Making sense of the Staffing Alphabet Soup
At a CIETT conference a few years ago one of the industry speakers referenced the “Alphabet Soup” when talking about the growing number of acronyms in the staffing industry. It’s a very apt term and one that is becoming more applicable in the South African market. Getting to grips with the terminology is key, especially as many large corporates most notably multi-nationals are adopting these staffing models.
What is driving this change?
In today’s complex environment, companies are opting to focus on their core business, choosing to partner with other specialists when it comes to managing non-core elements. Think about how many companies outsource cleaning, security or IT. It was therefore to be expected that parts of the HR process would follow suit.
Decision drivers include: - outsourcing as part of the overall company strategy, reduction in costs (variable vs. fixed), access to specialist skill, knowledge and experience and enhanced business performance.
And whilst the initial knee-jerk reaction of recruiters might be that the client is changing the rules, there are definitely advantages for those offering (or participating in) MSP, RPO or BPO services. Most notably would be the shift from transactional service provider to partnership model.
Master Vendor (MV)
The concept of a Master Vendor (MV) is familiar to most South African recruiters as large companies, particularly those with multiple offices across different geographical locations, choose to appoint a Master Vendor. A single company that is given preference to provide labour and/or permanent recruitment services to the organisation. In most cases, the MV will be given first option to fulfill the client’s requirements but can also utilise sub-contractors to assist where necessary.
Recruitment Process Outsourcing (RPO)
RPO comes in many shapes and sizes, from end-to-end (organisation wide) to focusing on specific divisions or categories of jobs or levels of employment. It can also be structured in a variety of ways from full functional outsourcing, in the case where the organisation has no department internally, to outsourcing specific parts of the hiring process, management of permanent recruitment agencies through an MSP model or event customized solutions to specific client challenges.
RPO is typically structured to utilise technology effectively to manage quality of service and compliance to standards. It focuses on reengineering processes to shorten timeframes, improve effective recruit Unpacking Managed Service Provider (MSP)
Labour costs are a significant expense for most organisations and in today’s complex labour market where organisations have a mix of permanent, contract, temporary and outsourced labour, keeping a handle on this can be difficult. Employing a Managed Service Provider (MSP) means the client has a single Service Level Agreement and only has to manage the performance of one supplier, whilst reaping the benefits of accessing multiple sub-contractors.
Benefits for the Organisation include:
· Risk mitigation through increase compliance
· Cost saving (market rate management)
· Access to Talent in an efficient, quality controlled way
· Full standardised reporting on costs
· Enhanced workforce planning and decision-making
Benefits for participating Agencies include:
· Even/fair playing field with standard rates and service delivery
· Reduced cost-to-serve (leveraging MSP technology platforms)
· No chasing of payments
· Access to more opportunities
Neutral or not?
There are typically two types of MSP/RPO – a neutral one, i.e. one that simply manages the process and the providers and does not participate in the provision of labour or candidates, and ones that also supply. Whilst there is no evidence that one is better than the other, it is clear that in cases where the MSP/RPO is also competing with sub-contractors (or providers) there needs to be a clear understanding of the process and service level agreements, trust, and high integrity and ethics.
Business Process Outsourcing (BPO)
BPO Solutions, outside of MSP and RPO, are often more difficult for employment agencies/staffing firms to develop competencies (most require expertise in a specific business process) not related to acquiring talent. Despite the industry into which the BPO is being offered, there are several commonalities, including:
· demonstrated expertise in the service or business process being managed;
· “Ownership” of the responsibility to deliver outcomes;
· not priced by headcount (hourly wage) but by management fees on deliverables and outcomes achieved;
· governance by KPI’s, SLA’s and most often expected cost saving;
· in addition to work product (outcomes), it is typical to expect BPO provider to be responsible for providing facilities, equipment and/or other components to deliver the programme
In today’s complex labour legislation framework there is a fine line between BPO and temporary employment service provider and in certain industries, opting for the true outsourcing model can eliminate issues relating to the “deemed” provision and other technicalities as workers are employed (and supervised directly) by the BPO and there is no employment relationship with the client.
The market is changing – or has changed – and it is up to you whether you decide to adapt. There are of course opportunities to continue to offer services as you do today, avoiding these programmes altogether, but it may limit your ability to service large, especially multi-national companies.
If you want to get ahead, consider how you can:
• Build competencies to be a provider of RPO/MSP/BPO; and/or
• Participate as a staffing/perm placement agency to support these programmes;
Understanding the A, B, Cs
Business Process Outsourcing (BPO)
Contracting the operations of a specific business process/function to a third party service provider (usually non-core functions) who is responsible for agreed upon outcomes and deliverables. This often happens within the call centre or distribution centre environment where outputs can be easily measured.
Recruitment Process Outsourcing (RPO)
A form of Business Process Outsourcing where an organisation transfers all or part of its recruitment process to a third party service provider (recruitment/hiring process for its full time, permanent workers)
Managed Service Provider/Program (MSP)
A form of outsourcing where a company chooses to contract with a third party to provide the management of its contingent worker program and its suppliers of contingent (temporary) labour. This has of late also come to refer to a third party managing permanent recruitment for the organisation including vetting and quality management of sub-contracted permanent recruitment agencies.
Vendor Management System (VMS)
An internet-based technology that provides both sourcing and billing applications to enable procurement and management of suppliers of contingent workers, the on-boarding and off-boarding of contingent labour, time and expense keeping, consolidated billing and reporting. May be used with an MSP, or used internally by the organisation. May also be used to manage permanent placement suppliers/services and statement of work (SOW) services.
Applicant Tracking System (ATS)
Technology that integrates with the HR information System (tracking perm employee data) which specifically focuses on the management of candidates and housing a pool of candidates inquiring about potential perm employment. The ATS is often linked to a career portal on the company website, that may allow candidates to apply online, undergo initial screening/assessments, self-schedule an interview and (if hired), be on-boarded using electronic documents and email notifications.