BEHIND THE CURTAIN…The untold story of Vendor Management Systems

Once upon a time….

In the past, companies who needed contract Engineers, or other temporary or contingent labor would contact a service who specialized in this function; and, that service would earn the company’s business by finding qualified individuals who perfectly fit the job requirements, in as short a time as possible.  Small services grew their businesses by providing faster, friendlier service, and higher quality candidates than their competition.  The longer a service worked for a client the better they knew individual managers and their particular needs; and, the stronger their “pipeline” of qualified candidates for that business sector became.  I wish we were back there. “There’s no place like home….there’s no place like home.”

Enter the Wizard….

While businesses have always looked for greater efficiency and cost control in buying goods and services, and VMS tools have been used effectively to accomplish that, it is a fairly recent development to use them for staffing solutions.   In the past 10 years we have observed and experienced, first-hand, the proliferation of Vendor Management Services being utilized to manage contingent staffing.

For the uninitiated, VMS are internet-enabled tools, administered by groups who function as intermediaries between clients and staffing suppliers.  They act as a mechanism for business to manage recruiting functions.  Although some VMS are utilized for “Direct Hire” recruiting, they are primarily sold to companies who utilize large numbers of contingent staff and who are receiving an influx of resumes from several service providers simultaneously. Since it requires an internet connection, the help of companies like business internet providers uk are very much needed.

The VMS distribute job requirements to recruiters and other vendors, track date and time of incoming resumes, log time cards and simplify payment by enabling the client to write one check instead of many.  Ideally, a VMS facilitates the interview and hire process, time card collection, approval and payment – and off-loads this responsibility from Human Resources.  So far, so good.

Behind the curtain….

Just as Dorothy and her companions were shocked to see the little man behind the curtain instead of the all-knowing wizard, some will be surprised to hear the “behind-the-scenes” story of Vendor Management Systems.  Indulge me while I tell you a hypothetical story of little Dorothy, Inc. and what happened to them.

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Once there was a small contingent staffing group named Dorothy, Inc. who had been working for one site of a national company, Glenda, Inc., for 10 years – providing design engineers, technical writers, etc.  Dorothy recruited and referred qualified candidates, many of whom were interviewed and hired by Glenda, Inc. for their full time workforce. Glenda, Inc. was a valuable client of Dorothy and represented a healthy part of Dorothy’s business base.  Dorothy knew all of the hiring managers in the company and all four of the persons in the Human Resources Department – considering them friends as well as clients.

The tornado….

One day Dorothy received an email from a yet unknown group, ZZZ, informing Dorothy that Glenda, Inc. had entered into a national agreement with them for their Vendor Management System.  Henceforth, instead of receiving open positions from Fred Smith in HR, Dorothy would be logging into ZZZ’s “tool” for the job description and pertinent details.

In a few days a contract was sent to Dorothy by the new VMS.  This contract stated that all payments from Glenda, Inc. to Dorothy Corp. would, from this day forward, have 3% deducted for the use of ZZZ’s “tool”.  In addition, Dorothy would no longer be receiving payment from Glenda, Inc., but that it would now come through ZZZ. ZZZ promised that payment would be forwarded on to Dorothy no later than the 61^st day, although Dorothy had always had 30 day payment terms with Glenda, Inc.. The contract listed new insurance requirements including types of insurance that Dorothy had never bought before.  After all, Dorothy only provided Engineers and Designers who sat at desks, were not allowed to drive company cars, handle money, or sign off on project work.  Another contract clause stated that from then on Dorothy, Inc. would not be allowed to have their name associated with their candidate.  No logos or recruiter names would be allowed on the resume.   And from then on pre-employment drug screening would not be done by Dorothy’s faithful vendor, but rather, must be processed by a subsidiary of the VMS.  Lastly, the most heinous clause of this contract stated emphatically that Dorothy, Inc. was, henceforth, forbidden to speak to any of the hiring managers or HR Managers at Glenda, Inc.  All questions were to go through ZZZ Company.

The field of poppies…..

Dorothy was told that ZZZ’s “tool” would greatly simplify time card processing and billing.  They were told that ZZZ had many other clients and that if Dorothy scored well on ZZZ’s metrics, they might very well be invited to recruit for those clients as well.  Dorothy was told that the VMS was “vendor neutral”, meaning that no service would have an advantage over the others,  “Somewhere, over the rainbow, skies are blue, and the dreams that you dare to dream really do come true.”

The castle of the wicked witch….

