Tuesday, June 12, 2018

Vendor Management Systems – Good Riddance

Truth be told, I hate Vendor Management Systems (VMS). For specialized staffing and consulting firms they rob everything that I have worked my career to build. They dictate who I can speak with and when, what I can charge, how much I can make, and invariably require more time to service my clients. While I understand the motivation behind clients seeking to control costs, the people making the decisions to implement these systems and methods do not account for economic market conditions, the effects of supply and demand, staffing cycle time, and ultimately what you are getting for what you are paying for.

Here are the Top 4 reasons that I believe that Vendor Management Systems will either be phased out by many corporations or significantly restructured over the next 12-24 months.

  1. Market Conditions and Supply and Demand: History tells us that during times of low unemployment, wages increase. This is due to a greater demand for quality talent than exists in the marketplace. Very often the bill rates quoted by the companies employing VMS’s are significantly lower than those that I can charge other clients. The pay rates indicated are similarly lower than what I would normally pay. When market conditions are such that solid candidates and consultants are readily available, the job requirement is of greatest importance. The opposite is true in times of low unemployment. Unless the client is offering incredible volume I envision more and more staffing companies shying away from clients dictating inadequate bill and pay rates. Corporations are either clients or sources so I also envision these corporations facing more efforts to lure and recruit employees away.
  2. Cycle Time: Another thing that occurs in times of lower unemployment is that staffing cycle times increase dramatically. Great people that are available locate new opportunities very fast. Wise companies know that they need to act fast. My relationships are so solid with some hiring managers that I will get a call on Friday and have the consultant begin the assignment on Monday. The level of trust is so deep that they know that the consultant we supply will continually provide services that meet or exceed their expectations. With the implementation of the VMS, that cycle time has lagged to an average of three-five weeks. This additional time also involved requiring many more hours of effort on the part of the hiring managers. Companies employing vendor management systems will find that they will lose the better candidates more and more due to time inefficiencies.
  3. Value: In most cases you get what you pay for. The quality of candidates that a client will receive at these below market rates will in the long run cost more than a better-skilled higher paid consultant. These higher skilled consultants will in almost every case have a faster ramp up time frame, will produce more output, and with higher quality. I know of no procurement or HR departments that perform these types of analyses when evaluating the performance of the VMS. Any evaluation of a hiring decision must include output, speed and quality relative to cost. To not do this is misguided and detached from the realities of accurately evaluating talent decisions.
  4. Specialization: I have been servicing my niche marketplace for over 30 years. The fact is that the person doing the first line screening is rarely fully competent to make accurate assessments on the resumes that they review. It is unreasonable to think that this person could be fully competent in all of the areas that they may be supporting – they cannot be experts in the nuances of finance, software development, training, and legal departments – to name just a few. So what happens is that talented candidates are missed and inappropriate candidates are called in for interviews. Excluding the hiring manager from these decisions costs valuable time and money.
Companies using vendor management systems will either need to increase the rates they pay to remain competitive or they will see a deep decline in the quality and caliber of the consultants that they bring on board. If they do not improve their business processes to greatly increase the speed of their hiring decisions they will miss out on more and more quality candidates.

To vendor management systems I say good riddance.

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