The chicken or the egg?
For organizations of all sizes and compositions, it can be a daunting challenge to determine whether to implement a new contingent workforce management solution
. Nearly every type of business can benefit from leveraging contingent labor in one form or another as evidenced by the continuing growth in the use and utilization of all manner of non-employee workers. From the traditional “temp” workers supplementing full-time staff to the more recently use of independent contractors, project workers, freelancers, and other worker classifications that increasingly comprise the contemporary workforce, organizations of all stripes have become more comfortable and reliant on the contingent workforce as a regular part of their business operations. According to the World Economic Forum’s insight study The Future of Jobs Report 2018
, by the year 2022 between one-half and two-thirds of companies will be utilizing contractors, temporary labor and freelancers to address growing skills gaps.
Not surprisingly, the complexity of modern workforce management has created a crowded field of providers that support the design, development and management of contingent workforces. Two of the most trusted and effective offerings are Vendor Management System (VMS) software products and the Managed Services Providers (MSP)
. Both have become trusted industry-standard practices and both represent significant challenges to implement successfully.
Yet, despite knowing that intrinsic value exists in applying either a technology or a service (or both) to contingent workforce management, it can be difficult for organizations to determine whether either option is best suited to help achieve their objectives. And for those that conclude there are benefits to employing both, the question is further complicated by the decision surrounding which to deploy first and why. For guidance on making the best of these thorny dilemmas, savvy organizations need workforce management experts to help guide their decision-making and execute on deployment.
We asked workforce management solution experts for their best advice on how to determine if their operations could benefit from VMS solutions, MSP solutions or both. We also asked them how they help organizations to decide the best order of operations when the decision is made to engage both VMS technology and MSP services. Here’s what they said.
Yvonne McAteer is the Senior Vice President of Sales and Strategy at nextSource
. Here’s how she helps organizations decide if a VMS is the best option for addressing workforce management challenges.
“There are a number of important questions to pose to the customer. For example, any change management or technology initiatives they mention will often help to clarify whether or not VMS makes sense for the organization.”
McAteer shared the top four most salient questions she poses to organizations considering deploying a VMS solution.
- Does this tie with the organization’s broad strategy, such as bringing speed and agility to the workforce, reducing organizational risk or improving financial performance?
- Does the organization possess the internal expertise necessary to determine and articulate the workflows and business processes necessary to properly configure a VMS solution?
- Do you have the internal resources needed to manage a contingent workforce?
- Are you prepared to align bill rates with suppliers in such a way as to avoid having to revisit them again shortly if the organization intends to field an MSP solution after deploying VMS?
“These are mission-critical considerations,” said McAteer, noting that typically, it is the larger organization that is more readily equipped to embark on a VMS initiative because they often already have tighter, more mature controls over business processes related to workforce management. Automation enabled by VMS tools is heavily reliant on proper configuration of the software to address workflows that are already proven effective. Whereas smaller organizations may not have an inherently clear set of existing policies and practices that can be easily automated. In the absence of such clarity, there is a higher likelihood that simply deploying a VMS tool will not automatically result in effective utilization of VMS tools.
Similarly, it is somewhat pre-requisite for an organization to have sufficient internal resources available to dedicate to the implementation and management of a contingent workforce. Without the basic management infrastructure in place, implementing a VMS may be putting the cart in front of the horse. The existence of internal workforce management resources also supports the organization’s ability to prepare the above-mentioned processes and workflows for staffing supplier management.
“The last of the three questions are geared toward an organization that may also be considering adding MSP services to their contingent workforce mix at some point,” said McAteer. She adds, “It is important to consider the future state so that when negotiating bill rates with suppliers as part of your VMS implementation room is left to absorb the cost of an MSP program deployment at a later date, if the intent is to deploy a supplier-funded model.”
When it comes to considering an MSP solution, nextSource’s Director of Business Development Joe Olstadt offers three key questions an organization must address:
- Do you truly have a well-conceived contingent workforce management policy in effect?
