Three Equally Valued Sides Representing a Perfect MSP Triangle

At first glance, the MSP staffing industry does not seem overly complicated. In its most basic form, an organization requires a particular skill set, staffing firms provide candidates that match the required skill set, and if all goes well, that need is met. Sounds simple, right? Well, in many cases, the reality is much different. Managed Service Providers (MSP) can supply substantial value to organizations, but it is not without leading through a challenging business landscape.

Whether you are on the frontlines of a Program Office processing transactional requisitions or the strategic forefront, the challenges members of a program team face can be quite different in nature. Still, the root of all that happens comes down to satisfying three distinct groups: The Client, Supplier, and MSP. Program offices act as an advocate for all parties while facing constant pressure, from each- all demanding support, communication, and results.

In an ideal world, all should work in perfect harmony, but the reality is that each side brings a different set of needs, wants, and challenges to the program office team members. I’ve often explained this relationship in terms of a triangle. Three equal sides, each supporting the other; each needed each other to flourish. In the center of this Client, Supplier, Company triangle sits the MSP Program team. Its’ placement is intentional; dead center, looking out at all three equal sides. Depending upon which side a program team member is facing (focusing on), their view might be a bit different; and so might be their priorities. It is human nature, and like most of us, they focus on what is right in front of them. This can be seen in programs that lose sight of the value they provide to the Client or the lack of strategic partnerships they have with their Supplier base. If the primary focus is heavily weighted towards one side of the MSP triangle, inadvertently, the other two suffer. The strongest Program Managers rise above the triangle to gain a holistic view to act upon. They can manage all three sides at the same time, finding ways to strengthen strategy, partnerships, and financial results. By looking at some of the more common challenges MSPs face and then finding ways to genuinely partner, each side of the MSP triangle can work together in a more strategic, productive fashion.

Value Engineering plays a significant factor in partnering with an MSP provider. Cost savings can be actualized on many fronts, including tenure discounts, volume rebates, reduced time to fill, contractor quality as measured by premature turnover, and rate card management. One of the more significant challenges arises when out of date, unrealistic Bill Rates are in place. Many organizations are unwilling to revisit their rates for a host of reasons. These types of Bill Rates may cause Suppliers to run into issues attracting A+ talent, an overall increase in cycle time, and the possibility of workers leaving their assignments for a more attractive offer. Organizations also look to Suppliers to cut their profit margins as a way to lower costs, but when Bill rates are already competitively weak, Suppliers can become disengaged and unenthused to provide candidates to Client “A” if Client “B” has more robust Bill rates and the profit margins are stronger.

A recent article on INC.com titled “7 Reasons You Should Pay Your Employees Above-Average Salaries” speaks to the importance of strong pay scales. Author John Boitnott states, “Increasing employee salaries can feel painful at first. It may mean less profit for your business in the short term. Over time, though, it may not only improve company culture and happiness but also save you money. Plus, increased retention will lead to less money spent...”.

Increasing employee salaries is not just a move to make them happier, but an investment toward a more productive and high-quality business. The decision to pay more than the competition; pays for itself repeatedly. When sourcing, training, and statutory costs are calculated alongside lower proficiency rates until new employees “get up to speed,” the lost revenue begins to become more prevalent. Yet, many organizations are dead set against revisiting Rates regularly to ensure they stay competitive.

I’m reminded of a conversation I had with a Program Manager a few months ago; I’ll call her Sarah. Sarah was recently assigned to oversee a global program that is supporting Contingent labor for an e-business. Longer cycle times and high turnover had plagued the program for some time. At the request of her sponsor, Sarah was preparing a presentation to address both issues. A root cause analysis was conducted, and Bill Rates were quickly found as a top issue. Sarah shared with me that she “Needed to put an action plan together to address the challenges we are seeing, but the client sponsor did not want to hear about Bill Rates because he believed Bill Rates were not an issue.” She was stumped on how to move forward. Suppliers can be a great source of knowledge, and by partnering with a small group, Sarah was able to provide an in-depth view of the talent landscape in several of their key markets, the challenges Suppliers face, and the solutions to overcome these challenges. Sarah utilized one side of the triangle to improve the MSP triangle as a whole.

