For nearly two decades, the contingent workforce program marketplace has honed its ability to govern a hand-picked portfolio of staffing partners. Now, the question is how far can policies and “rules of engagement” go to manage these suppliers’ participation while still eliciting their best efforts.
Those staffing partners have been put into highly competitive MSP/VMS environments that at times have squeezed profitability to a point of diminishing returns, creating sourcing black holes that can be detrimental to the service quality of an overall CW program. When quality is sacrificed due to lack of common sense and dictated by outdated policy walls, the program loses.
There is a need to strike a balance between giving staffing partners free reign and choking their ability to deliver the value the program requires. The challenge: How to find that balance?
A step forward here would be to understand the motivational attributes of the staffing partner portfolio concerning profitability. There are four major attributes that contribute to staffing partner profitability:
- Volume of headcount (Volume)
- Level of effort to fill (LOE)
- Markup (Markup)
- Length of assignments (LOA)
While these attributes are associated with CW programs, they may not be aligned with cost controls for the buyer organization. The accompanying chart depicts how those components combine to help drive staffing firm profitability, on a scale of one (low) to five (high).
The ideal supplier-partner scenario depicted in the chart is the left-most set of data: High Volume + Low Level of Effort + High Markup + High Length of Assignment — a rare combination within today’s CW market. As MSP and VMS technology and solutions have matured, staffing providers can often find themselves in situations where volumes are low, markups are low, level of effort is high and length of engagement is truncated — all of which combine to put enormous pressure on the provider to sustain delivery of high quality and talent service to client organizations.
Recent technological advancements may reduce the level of effort for staffing partners, such as artificial intelligence and advanced candidate pool management systems. Other options for typical staff augmentation partners to compete in highly competitive contingent workforce programs is to engage offshore recruitment personnel, which can be effective to help provide faster turnaround time if the offshore solution is in a time zone that enables it to provide overnight support for sourcing for positions in the US while lowering bottom-line cost. There are challenges with offshoring of recruitment, however, such as information transfer and lack of direct contact with the engagement manager.
The advancement of cloud talent organizations is also going to apply economic pressures to traditional staff augmentation partners as these organizations operate with low overhead. The art of recruiting is still needed for clients to achieve their quality and cost savings goals, but times are changing. Staffing partners need to consider all opportunities and their ability to impact and influence client success specific to talent that makes a real difference. This will help them select clients and contingent workforce programs that make sense for them by finding profitability based on volumes, level of effort, markups and assignment length.
For the CW program manager, understanding the profitability models engaged by their staffing partners is critical — not for identifying further cost management reductions, though that might naturally occur — but for understanding how to create a policy and rules of engagement that increase quality, lower costs and enhance the profitability of one’s staffing partner portfolio. With the introduction of direct/self-sourcing initiatives and private talent pools, further profitable opportunity stress will be affecting one’s staffing partners. This is inevitable and will cause an opportunity imbalance for one’s staffing partner portfolio.
Like any asset portfolio management effort, adjustments will have to be made to provide the proper care and feeding to one’s best-performing staffing partners. This will be done through further optimization actions, but equally important, by also understanding how your staffing partners create their return on investments and how to enhance that effort in alignment with the goals and objectives of your program.