Thinking about self-managing your contingent labor program versus outsourcing to an MSP partner? - Thinking about self-managing your contingent labor program versus outsourcing to an MSP partner?
THINKING ABOUT SELF-MANAGING YOUR CONTINGENT LABOR PROGRAM VERSUS OUTSOURCING TO AN MSP PARTNER?
To outsource or not to outsource? It’s a common question asked by buyers of professional services across almost every industry. In the new era of talent scarcity, with the growing importance of non-employee labor as a vital component of total workforce strategy, it is a topic we are hearing in the marketplace for contingent workforce managed services. Most often it comes down to a fundamental question around the merits of managing a contingent workforce program internally or outsourcing it to a Managed Service Program (MSP) partner.
Why is this such an issue today?
At a macro level it has huge strategic importance – because the world of work is rapidly evolving and as many organizations are struggling to attract and retain the talent they need; workforce strategy and management has become mission-critical. However, at a more basic and tactical level, the problem is that many organizations simply haven’t been well-served by their existing contingent workforce program.
In the next several blog articles we’ll examine the topic of self-managing a contingent workforce program versus outsourcing to a third-party MSP partner.
MSP Defined – Managed Service Program
Before looking at the merits of insourcing versus outsourcing the management of your contingent workforce program, let’s start by defining what we mean by the term MSP.
In our business we use MSP to mean Managed Service Program, and is defined as the management of the sourcing, engagement and administration of temporary and other ‘non- permanent’ or ‘non-employee’ resources and tasks by an external contingent workforce solutions provider like Hays Talent Solutions. (It should be noted that some in the industry use the term MSP somewhat synonymously to describe the business as a Managed Service Provider, instead of as a service delivered to client organizations by a service provider.)
The Basics of an MSP Service
As defined above, a contingent workforce management program provides oversight of a company’s contingent workforce and associated suppliers for the benefit of the company. Most traditional programs are primarily focused around three dimensions: Efficiency, Cost, and Risk.
Contingent workforce programs can be managed by either the company’s employees or outsourced to a third-party provider, often referred to as an MSP. The primary program deliverables are:
- Management of the requisition, evaluation and selection (recruitment) process
- Oversight of all operational processes (i.e., onboarding, timekeeping, invoice management, change management, offboarding)
- Monitoring of staffing supplier rate competitiveness and compliance with client rate ranges (if applicable)
- Configuration and front-line support of the VMS technology the program is built upon
- Consolidated invoicing & payment to staffing suppliers
- Issue management and resolution
- Supplier performance and compliance management
- Policy enforcement
- Worker quality management
- Program reporting & planning
- Ongoing end-user training (both suppliers and internal users)
Who Uses MSPs?
The most recent research from Staffing Industry Analysts indicates adoption of Managed Service Programs (MSPs) by companies with more 1,000 employees has grown from 40% in 2009 to just over 60% in 2019. During this time period, MSP services have evolved from tactical programs designed to consolidate supply, reduce risk and drive cost savings, to becoming much more strategic – often delivering talent sourcing strategies and solutions on a global scale.
The significant growth and market adoption of MSP has been driven by a number of factors, including:
- Better informed buyers looking to deliver more strategic value to their organizations
- The realization that contingent workforce is a significant spend that demands category management by Procurement professionals
- Growing interest of HR and Talent Acquisition in the strategic value of the contingent workforce
- The introduction of innovative new technology solutions designed to improve both access and engagement to talent
- With increasing talent scarcity, organizations need to improve their employer value proposition in the talent marketplace (to appeal to both providers of talent, and contingent workers themselves!)
Outsourcing the MSP to a third-party workforce solutions provider is common in organizations of all sizes and across almost every industry. In general, it is more common to find an MSP when there is at least $5-10M in annual contingent spend, spread across a number of categories of workers, with multiple suppliers of talent, in more than one physical location.
Given the many potential benefits delivered by expert MSP providers, and the broad market adoption, why would any rational organization ever want to consider taking this highly complex and specialized work on by themselves?
The Many Temptations of Self-Managing Your Contingent Workforce Program
When first contemplating a contingent workforce program, one fundamental decision is whether to outsource the program management to an external Managed Service Program (MSP) partner or manage the program internally instead. Almost every organization starting a contingent workforce program will find the support of an MSP service provider to be critical to the success. An experienced and capable MSP bring strategic guidance and delivers tactical process and procedure.
Despite the significant value-add, some programs (and their MSP providers) begin to lose their luster over time inspiring client stakeholders to reconsider the decision.
There are many reasons why stakeholders might be tempted to contemplate self-managing their contingent workforce programs. Here are some of the common themes our sales team has heard in the field over the last year:
- Performance – the program is failing to deliver promised or expected results. Most often this criticism is centered around not getting the right talent, at the right time and place. Simply put, suppliers are not successful, and hiring managers are frustrated with the lackluster performance!
- Lack of partnership – the MSP acts as business process outsourcer, focused largely on cost reduction and process efficiency.
- Lack of innovation – instead of introducing new strategies or innovations to the program, the MSP service provider is coasting along, just maintaining the status quo.
- Generic approach – the MSP displays a lack of agility or tailoring to client’s specific needs, instead delivering a rigid, standardized service.
- Claimed vendor neutrality – the MSP service provider favors their traditional staffing or payrolling business, despite representing themselves in the market as vendor neutral.