The Myth of the Mandated Program. Many organizations will claim to have a mandated program that requires end-users and hiring managers to utilize the MSP program. The reality is that there are only a few programs (if any) that are genuinely mandated. Let’s face it; Rouge spend is a cancer that only grows throughout an organization when left unchecked. In many cases, this “out of scope” or “rouge spend” can be a substantial cost for organizations. Mandating the use of a competitively bid process offers the best opportunities for reducing costs. And although challenging, there are practical methods that can be put into place to decrease this type of Spend. Methods include:

• Senior Executive Sponsorship, a crucial factor to the success of any program
• Ease of use for the End-user community
• Valid and up to date Bill Rates
• On-going Process efficiencies

Several years ago, I oversaw a program that was considered by the Client to be a mandated one. I remember a specific instance when we were working with a new VP who managed a large R&D center. We were looking into rate exceptions for Project Managers within a particular cost center. The MSP program filled these types of roles regularly at a Bill Rate of $75.50, but we uncovered a Project Manager with an hourly bill rate of $175.00! It had to be an error, right? With no real insights into the suggested Bill Rate, a Hiring Manager decided to fill the position outside of the MSP program with a referral they received, resulting in an hourly Bill Rate difference of $100.00. Taking into account a 40-hour workweek, and an average assignment length of 24 weeks, the additional cost to the organization was $96,000. In this instance, the implementation of a Rouge Spend policy provided cost savings. The plan was simple. To manage costs, all Hiring Managers were required to contact the Program office and validate all proposed Bill Rates. In turn, the Program office and MSP produced a range for each position and provided this information to the Hiring Manager end-user community. Suppliers proved to be essential in providing insights into the geographical challenges, market intelligence, and historical rate data.

The Supplier Struggle

According to the American Staffing Association, there are approximately 25,000 staffing companies currently operating in the United States. How does a Supplier differentiate themselves from the competition, showcasing what makes one their firm stand apart from so many others? While most MSPs have a Supply Chain group who is responsible for Supplier relationships, contracts, etc., in many cases, Program Managers don’t turn to this group for guidance regarding Suppliers. Instead, many depend on other Program Managers to refer Suppliers to a program or to a new distribution list. Strong Supplier relationships and consistently impressive performance both prove to be vital to a Suppliers’ success.

Suppliers often differentiate themselves negatively by making one or more of the most common pitfalls.

• Consistent Account Management Changes- Account Management turnover or churn should be avoided if possible. Program Teams need to be able to count on one or few contacts whom they can build long-term relationships with and rely on. The long-term development of the relationships between Account Managers and Program offices is paramount to the success of any good program.
• Lacking a clear understanding of job requirements or rushing to submit a candidate without vetting qualifications against the Job Posting can be costly. The rush to present must be balanced with quality candidates. Response Rates of 80% or above matched with Hit Rates less than 5% should speak volumes to the process adjustments that a Supplier should make. Quality vs. Speed will continue to be under the microscope and should be examined regularly.
• Overpromising and underdelivering never work. Presenting yourself as Jack of all Trades. “We can do it all,” translates to, “I don’t understand the strengths or current opportunities my business has.” Focus on your strengths, and do it exceedingly well.
• Passive Supplier engagement should not be confused with Niche Suppliers. The latter works on particular positions or skill sets while passive Supplier are active on an account but rarely supply candidates, attend Supplier Spotlight calls, or have deep insights into the organizations they are partnered with. Fully engaged Suppliers understand their Clients’ needs, culture, and processes. They actively take part in Supplier Spotlight calls, ask questions, and bring industry insights and best practices to the team. They see the value in healthy relationships and work towards becoming an invaluable asset to the program.

A Note About Supplier Optimization

Recently, I attended a Supplier summit for a program that has an estimated Spend of nearly $80 Million, with a Supplier base of 52, where only 30 of them were actively participating. The programs’ leadership team was reviewing its strategic initiatives for the rest of the year, and on that list was Supplier Optimization. The goal of the optimization process was to lower the number of Suppliers “significantly to roughly 24 to 26 total Suppliers”. Optimization was discussed as a benefit to Suppliers, and it got me thinking- How is this a real benefit to Suppliers? Assuming that those passive Suppliers who were not participating would be the same that were being offboarded (maybe with an exception or two), a 50% reduction of the overall Supply Base is nearly identical to the number of suppliers who are not actively participating. Therefore, when the Optimization is completed, the number of active suppliers virtually stays the same supplying little or no benefit to Suppliers. The approach and how it was communicated is an example of a program that’s too focused on one side of the triangle rather than looking holistically at how each side can assist and benefit from the process.

Conclusion

Thanks to The Bermuda Triangle and the Love Triangle, Triangles get a bad rap. The MSP Triangle is different. It supplies a foundation for a more strategic program leading to healthier financial results. It offers the ability for three equal sides, to come together and support the MSP Program, where all can flourish.

What are some of your proven strategies in bringing all parties together to produce better results? I’d love to hear from you.

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