vTech facilitated a session for bridging gaps and taking responsibility among Clients, Managed Service Providers (MSP) and Suppliers at VMSA Live Florida. The MSP model brings various benefits for Clients, MSPs and Suppliers. With this in mind, during this interactive session, we wanted to identify challenges faced or gaps exist among Clients, MSPs & Suppliers and discuss what different entities are doing or what can be done to take the MSP model to next level. In order to understand the challenges of entities involved in MSP model, clients, MSPs and suppliers with more than ten years of experience exchanged hat in a seventy-five minute discussion.
Here are key takeaways from interactive session:
Challenges faced by the Client
Retention and Engaging Talent
The Primary objective of contingent labor is to achieve the client’s business goals efficiently. The consultants are the doers. Retaining and engaging them is the most important variable for each entity involved.
- Effectively switching resources among projects: Uncertainty in project duration causes fear and insecurity in the consultant’s mind. We have worked with a MSP where the client has created a pool of talent under the PMO. All resources are hired under the PMO talent pool. Hence if any consultant completes the project with one agency, he can be utilized effectively, quickly and smoothly by another agency. It gives security and stability to the client’s 200+ consultants, working with this particular state government client.
- Engagement Matrix: vTech has been performing periodic meetings and reviews of engagement matrices to help resources see the bigger picture with reference to how they are making a difference. It has been very successful to engage resources. We can proudly say that our consultants not only get the job done, but get the job done well.
- Performance Review and Rewards: There is no motivation for resources to go the “extra mile” if there is a lack of performance-based incentives in their respective contingent labor program. It might be a good idea to have suppliers perform performance reviews in coordination with the HM (Hiring Manager). Though cost saving is one of the top priorities of the client, raising pay of a well performing and dedicated consultant by a dollar or two after he or she has worked one or two years on a project might go a long way towards motivating the consultant.
- Stay Interview, not Exit Interview: Instead of conducting Exit Interviews, a proactive approach of ‘Stay Interview’ (Source) might be more effective.
Finding Quality Consultants
- Have you ever seen requirement tagged as “High Quality”? Quality matrix instead of Speed or Quantity matrix should be used to evaluate suppliers for requirements/clients, where Quality is paramount. Also we have seen requirements labeled as Urgent, Low priority etc. How about requirements labeled “High Quality” for requirements where Quality is the most important criteria?
- You get what you pay for: Ask any supplier if they can afford to have a recruiter work more than 1- 2 days on a requirement where the margin is 5% or less. If there is not enough margin for the supplier, there is less incentive for them to focus on quality. If the client wants to pay the lowest market rate for a consultant, how can he get the best consultant in the market?
Compliance Issues:
- Ongoing training for involved entities: One of the major compliance challenges is the fact that some small suppliers are not fully aware of new compliance and even existing compliance standards. There are also numerous gray areas for various rules and regulations for 1099 consultants and co-employment risks. Ongoing training, seminars and education sessions for suppliers concerning compliance standards are burdensome, but essential to the success of an MSP program. It will ensure that all parties involve are compliant and helping them to avoid being “burned out” for not being compliant.
- Technology for Tracking and Notifications: Despite the fact that VMS has been used extensively, the use of VMS to track whether MSPs and Suppliers are in compliance has still been lacking. Extensive use of technology for tracking and notification related to compliance can help significantly.
Overall on Boarding Time is High
- Walk-in style interviews and Quick Feedback: For some government agencies, we have witnessed interview feedback that takes 2-4 weeks. By that time the candidate is no longer available, thus the Recruitment Cycle has to restart. Instead of spreading the interview process across 5-7 days, and giving feedback after 2- 4 weeks; if the HM can manage to squeeze all interviews inside 1- 2 days, candidates can be offered positions quickly. Whenever clients have shown urgency in interviewing and offering, we have seen MSPs, Suppliers and Candidates realize the urgency and act accordingly. This could surely lead to reduced overall on-boarding time.
- True Multitasking vs. Traditional Multitasking: If time is of the essence for the client, making sure that the MSP has a sizable number of processors (resources) allocated to handle true multitasking. It is also crucial to identify and choose the right supplier base that has the capacity and technology to do true multi-tasking of sourcing, interviewing, follow up, rejection, offering, and on-boarding stages concurrently and smoothly.
- No Notice / No Knowledge Transfer: Some of the retention and engagement techniques discussed earlier in this blog might surely help to avoid consultants leaving projects without giving proper notice.
