Is Vendor Neutrality Important?

Posted by : Jeff Nugent

The topic of neutrality often comes up when evaluating vendors as clients contemplate outsourcing the management of their contract labor programs.Here is my take on things.....Full Neutrality is the only realistic way that the MSP and or payrolling firm can act as an objective partner/advisor working 100% in the best interest of the client is to act without the inherent conflict of interest (financial or otherwise) that is present by allowing a staffing firm or staffing firm owned MSP manage a program or perform the payrolling of independent or directly sourced contractors.

To no surprise there has been a HUGE marketing push by the large staffing firms to rebrand their MSP offerings and talk about neutrality. The reality is that the entire business case around staffing firms investing in vendor management / MSP solutions is to protect their market share or give a competitive advantage to the overall higher margin staffing line of business.

Trust me, I founded two of the first VMS programs in Canada (Brainhunter’s Talentflow and Procom's Flextrack) which were both owned by their respective staffing firm parents. Since then I have evaluated many other VMS and MSP vendors and when you get deep into it (past the brochure and sales pitch) the main business driver generally falls back to driving more staffing business.

Although I know the intentions are often good at the operational level within these “Vendor Neutral” MSP providers, it falls on deaf ears at the ownership or board levels who look at overall enterprise wide financials and profitability.

In saying that the capabilities of the larger staffing firm owned MSP vendors have increased considerably in concert with the sales and marketing efforts. So depending on the situation you may decide to implement a program run by a staffing firm owned MSP. My advice is Please, Please, Please ensure you know what you are getting into and take measures to put the proper checks and balances in place so that your program avoids any risks and meets the objectives that you envisioned when designing your program. As expected when talking with staffing firm owned MSP’s you will encounter that the sales effort (often lead by the staffing firms account managers) glosses over the conflicts of interest.

To protect yourself and ensure conflicts of interest are mitigated when engaging with a MSP arm of a large staffing firm:

1. Ensure the underlying technology supporting the MSP program is not the same technology (no matter what the sales pitch is) used by the staffing firm to track their applicants. Although you may get lots of technical jargon on how separate the information, its only 1 human error at the data entry level that can have confidential information ending up in the staffing firms database.

2. Contractually obligate that the affiliated staffing firm is not allowed to do any staffing business with the client. This is the true litmus test. The key is contractually obligate. Lots of firms agree in presentations but when you state it as a contractual obligation they will have to choose what business they are in.

3. Inquire into compensation of MSP management and key program resources. I know this seems quite invasive but at the end of the day human actions, especially in the agency world is about the money and you want to ensure that the key program resources, the MSP management team etc. are incented to act in the appropriate neutral fashion. This compensation should take into consideration commissions or bonus plans, stock in the parent company, etc.

4. Ensure open communication with ALL vendors continues between the vendors and the client directly. Although the amount of time spent taking vendor calls, etc should be reduced everyone must remember that the vendors are an important stakeholder in helping program success and therefore it’s very important to ensure that direct communications are not stifled by your MSP or forgotten by your managers.

5. Implement mechanisms that facilitate open feedback such as anonymous vendor satisfaction surveys, feedback, whistle blowing hotlines etc.. these mechanisms help in facilitating open honest feedback when things like vendor forums, quarterly vendor/stakeholder socials etc do not produce the desired openness.

6. Implement automated unfiltered reporting capabilities within the technology that allows for analysis/audit of unfair or questionable business practices on an predetermined timeframe and or on in a real time adhoc fashion when required. This is very important especially to provide objective data during escalation situations. Please feel free to share your feedback, comments, experiences and best practices.