- Lack of expertise and professionalism – after a consultative sales process and implementation led by true industry experts, the MSP puts an inexperienced junior “steady state” team in place to run the program
- Lack of value – the MSP fails to provide any incremental value after year 1 cost reductions delivered by vendor rationalization and rate card negotiations.
In simple terms, many organizations consider self-management of their contingent workforce program because they are frustrated and disappointed with the efficacy of their current approach. We often hear from stakeholders that their contingent workforce management programs – which really means the MSP service provider they’ve hired to develop and manage the program – is failing to deliver the level of service, and ultimately the talent, that client stakeholders expect.
Collectively, we refer to these inefficient and ineffective programs as “MSP v1.0” – because they often are the first generation of basic managed service programs.
MSP 1.0 is usually represented by a command and control management structure, where the MSP service provider acts as a gatekeeper between staffing suppliers and the business. They are focused on driving compliance, process and cost savings…all valuable benefits for environments that had no program before, but also benefits that yield diminishing returns over time.
Given the above complaints, it is also not surprising to learn that many hiring managers are frustrated with their organization’s current approach to contingent workforce management and chose to go around the program in order to get the talent they need. Stakeholders from these legacy programs also shouldn’t be surprised when they discover huge amounts of rogue spend taking place outside of their programs. They’ve helped create this mess by selecting a poor MSP partner.
It is clearly time for a change.
Talent Forward – Delivering MSP 3.0
Talent Forward is a strategy and operating methodology for delivering an MSP service that works in today’s complex global talent market. It was created to address organization’s frustrations with their outdated and ineffective MSP 1.0 programs and reflects Hays Talent Solutions’ desire to deliver a disruptive new service offering that meets and exceeds the needs of our clients.
In a Talent Forward MSP service our objective is to deliver the right talent, at the right time and place, for a fair price – regardless of worker classification, or source. There are four major elements, all designed to work together and provide clients with better access to talent:
- Staffing Supplier Enablement– Building a program where Vendor partners are informed, excited, engaged and committed to delivering the best talent to our clients.
- Extended Supply Chain – Expanding and optimizing the mix of traditional and alternative talent, including SOW, service providers, and online marketplaces (with compliance and governance)
- Direct Sourcing– An outsourced recruiting solution, that leverages our client’s brand to build and engage a proprietary talent community, which can then be used to source workers at a significantly lower cost and quicker time to productivity than the traditional staffing suppliers.
- Technology & Analytics – Streamlined process, real-time data capture across the enterprise program, rate card development, benchmarking by market and competitors, Worker availability, robust analytics, and the resulting decision-making insights for a foundation of your technology-enabled service delivery
When deployed in a program environment built around open communication, transparency, and true partnership between a client and its talent supply chain – Talent Forward fulfils the vision of “MSP v3.0”. It is an enlightened and future-proof methodology that ensures organizations consistently attract and retain the talent they need in today’s challenging talent environment, and tomorrows.
It is our experience that if more organizations had contingent workforce programs built on a solid foundation like Talent Forward, they likely wouldn’t consider self-managing!
Should You Consider Outsourcing Your Contingent Workforce Program Management?
In many industries, competitive pressures like automation, legislation and market changes are forcing leaders to revisit every aspect of their operations. At this point you may be wondering if self-managing your contingent workforce program is a smart idea to consider for your organization? Or, is it a better idea to outsource the function to a specialized MSP service partner?
In another blog article we’ll go into more depth on strategic considerations, but before then here’s a high-level outsourcing analysis to help you decide if it is a topic even worth exploring further. As you think about your contingent workforce program, ask yourself the following high-level strategic questions: (Answer: Yes/No to each.)
- Is this function core to what we do as a business? Are we experts at delivering it?
- Do we know how to find, manage, and retain the talent it requires to operate?
- Are we willing and able to climb the learning curve? Do we know: Who will help us? How we will stay up to date? What technology we will need to be successful?
- Does managing this function fit within our organization structure? Who will “own” it?
- Can we justify taking on the additional fixed overhead cost?
The question of self-managing versus outsourcing the management of your contingent workforce program is complex. Given the strategic importance of your workforce, and the ability to get work done in your organization, it is a decision that should not be made without careful consideration.
If you answered “Yes” to each of the five questions above, then your contingent workforce program might very well be a candidate for self-management. This is a topic we’ll explore further in the next blog article in this series where we’ll explore scenarios where it might make sense to self-manage your program.
If you answered “No” to all five questions, then it is very clear that your contingent workforce management program is a function that should be outsourced.
A mix of “Yes” and “No” puts you on the fence, and you should think about how good a fit it is for the talent and time you have available on your team. Could an outsourced specialist do it better and deliver more value? If you do it internally, is the potential benefit worth the cost? In the final article of this series we’ll present a comprehensive framework to help you answer the question.
NOTE: This article is part of an ongoing series exploring key elements of the Talent Forward MSP strategy, along with key insights and best practices from the workforce management experts at Hays Talent Solutions.
SVP, Head of growth at Hays Talent Solutions
With nearly two decades of experience in the human capital management industry. Kimball has experience in structural engineering, publishing entrepreneur, and running a successful strategy consulting firm. He earned a Bachelor of Science degree in Civil Engineering from California Polytechnic State University, San Luis Obispo and an MBA with honours from the University of California, Davis.
Now his expertise is used working cross-functionally with the Hays Talent Solutions global leadership team to build the strategic plan for the expansion of Hays Talent Solutions in the Americas region. Focusing on business growth and client acquisition, activation, retention, and upsell across the region.