Human Resources: The 4 “Must Haves” of the Next Generation Vendor Management Solution Providers

Despite the downturn in the economy I still find myself spending a lot of time consulting with recruiters and hiring managers that are working with recruiters and various vendors. Some companies see this as a buyer's market and savvy hiring managers, especially those with multiple job openings or from companies that traditionally have seasonal hirings, are usually good negotiators so 35% fees are the exception, not the rule.

However, for companies that have openings less frequently or newly staffed HR management, a good recruitment firm with a seasoned recruiter can still make a high fee sound like a bargain because of their well honed sales pitch.

Enter what I call the “Aggregators”.

Let me back up a little. With the advent of the internet and job boards such as Monster, jobs that were posted online led to hiring managers being buried in resumes. Innovative software providers solved the problem by creating SAAS applications that filtered through the myriad of candidates to find just the right one…or not.

Truth be told, smart hiring managers know that sometimes the best candidate for the job isn’t already looking for a job. So their resume isn’t out in cyberspace just waiting to be plucked. Sometimes the perfect candidate for a position is already gainfully employed somewhere else and blissfully unaware your perfect position even exists, so they’re simply not looking.

Enter the recruiter. An employer posts a job and hires a recruiter to find him or her the perfect fit from not just the actively searching pool, but also from the “passive” workforce. Meaning people who, presented with the right opportunity, would jump ship to another employer for an opportunity they consider “better” in some manner.

Contracting a mega-recruiting firm with an army of recruiters is one way. Hiring a single internal recruiter with a huge network of the right contacts in your industry might be a better way. Signing up your own army of highly specialized recruiters that can populate your application tracking software with only the highest quality of candidates makes the filtering process even easier.

However, in most cases the latter requires finding and qualifying recruitment firms, negotiating multiple contracts and the results are that the HR manager finds themselves managing more operational issues with multiple recruiters with multiple rates. More time consuming then ever and less productive.

So…like I said earlier, enter the ‘Aggregators.’ The next generation of staffing applications and services especially designed to manage not just the hiring manager to multiple applicants relationship, but the “one to many” hiring manager to multiple recruiters to multiple applicants relationship.

The concept itself is really not that new. Staffing agencies themselves have been trying to provide this service for some time now. Take for example a large staffing agency connected with an employer whose requirements span across multiple industries and geographic locations. Alone, the agency cannot handle the task, so in an effort to become the ‘exclusive’ provider and not lose the account, they started creating vendor management solutions.

The first time I heard of a staffing agency providing staffing vendor management services, a million questions went through my head such as who determines what agencies work which jobs? Who negotiates the fees? How is the bottom tier recruiter effective without direct contact with the hiring managers? Who decides which candidates are submitted and which ones are not? All of these questions lead to the ‘exclusive’ staffing agency having a lot of control over what the employer does. And the answer to all of these questions usually depend on what best benefits the vendor (who happens to also be a staffing agency) rather than the employer.

Companies like BountyJobs, TALENThire, Dayak and Talpro offer an alternative to outsourced contingent recruiting. Instead of dealing individually with several different agencies across all applicable industries and the headaches that brings - such as different accounting and invoicing, different tracking and submission procedures, different service fees, writing multiple monthly checks and so on - this new breed of provider empowers an employer to manage all forms of agency relationships, including direct hire, contract labor (temporaries) and contract-to-hire, all through a single ‘vendor neutral’ service.

Of the four vendors mentioned above, BountyJobs, the New York City based company with a distinctly “cowboy” flavor seems to be the biggest player, touting 10,000 active headhunters and 20% of the Fortune 500 as customers. However, bigger isn’t always better even if you are part of the Fortune 500.

Talpro also seems to be a stand out. Eden Britt, Global Lead of Talent Attraction at Cisco said that “Talpro will enable Cisco Partners to gain access to a number of preferred suppliers across the US specializing in networking and sales recruitment. Talpro’s solution will offer reduced agency rates enabling [Cisco partner] companies to save up to 40% of regular agency fees, combined with the efficiencies of full US agency coverage and access to hundreds of thousands of candidates.”

Talpro’s niche seems to be their ability to quickly and effectively put together these cost saving programs for organizations of any size and work more directly with clients.

So what do you look for in an effective vendor management service?

1. First and foremost is no cost to the employer. Best of breed vendor management services (VMS 2.0) providers earn their fees from a pre-negotiated percentage of any fees paid to the recruiters after the hire is made, so their success is based on the quality of candidates they bring to the table.

2. Ability to negotiate lower staffing fees. While the answer is yes to the question of whether these vendors earn more revenue on higher recruiting fees, you should look for a vendor that is not only offering to take away your outsourced staffing management headaches, but also reduce the fees you are currently paying by negotiating lower fees with your approved vendor lists. By reducing the fees you are paying, you will see an immediate decrease of budget consumption.

3. Approved staffing vendor list management. Some of these vendors just simply give you access to a specialized job board full of recruiting vendors just waiting to overwhelm you with their requests and candidates. A true vendor management service actually manages your vendors allowing you to focus on your job functions. These vendors will consult with you, analyze your recruitment needs and help you build a smaller more manageable list of approved agencies. Furthermore they will monitor the performance of the current vendors and act as a buffer between your staff and non-approved vendors soliciting sales calls.

4. Live one-on-one interaction. A truly dedicated provider will offer one on one assistance to your HR department and hiring managers not just a way to shotgun your requirements to hundreds of eager recruitment firms.

The bottom line is that your efforts and cost should reduce and your productivity should increase. Your vendor management service provider should present themselves to you as a partner who is truly seeking to reduce your costs and make your organization more effective by streamlining your contingent recruiting efforts.

At no cost for these services it should be a “no-brainer” for most companies to implement especially in these hard economic times. My advice is to quit wasting money paying large fees and use the leverage of buying power these VMS providers offer.

About the Author: John Logan is a freelance contributor to HR.com and is currently the Chairman and CEO of SafeGuard Guaranty Corporation, an insurance company; former President of Business Benefits Solutions Network, an employee benefits and insurance consulting company; and the former Director of Global Operations for Peopleclick, an HR software provider. John can be reached at john.logan[at]safeguardguaranty.com.