The purpose of Vendor Management Systems is to establish a connection between staffing agencies and the companies they serve in a way that (presumably) levels the playing field and increases competition between agencies.
When properly leveraged, VMS staffing can be incredibly fruitful. There are opportunities to make more placements, not to mention the fact that VMS contracts are typically longer than traditional placements. But be warned: the VMS world is highly competitive, and anything short of a comprehensive approach could be a waste of resources. Before you jump in headfirst, you need to determine whether or not pursuing VMS clients is even worth your time.
Do You (want to) Have What it Takes?
First off, it’s important to ask: what kind of firm are you? What is your market? Do you service multiple industries, or something more specific (i.e. IT, medical, engineering, etc.)? Are you looking to make more placements, or develop closer client relationships? The truth is, VMS isn’t really based on relationships, it’s based on data. So if your firm is of the traditional ilk that strongly emphasizes client relationships, then you’ve got to change the way you play the game.
Since VMS’ are vendor-blind (or supposed to be, anyway) you’ll be spending a lot more time trying to fill reqs as quickly and successfully as possible, not wining and dining hiring managers to keep in their good graces. In order to remain successful, you’ll need to allocate resources and have recruiters dedicated to securing placements within the VMS with the goal of becoming a Tier 1 vendor (frankly, the only tier that matters).
On average it takes staffing companies about 6 months to start seeing a return on investment in VMS clients.
What’s a Tier 1 vendor, you say? Within a VMS program, a firm’s reputation is based on a tiered system. Staffing companies are given a scorecard, which are usually ranked and organized by the Managed Service Provider (MSP) into different tiers based on their performance and placement rates. Tier 1 gets premium, early access to open positions which gives them a head start when it comes to placing candidates. But in order to keep an elevated tier status, firms need to meet a certain amount of “coverage” (among other requirements). A firm has to respond to a certain percentage of open positions provided by the MSP within 24-48 hours in order to maintain their rank.
“To keep our clients in Tier 1, we regularly maintain about an 80% coverage or more,” says Sajeed Mohammed, Delivery Manager at 247Hire. “This means responding in some form or another to at least 8 out of 10 the open positions sent out by the MSP.”
“VMS staffing yields a higher volume of open positions,” says Charlie Denys, Sales Director at 247Hire. “But it has a much lower placement rate at around 10% where as non- VMS staffing has conversion rate upwards of 40%”.
In other words, if you’re a firm pursuing VMS accounts, then you need to properly invest in that pursuit for the long-term in order to maximize your ROI. If you’re not committed, you won’t get far— you’ll miss out on placements and you’ll fall down the tier rankings. Plus, on average it takes staffing companies about 6 months to really start seeing a return on investment in VMS clients.
A Smarter Way to Work the Program
To effectively manage your resources for success, your best bet is to invest in an offshore partner experienced in working within a VMS. It’s not worth having your onsite recruiters chase VMS placements – you’d be better served by putting their skills to work on candidate engagement and loyalty-building.
And don’t be surprised to find your onsite recruiters dodging those VMS reqs, unless your commission plan specifically addresses your VMS client business. Profit margins associated with VMS placements are on the lower end when compared to classic placements. Lower margins mean lower commissions, which mean less incentive and more recruiter turnover.
Redirecting your staff toward VMS accounts also means additional training, which isn’t the best use of their time. Furthermore, additional training means a longer ramp up before you’re meeting the high demands of a VMS client. But by partnering with an offshore provider that already has success managing VMS staffing on behalf of their clients, your firm can jump right in.
No Half Measures
Deciding whether or not to get into the VMS game really comes down to where your priorities lie as a staffing firm. If you want to diversify your business and the types of industries and job roles you serve, then perhaps VMS could be an avenue for future company success. But you can’t do it half way; if you want to get your slice of the VMS pie and secure those longer contracts for you and your candidates, you need a complete, long-term approach. VMS accounts demand dedication and proper allocation of your firm’s resources to reap the full benefits.
Interested in learning more? Since you’re already here, why not check out the success stories from some of our clients!
“We were at a critical crossroads with VMS. Could we take the steps needed to increase our competitiveness in the VMS space? With 247’s optimization of our recruitment management process, the answer was a resounding ‘yes.’ Today VMS is a thriving and profitable part of the EDGE offering.”