Challenges faced by MSPs
Resistance from stakeholders buy-in for MSP programs
One MSP Manager shared what her team has been successfully doing:
- Involve key stakeholders early from various departments.
- Show value of the MSP model with case studies and success stories.
- Do not Drop Statistics; Drive them Home – Simply listing statistics is not enough. You must interpret them so that your client understands the significance of stats to them.
- Exchange hats to bridge gaps: Thinking about questions, concerns and challenges you might have as if you are the Procurement Manager or HM; it will be easier to understand real reasons behind resistance from other parties and help to simplify and solidify your solution.
Hiring Managers or Suppliers try to work around MSP System
- HMs work around: Some HMs are unable to get the right resources from existing small number of approved suppliers, some HMs have direct relationship with some suppliers, some HMs did not buy-into the MSP program and were forced to use new MSP programs – these might be a few of the reasons why HMs try to work around MSP programs. Considering HMs as important stakeholders is very crucial because they are the ones who will be using the program. MSPs need to make every effort to get buy-in from these key stakeholders.
- Suppliers work around: There are some perceptions among some Suppliers that other Suppliers are bypassing MSPs, other suppliers are trying to connect with HMs to realize undue advantages or other suppliers have more information than us and hence they are successful. With these perceptions, some suppliers think bypassing the MSP might be more beneficial to their company. Too often these instances prove to be more assumptions than reality. Educating Suppliers and strict Program Enforcement Policies might help. Please share your ideas to discourage work around.
Approval of Reducing Supplier Size
- How one of the Top MSPs reduced their supplier’ size from 100 to 8: While working for her new MSP program, her team worked rigorously for the first few months to collect existing procurement data to identify high performing suppliers. Based on this information, the client reduced suppliers from 100 to 30-35 suppliers. After reducing from 100 to 35 suppliers, she identified suppliers based on the client’s niche skills. In another 3-4 months suppliers were reduced to 20. The real challenge started while reducing suppliers from 20 to 8, as by now some suppliers had a few placements and were also favored by clients. However, they do not fall under the strategic plan for the success of the MSP program. Her team presented a case study based on their past experience and other industry best practices to show how MSPs are performing with 8 suppliers and 20+ suppliers for similar type of clients. This presentation with case study helped clients to foresee benefits from reduced supplier base and reduce supplier size.
- Key take away from this MSP’s experience was Statistics, Statistics, Statistics: Share statistics, with case studies, to present your case to key stakeholders. Let clients take their time to get comfortable and do not rush them. Use Big Data Analytics of existing client’s data to help them make a decision to reduce size rather than MSP making a decision for the client.
- Supplier Tier approach: Rank suppliers based on their current performance. Non performing suppliers go to Tier II system. Opportunities will be available to Tier II suppliers; after few days they are released to Tier I suppliers. Bottom 50% performers from Tier I and top 50% performers from Tier II will be switched annually. This approach will not only allow clients to keep some of their preferred non performing suppliers but also allow MSP suppliers to fall back to Tier II suppliers when Tier I suppliers become inactive or leave the program. Some successful MSP programs are using this approach quite effectively in government sectors.
No feedback for good candidates submitted or interviewed
- Quick and Easy Feedback App: This burning question was raised by a supplier during another session at VMSA Live Florida. A leading MSP has recently launched a mobile app where an HM has to select a rating for a particular candidate – basically a feedback at HM’s fingertips. This might not be sufficient feedback but is definitely a welcome start. Once it is successfully adopted by HMs, this quick feedback system can be extended to provide the HM with a rejection reason drop-down menu for quick selection.
- Review HM: After getting key stakeholders buy-in, the same MSP has implemented a process to review HM’s performance to track how well the HM is providing feedback on submitted or interviewed candidates. So if the HM complains that quality of submission is not good or they are not getting good submissions, MSP can go back to HM and explain that one of the reason is lack of feedback on resources from his/her end. They can also use statistics to show that a HM who has provided more feedback has more chances of getting better resources quickly.
Less engagement or participation from suppliers for difficult requirements
- Collaboration of Recruiting intelligence and Project intelligence: One of the ways to engage suppliers for difficult requirement is to have an HM join on a call with Suppliers. During this forum, Suppliers can share real market data concerning the availability of local candidates, any specific skill sets from requirements which are hard to find etc. Based on this market information, HMs can share information about which skill sets can be compromised. This interactive session might help to engage suppliers, modify requirements quickly and close difficult requirements without reopening multiple times.
