The MSP and self-managed staffing solutions cycle

Posted by: Matt Rivera

The management of contingent labor, and staffing solutions in general, seems to be cyclical. It’s a classic make or buy decision with which companies continuously struggle.

The cycle goes something like this: A company realizes that there are too many vendors (or they don’t know how many they have), and they embark on a managed staffing program to reduce vendors and cut costs. The company hires a managed staffing provider (MSP) to manage the program. The MSP shows first-year savings by getting vendors in line, while company managers quietly rebel at having to use the centralized program, procedures, or technology.

The MSP has limited success in subsequent years. The program grows while more managers look for ways around the system. Around this time, internal program ownership changes from HR to procurement or vice versa, and the MSP is put on notice. The company then considers the millions of dollars running through the program and begins to think about using technology (a vendor management system (VMS) or perhaps an internal system) to run the program themselves.

After putting internal resources in place, the self-managed program takes off in earnest. Meanwhile, the number of resources required to keep up with the program steadily increases. Several staff members are taken from core duties to help manage the program or vendors. When costs and resources hit a boiling point, the company once again looks to outsource and sends an RFP for an MSP to run the program.

Lather. Rinse. Repeat.

This might not be the exact cycle at every company, and some companies do successfully self-manage their program. However, the cycle can (and usually does) emerge around the same point, even for successful programs.

Why? Because managing a contingent labor program and staffing vendors is not a core competency of most companies. Eventually, management recognizes this fact and realizes that HR or procurement has become fragmented or is expending considerable resources in this non-core area.

Worse yet, more responsibility might fall to the hiring managers. Again, this is time spent on non-core activities.

Organizations can break this cycle by strategically deciding how to manage the contingent labor program. My colleague, Jon Grosso, created a quick list to help in the decision making process. In case you missed his post, the following is an abbreviated list of some questions to ask yourself.

1. How complex is your managed staffing program?
2. Does your company typically outsource services?
3. Do you have executive sponsorship?
4. Are you willing to be held to the same performance standards to which you would hold an external provider?
5. Can you bring the same number and level of resources to bear as an external provider can?
6. Does your organization possess managed service or program management expertise as a core competency?
7. What are other organizations in your industry doing?

For most companies, the answers to these questions should lead you to an MSP solution — if not now, then in the future. Because at some point HR, procurement, and hiring managers will want to focus on their core job duties. Allowing them to do that is one of the top reasons you probably considered an MSP in the first place.