May 19, 2020Read More
Although VMSA Live is always educational and exciting, this year’s conference seemed remarkably fresh and unique. Like the arrival of spring, the event brought forth a sense of renewal, exploration and new directions to pursue. It wasn’t just the presence of a more diverse mix of companies in attendance. The contingent workforce industry seemed poised for a new shift. The digital nature of business, the gig economy, the exponential boom of smaller and midsize enterprises all signaled a powerful change in the dynamics of modern work. These transformations weren’t lost on Managed Services Providers (MSPs). Some of the most recognizable firms were even reconsidering the term “MSP,” believing it no longer indicative of the role. However, that doesn’t mean MSPs are about to fade away. I think we’re about to witness to emergence of MSP 3.0 – where the transactional gives way to the strategic.
Last July, Allegis Global Solutions (AGS) announced the launch of its SIGMA MSP offering. This kind of MSP Lite program caters to small and mid-market companies that spend between $5 million and $50 million on contingent talent. Why is this crucial? Smaller businesses are playing a much bigger part in today’s economy. MSPs such as AGS, Randstad Sourceright, PRO Unlimited and Geometric Results (GRI) understand this. They are creating models that give modest enterprises greater agility and power to innovate through the support of an MSP partner that do more than effectively manage staffing suppliers and contract workers—they are evolving into consultative business partners and strategic advisers.
The signs are everywhere. As Bersin by Deloitte noted in July 2016, the workforce software market is radically reinventing itself. This growing $14-billion industry has reshaped the way we think about talent acquisition, management, engagement, performance and skills development. And it’s being fueled by the power of smaller players in the space.
Contingent talent have also become more instrumental and visible in smaller companies and entrepreneurial innovation houses. Years ago, the term “contingent worker” made a lot of sense. Gifted contractors began taking on more pivotal roles in their assignments or tackling mission-critical projects. Referring to them as temps seemed to fall short of the services they were providing. However, contingent talent are no longer, as the name implies, a “Plan B.” They are important contributors to the companies they support – and more companies are integrating them into their businesses to fuel innovation, fast growth and competitive advantages.
Rapid expansion is no longer just the goal of companies, it’s a reality. The challenge, as illustrated in a joint study conducted by the Kauffman Foundation and Inc. Magazine, is that more than 66 percent of the companies listed as fast-growing shrunk in size, went out of business, or had been sold within five to eight years. To weather the storm, as William Watterson pointed out in The Next Web, expanding businesses need to have plans in place:
And this is precisely where I anticipate MSP 3.0 to shine. As AGS wrote shortly before last autumn, “For MSPs to stay relevant they must evolve from a transactional supplier into a strategic partner and deliver the value that businesses need. In essence, MSPs need to become talent advisors, serving as a strategic arm of the client business.” Right now, MSPs are positioned to do that. And clients of all shapes and sizes should take notice.
By nature, MSPs oversee one of the most vital aspects of any client business -- talent. MSPs have valuable insights, essential data and keen perspectives that can undeniably benefit client managers in mapping out their financial goals for the year. By including MSPs in business growth and planning efforts, clients strengthen the might of their forces in this war for talent.
Client hiring managers are facing a battle across several fronts. They are desperately seeking top talent to fill in-demand positions, yet time seems to conspire against them. Their workloads have become more demanding, they’ve been stretched thinner by lean operations that attempt to curb overhead, and they have fewer people in key positions to perform the work, which is backing up and piling higher. With the dawn of each new year, these same hiring managers must confront a fresh batch of pressing corporate responsibilities, operational goals to attain, internal staff to manage, and increasing pressure to innovate and optimize processes. MSPS -- with their resources, expertise and information -- can become an untapped goldmine for stellar business planning outcomes.
The primary motivation for MSPs is to deliver the right talent at the right price and at the right time. Making the program equitable for all parties involved -- the client, the suppliers, and the workers themselves -- is paramount to their success. Leading MSPs balance the need to deliver the best possible talent with fiscal responsibility. They accomplish those objectives using tools such as market rate and people analytics, labor economics reports, rate controls, supplier surveys, and pulling data across all clients through business intelligence systems.
During program implementation, experienced MSPs develop a custom cost-savings measurement plan with their clients. Together, they determine the data to be measured, the sample size, the reporting frequency and the format of the data. The process becomes a comprehensive cost savings analysis in which the MSP reviews pay and invoice rates, supplier markups, various tenure policies, and discounts. The MSP also identifies the risks and countermeasures associated with implementing the various cost savings opportunities.
When budgets are created and overseen at the enterprise level, they can sometimes omit the pivotal input and participation of department hiring managers. However, this input is essential to effective planning and forecasting. Together with MSPs, hiring managers can identify upcoming expenditures or savings opportunities that may have been missed by executives too far removed from the frontline. A lot of clients recognize the amazing soft cost savings supported by MSPs; yet there are plenty of direct savings to be achieved, as well:
The ability to make informed decisions based upon reliable real-world data is vital to the success of business planning. MSPs mandate the program across the enterprise and ensure that all contingent work is being captured in a VMS. This gives clients visibility into all aspects of the program: the overhead, the costs, demand planning and forecasting. The reporting capabilities of the VMS deliver intelligence and analytics that allow MSPs to drill down into market dynamics and then provide that insight to hiring managers. Examples include:
The datasets MSPs collect provide hiring managers with a treasure trove of information that can be used to forecast demands, usage and financial considerations for near-term and long-term planning. Through this approach, MSPs collaborate with client hiring managers to ascertain the right number of people being requested, which prevents frivolous or rogue spending -- an instrumental component in creating a meaningful and achievable plan.
Budget and resource planning require a level of transparency that extends beyond the organization. It’s just as crucial to understand the external factors of the market. MSPs use a variety of methods to compile market rate intelligence:
MSPs combine these data sources to create matrices with recommended rate strategies, and then determine the best rate card to support the hiring manager’s business goals. They review rates regularly to ensure that changes in market demand and statutory costs are captured. By nature of the program design and contractual agreements, MSPs can enforce adherence to these rate card controls across the supplier base.
In a larger corporate context, MSPs properly manage purchase orders (POs) to make it easier for accounting professionals to determine accrual financing needs. Increased accuracy in this area mitigates the need for clients to borrow as much money to cover short-term cash flow needs, thereby reducing finance charges.
Even in outsourced contingent labor programs, retention is paramount to the success of the engagement. MSPs and their staffing partners excel at placing the best matched talent to the role, which contains costs and significantly speeds up time to productivity. There remains, however, a learning curve for new talent as they ramp up. And despite the temporary nature of complementary workers, the program’s ultimate success depends on them completing their assignments.
Through engaging and comprehensive onboarding programs, MSPs and their staffing partners substantially reduce the risk of attrition; it’s a fundamental part of their job. They have cultivated and mastered their onboarding experiences across clients, creating repeatable, continuously improving and transferable practices that enhance acculturation and retention for every organization. With a more certain and stabilized indicator of worker longevity, client hiring managers have the advantage of developing strategic plans that are less likely to encounter unexpected disruptions or gaps.
The potential value MSP 3.0 will bring to the organizations of all sizes should not be discounted. MSPs have access to a wealth of past experiences, data, market intelligence and business planning acumen that can strengthen the growth outcomes for expanding businesses.