Challenges faced by Suppliers
Unrealistic contract terms
- Negotiation vs. Bargaining: Negotiation expert Jack Kaine explained during the Negotiation seminar at VMSA Live Florida to negotiate but not to bargain. Make the pie bigger for a WIN-WIN scenario by adding variables and parameters for negotiation, which might just allow ways to work on some concerning terms and reach agreeable terms for both supplier and MSP/Client.
- MSP educating Suppliers: Instead of using a “take it or leave it” approach, one of the top MSPs has a dedicated contract specialist who educates Suppliers, understands their specific challenges and works with them to bridge gaps. Most of the time suppliers have to agree to contracts, but once they thoroughly understand why a specific clause is written from an MSP/Client’s perspective, it will be understood that more than often it is actually acceptable and realistic.
- Exchange Hat and Open for change: When MSPs/Clients wear the hat of the Supplier, they are better able to understand their challenges. If more than 50% of the suppliers have concerns about a specific clause, there is a high probability that the contract terms might be unrealistic, thus the client/MSP should be open for change or negotiation.
Price issue (Program cost, VMS fees, discount trickle down to Suppliers)
- Efficiency through automated and standardized processes: At vTech, we learned early that if you want to be successful and compete with other business, the most important key is that your business should be able to run smoothly even when a key employee leaves the company abruptly. With this vision in mind, we standardized and automated processes. This not only helped us to reduce dependency on key personnel but also helped us to improve efficiency, cut cost significantly to help us and our partners – MSP/clients.
- MSP present Supplier case with statistics: During one of the sessions at VMSA Live – “How we tried to implement $550 MM Global MSP program and failed”, a client shared that they had 3 suppliers dropped out of the final 4 suppliers. Instead of investigating why they dropped out, they continued with the program and eventually failed in that program. Despite improved efficiency, automated process and offshore recruitment, there are some MSP programs with such terms, program cost and discounts, those are almost impossible to work with and maintain quality. In these scenarios, MSPs might want to identify early trends if suppliers are dropping out or showing a lack of interest. In fact, they should not wait too long but listen to the concerns of suppliers early-on, share their concerns and statistics with clients for a win-win outcome.
- Exchange hats to bridge gaps: Have an open, transparent brainstorming session between Clients, MSP and Suppliers with their hats exchanged to share and learn about each other’s challenges and concerns. This might open doors for negotiations where there is a real need to help out suppliers in rate or program cost, especially, for the programs where margins are significantly low.
Ambiguity in Job Requirements and Frequent reopening of requirements 
- Collaboration of Recruiting intelligence and Project intelligence: Recruiter has access to market information and the PM has access to project information, team culture and the future vision of project. Having collaboration between these two parties can fill this gap significantly.
- MSP Best practices: Suppliers should have annual conference with PMs, meet various teams and visit departments. PMs should participate in conference calls to discuss difficult requirements. Suppliers also need to appreciate the opportunities given by MSP/Client to meet PMs and should not misuse this opportunity to work directly with PMs or work around MSP program.
- Connect with MSP: A manager from one of the top MSPs encouraged and emphasized cooperation with MSPs, instead of complaining about not having access to HMs. Often focusing too much on HMs, suppliers miss the trick by not reaching out more often to MSPs. If the Client or MSP insists on having no access to HMs because of policy, supplier should respect it and use the right channel of MSP to exchange and unlock access to the right information.
- Google it: One of the top MSPs kept it very simple and blunt – “Quite a bit of information about project, team culture, vision and plan of project/department is available at your fingertips with Google, social media and client websites. Use it extensively to become more successful and less reliant on information from HMs or clients”.
The session covered diverse challenges, proposed solutions and various key eye-openers. Involvement of Clients, MSPs and Suppliers at VMSA Live Florida made unprecedented difference. The attendance and interactive discussion for bridging gaps and taking responsibilities between Clients, MSPs and Suppliers was very encouraging and shows eagerness from all parties. We truly appreciate all those who participated and helped in making this interactive session a success.
What solutions you or your company have implemented to address some of the challenges listed above? What challenges does your company faces in the MSP model which are not covered? Please submit your comment to continue our discussion and journey to take the MSP model to the next level for a win-win scenario for everyone.
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