However, if done correctly, the business model does produce results. Many staffing firms are seeing good return on their investment and are growing.

It’s critical to remember that the MSPs rely heavily on staffing firms to be successful themselves in not only managing a client’s contingent workforce, but also in providing quality workers. The key is to know your performance statistics, track your success and then build on your success. This may well end up being a win-win situation for both the MSPs and the staffing firms.

Sona Sharma is a senior research analyst at Staffing Industry Analysts. She can be reached at ssharma@staffingindustry.com.

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