- Is contingent labor being used strategically or in an ad-hoc manner?
- How effectively does your organization balance access to talent versus cost savings?
Joe advises, “It is often a good idea to craft contingent workforce management policies that work in alignment with your organization’s full-time talent acquisition process and hiring strategy. Otherwise, an MSP might operate at odds with your HR and talent acquisition departments and that is a recipe for failure. Having a policy in place improves the probability of success with an MSP solution.”
“How contingent labor is currently being utilized is also a highly important consideration,” says Olstadt. For those already applying a strategic approach to contingent labor usage, Joe suggests, “it may be sufficient to simply ‘lift and shift’ existing contingent labor management processes over to a new MSP partner. However, if a company is only addressing the practice in an ad-hoc fashion more significant re-engineering of workforce management processes may be required to derive the maximum benefit from the application of an MSP to the tasks associated with sourcing and managing a contingent workforce.”
Olstadt counsels the majority of organizations opting to engage MSP solutions to consider re-engineering processes for smoother adoption and better results. But he cautions that this level of change requires a strong focus on change management expertise.
To answer the third question regarding the balance between access to talent and cost savings, Olstadt notes, “Organizations should look to its top three or four strategic drivers to determine which consideration should be the priority. You don’t want to be hashing this issue out during implementation. You should clearly understand the drivers at play before implementation so that an MSP can hit the ground running with clearly enunciated priorities.” Many MSP providers have tools that can help you identify your priorities.
The chicken or the egg?
For many organizations, it makes sense to employ the centralization and automation of a VMS technology alongside the purchasing power and compliance capabilities of an MSP service begging the perennial question: which project to deploy first?
Both McAteer and Olstadt seemed to agree that there is no hard and fast rule dictating the “best” order to deploy these two complementary solutions. Making the decision of which comes first for any given organization will rely on the specific answers developed to the numerous questions posed in each of the assessments detailed above. However, deploying them in tandem decreases implementation time and enables an organization to have both sets of experts involved in design, configuration and launch.
Ultimately, the comparative size of the organization plays a significant role in the decision-making. Typically, larger organizations tend to stand up a VMS first and then, later, an MSP. This is because larger companies characteristically possess greater levels of resources—both in terms of IT support and in terms of existing process, policy and personnel dedicated to workforce management. This means the underlying infrastructure needed to successfully determine the correct VMS workflows and configurations is already in place and the larger organization can more effectively shoulder the burden of standing up a VMS while retaining stronger control over contingent workforce management. Frequently, once implemented, the VMS provides much more penetrating views into drivers of performance, compliance and a host of other KPIs that the large organization can then use to weigh whether or not an MSP arrangement will drive additional operational benefits.
For the small and midsize business (SMB) organization without the same levels of internal resources, engaging an MSP first is often more appropriate. Typically more interested in reducing the workloads of their internal resources, SMBs find that MSP engagements deliver added value via the expertise they bring in re-engineering processes and fostering strong, effective change management practices helping drive positive results. With more standardized and well-controlled workforce management operations guided by an MSP, the SMB organization can then take the next steps in partnership with their MSP in selecting and standing up the most appropriate VMS solution. In fact, according to the Staffing Industry Analysts, MSPs can absorb as much as 62% of the workload associated with deploying a VMS platform.
Ultimately though, the decision of “which comes first” does not adhere in a hard and fast sense to the large company/small company distinction laid out above. There are many variables to consider, regardless of the size of the organization. For just one example, consider that a company of any size that aligns bill rates with their suppliers to account for a new VMS fee would then need to renegotiate with the suppliers again six to 12 months later if/when they elected to layer in new MSP services. Is this level of disruption to be avoided or endured? Other considerations lean toward the cultural. Does your culture emphasize internal control or does it work better culturally when your sourcing managers sit close to your hiring managers?
In the end, there are so many variables to weigh when making this decision that it is definitely advisable to engage some consultative expertise from a workforce management consultancy.