Effective within one week, Dorothy, Inc. lost all contact with its client of 10 years; lost 3% profitability for the use of the VMS, and 2% for the cost of the extra month before repayment; had been forced to learn the new time card and billing system, which sat atop Dorothy’s own system for payroll and billing, effectively doubling Dorothy’s back-office work.  Then, in a teleconference where participants were not allowed to ask questions, it was announced by ZZZ that it would be inviting numerous other services into the VMS; and after the hourglass ran down, those with the lowest prices and highest national placement numbers would be retained.  Oh, and the hourglass was running.  If little Dorothy, Inc. didn’t have good numbers they would be, as Heidi Klum says, “out!”  

It was within the first month that the problems began to occur.  The job descriptions in the VMS were incomplete; pay rate ranges, business sector, or job location might be missing.  Time cards in the VMS system didn’t match Dorothy’s time cards, and when Dorothy called to get it straightened out, the Account Rep provided by ZZZ didn’t answer his phone. As time went on, it became obvious that that poor account rep didn’t know what he was doing.  Well, maybe he just didn’t understand Dorothy’s business, or maybe he didn’t understand HIS business.  Or, maybe he was missing a heart and a brain. He definitely didn’t understand that different states have different tax and Workers Comp requirements. He arrogantly insulted Dorothy’s recruiters and owner alike.

Drug testing and background checks through ZZZ’s subsidiary became a “nightmare” of waiting days for results which Dorothy used to get from their own provider within 24 hours.

It appeared that Glenda, Inc. had fewer openings in the VMS system than expected.  Could they have become lost in the VMS system?  Calls to friendly competitors indicated they were receiving some open positions that Dorothy wasn’t getting – but overall they too were getting far fewer positions than before.  What was the reason?  Was the bad VMS eating the open jobs?  NO!  The bad VMS company, who had assured little Dorothy and the rest of its VMS participants that the VMS system was “vendor neutral”, was holding the positions for three days to a week for its own company to fill before “releasing” them to the “vendor pool”.  Oh, unfair VMS!  Unfair!

Each year of participation in the Vendor Management System the insurance requirements became more over-arching.  Dorothy’s insurance costs per year increased to three times what they were before the VMS took over.  Poor little Dorothy, Inc.

Most shocking of all, ZZZ asked Dorothy to utilize questionable wage and hour practices with employees to whom offers were made. That was probably the straw that broke the Scarecrow’s back!

In the end, that bad old VMS/ MSP outright threatened the owner of Dorothy with expulsion because they guessed that Dorothy was doing that most forbidden of all things – talking with the client.  “Who would have ever thought that a good little company like yours could destroy my beautiful wickedness?”

In the end, Dorothy was glad that she’d been courageous on the VMS yellow brick road; and proud that she’d kept her heart for her client pure and true.  But, as she clicked her ruby slippers, she vowed to use her brain in the future when dealing with companies like ZZZ.  “There’s no place like home.  There’s no place like home.”

Almost THE END

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The events of this story are actually true!  But to be fair, it is a composite of experiences we have had in several VMS systems.

The Wizard may be charming but he’s much less impressive than you’d think.

• Ironically national Glenda, Inc. has a stated policy to utilize more “small business”, and employs several full-time people to help implement this policy.  But the VMS works against this effort and rewards the largest services.  The fact is that it is tough for the small businesses to provide the national numbers needed to stay in the VMS, even though they are perfectly capable of providing excellent service.
• Managers and Human Resources of one client-company recently told me that they are incredibly frustrated with the results of the VMS they installed. They feel like they’re working for the VMS instead of the VMS working for them.
• One of our clients recently “fired” the VMS they’d had in place for a year…that is, the Managed Service Provider who offered and administered it.
• The American Staffing Association reports that the Aberdeen Group, an independent research organization, found that only 17% of companies who have implemented a program to manage their contingent labor workforce have seen an improvement in spend and source-to-cycle performance metrics.
• There is no problem with the software, it is the way the VMS is administered.    Since the cost is born by the vendors, one would expect the middle man VMS to treat the vendors as his clients.  He needs/must act as a go-between and advocate for the vendors he administrates.  But this rarely happens. Cutting off communication between vendor and client, he can pretty much do as he wishes, and lines his pockets as he does it.
• There is no substitute for client knowledge and superior customer service.

In conclusion, we have learned a lot from the VMS systems we’ve been in.  We know better what questions to ask up-front.  Depending upon how those questions are answered, we are much more likely to simply “opt out” than to spend the time and money to “opt in”. 

So, I say, “Send in the flying monkeys! “  This is one Dorothy they’re not going to scare! On the other hand,  there’s no place like home…….there’s no place like home…..there’s no place like home!