One of the challenges that comes from being a service provider known for long-term client retention is being involved in customers’ operations long enough to grapple with the problems arising from program maturation. Everyone knows the “honeymoon” period for a new VMS/MSP solution occurs in the first year or so, during which the low hanging fruit of process improvement, clarified rate visibility and other benefits are captured. It isn’t until the second or third year into the program that customers can sometimes begin to experience diminished returns from their VMS/MSP initiatives. This isn’t because the solution grows less effective. It is almost always because the underlying assumptions and business requirements are no longer what they were when the program was first designed and deployed. This guest post, penned by DCR Workforce vice president, Richard Snider, explains what organizations in this position should do to address the malaise of year-three programs.
Richard Sniders' Solution:
"Your results have flattened out. Your savings are diminishing. You’ve reached a point where adding new categories has been exhausted, or you’ve given up the battle on IT, statement of work (SOW) and other non-employee categories. What’s your next move?
The difficulties of sustaining the results gained early in an MSP/VMS (managed services provider/vendor management solution) have been experienced by the best-run programs. Squeezing every penny and every process requires a phenomenal partnership between managed services provider (MSP) and client, as well as with the MSP and vendor base. It also requires a complete cooperation between the departments touched by the transactional processes, such as accounts payable, accounts receivable, IT and cost accounting. If you’ve cleared those milestones, perhaps it’s time for a re-launch.
|When you look around and find that your program is not seeing any improvements, that’s the biggest indicator that the time for a re-launch has come. But how does a re-launch help? Simply put, it focuses rational thinking on “How can we gain savings?” vs. “Why are we not getting savings?” – and the distinction, while subtle, is crucial.|
Stagnant results are a mathematical inevitability; it’s going to happen whether you like it or not. In fact, many MSP/VMS solutions may see cost increases due to a more constrained market. Those programs are being pressed to find savings, however they may not have any left due to being mature. One reason for this is the use of year-over-year comparisons in a market that is growing its reliance on flexible workforce resources and changes in regulation. Simply put, the cost to supply is increasing.
One great example is bill rates. MSPs agree to terms and rollout rates to vendors who may put up resistance, agree or opt out of the program altogether. Remember, these are rates the MSP has agreed to deliver against, not the vendors. Your vendors may no longer be on board. Is your MSP shifting the burden of their pricing by relying on underperforming vendors?
Another related cause of stagnation may be that the costs have risen significantly: in pay rates, statutory costs and the cost of delivery due to changing compliance. There’s very little room for investment and resources to update or to create enough monetary motivation to do either of those. Your stagnation may be caused by your agreements and the lack of ability to invest in improvements of magnitude.
Is it time for a re-launch?
The million-dollar question is: Is it time for a re-launch? When you look around and find that your program is not seeing any improvements, that’s the biggest indicator that the time for a re-launch has come.
But how does a re-launch help? Simply put, it focuses rational thinking on “How can we gain savings?” vs. “Why are we not getting savings?” – and the distinction, while subtle, is crucial. The former is forward-looking; the latter is backward-focused in light of the changing market. That phenomenon may reflect on your quarterly business review (QBR) agenda whereby you spend 45 minutes on past performance and 15 minutes on future innovations.
Re-launching your MSP may not require a change in provider, in fact it may be more prudent to retain the current provider if they have met their obligations and are offering new approaches. Creating new energy can take several forms and may seem to cost more, but compare those costs against savings and cost-avoidance elements of your program. You could also try to re-brand, re-organize, add new technology by adding functionality to or implementing a more robust vendor management solution (VMS) and/or create new directions for your program.
Remember, HR leaders are seeking ways to deliver innovation, reporting and business gains back to the business. Procurement is seeking vendor savings, engagement, technological updates (automation) and ways to send financial gains back to the business. Start there for ideas.
I’ve found that most MSP directors can name three areas of the business that can benefit from an improvement within their client’s program. However, there are often systemic barriers to implementing those and/or cultural hurdles to getting access to those innovations. A major source of great improvements may be your current provider. If they don’t have any ideas, then perhaps your stagnation is within your solution or vendor.
How to overcome stagnation is well documented. Shaking things up can work, but often doesn’t work. In Iowa they call that “putting lipstick on a pig - it looks nice, but it’s still a pig.” By that, I mean cosmetic changes may have short-term results, however they’re unsustainable over the long-term. What works, typically, is a strong, formal approach to innovation. Here are some ideas to consider:
• Ask your vendor for unfiltered recommendations.
• Hold a brainstorming session with those who operate within the processes.
• Go outside the organization to discover best practices.
• Review the technology from a marketplace perspective.
• Look at your metrics and see if they’re still meaningful.
• Review the overall objectives of the program to see if they’ve been met.
• Look at benchmarks to see if actual improvements and progress has occurred.
• Ascertain if your vendors and stakeholders are empowered to create innovation.
Those are just a few suggestions, some of which may add no costs or might be simple, sunk-cost exercises. If there are actually no improvements to make, perhaps expecting those results is the root cause of the tension you’re feeling about performance that isn’t budging. The optional re-launches are to bid-out the program, convert it to an in-house solution or to abandon the program and attempt to retain the processes at a manager-autonomous level. However, those will add significant costs and the solution may not create the energy you’re seeking. It may look different, but it’s still your old MSP.
If your program is experiencing stagnation, let me help you pinpoint where the bottleneck may be and help you to get more from your MSP/VMS solution, including how Smart Track VMS can alleviate stagnation."
Richard is a veteran of the staffing and managed services industry who brings data, processes and results to engagement. He’s a Six Sigma enthusiast with genuine curiosity for how to make things work better relative to client expectations. Richard contributes to youth education programs and youth sports because he believes healthy, positive competition builds strong leadership and teamwork skills. He also enjoys a good lateral thinking riddle.