Why Go For A Pure Vendor-Neutral Contingent Workforce Model
Advantages of a vendor-neutral solution
Posted on 03-17-2018, Read Time: - Min
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In my role as a director of procurement at pharmaceutical giant Novartis, I embarked on a project to improve the sourcing of contingent labor. It had been a problem area for some time and we knew we needed to think a little bit differently.
We ended up selecting a vendor-neutral and integrated Managed Service Program (MSP) and Vendor Management System (VMS), which we believed would help us drive out savings, reduce maverick spend, improve supplier management, shrink time to hire, speed up and give us more detailed information regarding our hiring and spend patterns as well as reduce risk. It proved to be a system that helped us do all of these things and more.
What is the advantage of a purely vendor-neutral solution?
Pure vendor neutrality only exists when the MSP or VMS provider has no affiliation whatsoever with a staffing agency. When no one staffing firm is unfairly prioritized, true supplier optimization is possible, giving the business the best cost and highest-performing talent. Creating a competitive environment for sourcing labor, while ensuring a level playing field, enables rather than impedes the use of lower cost, direct sourcing options such as independent contractors and freelancers. Finally, pure vendor neutrality means the solution provider is beholden to no one other than the client, which is the never case when the MSP can compete to fill requisitions.
Prior to deploying the chosen solution, Novartis used a staffing agency in the capacity of an MSP to source and hire contingent workers across its US operations. After assessing performance of this in 2003, significant gaps were found, particularly when it came to meeting different complex requirements of hiring managers. It was also found that reporting, sourcing and risk management was all also not up to scratch,all of which was leading to a great deal of dissatisfaction on the part of internal stakeholders. That was a situation that simply had to change.
As a result of this performance review, the team conducted a wider assessment of our contingent workforce management program. At the conclusion of this assessment, it was determined that the best solution would be a vendor-neutral model. But, we didn’t just want a solution, we required a partner who would focus their attention on:
We ended up selecting a vendor-neutral and integrated Managed Service Program (MSP) and Vendor Management System (VMS), which we believed would help us drive out savings, reduce maverick spend, improve supplier management, shrink time to hire, speed up and give us more detailed information regarding our hiring and spend patterns as well as reduce risk. It proved to be a system that helped us do all of these things and more.
What is the advantage of a purely vendor-neutral solution?
Pure vendor neutrality only exists when the MSP or VMS provider has no affiliation whatsoever with a staffing agency. When no one staffing firm is unfairly prioritized, true supplier optimization is possible, giving the business the best cost and highest-performing talent. Creating a competitive environment for sourcing labor, while ensuring a level playing field, enables rather than impedes the use of lower cost, direct sourcing options such as independent contractors and freelancers. Finally, pure vendor neutrality means the solution provider is beholden to no one other than the client, which is the never case when the MSP can compete to fill requisitions.
Prior to deploying the chosen solution, Novartis used a staffing agency in the capacity of an MSP to source and hire contingent workers across its US operations. After assessing performance of this in 2003, significant gaps were found, particularly when it came to meeting different complex requirements of hiring managers. It was also found that reporting, sourcing and risk management was all also not up to scratch,all of which was leading to a great deal of dissatisfaction on the part of internal stakeholders. That was a situation that simply had to change.
As a result of this performance review, the team conducted a wider assessment of our contingent workforce management program. At the conclusion of this assessment, it was determined that the best solution would be a vendor-neutral model. But, we didn’t just want a solution, we required a partner who would focus their attention on:
- Improving satisfaction levels among internal hiring managers through:
- The generation of a larger pool of qualified candidates
- Creating a user-friendly automated requisition/payment process
- Helping to meet budget constraints by ensuring we were paying at or below the market rate
- Mitigating the risks associated with co-employment
- Managing a pool of qualified suppliers
- Accumulating data, but also analyzing and interpreting that data and delivering meaningful reports
Success of the solution was measured in a number of different ways, but ultimately it came down to incorporating several elements to bring as much spend under centralized control as possible. That, along with consolidating the supply base, incorporating a set of consistent rules as well as developing user-friendly processes were all the indicators of whether and how successful we were.
These are the benefits we realized.
Cost savings
When an MSP is first implemented, it's relatively easy to attain 8-10% in savings during the first 12 months. However, it's when, after a few years, when the program matures that you really get to know whether those savings are sustainable and you have selected the right solution.
As mentioned, before implementing a vendor-neutral solution, Novartis utilized a staffing agency to serve as the MSP to source and acquire contingent workers in the US. However, that agency could not always meet the complex requests made by hiring managers. This was forcing them to source labor from outside of the process to find what they needed, which wasn’t a good place for either organization to be in. As a result, consistent program adoption suffered and it became very difficult to control maverick spending.This was leading to increased costs, but more than that was concerning us because of the potential increase in liability due to a lack of proper contracting.
After transitioning to the new solution, we managed to bring this maverick spend under control fairly quickly and increase program adoption, which helped us to consistently deliver around 8% year-over-year savings.
To ensure that we weren’t missing out on any other savings opportunities, every year during the budgeting cycle, we would meet with key stakeholders from the solution provider to brainstorm ideas. The provider brought to the discussions a market-wide view and an idea of how some of their other clients were making savings. They were able to offer a variety of potential different strategies and tactics, which we took into consideration. Additionally, because they were vendor-neutral, they were in a position to reach out directly to suppliers and request objective input without them feeling their ideas would be shared with competitors. Again, this brought with it a new set of ideas and initiatives, which we took into our thinking and discussions.
Ultimately, a company’s rules for savings will dictate how you can calculate them. At Novartis, we were able to capture savings through comparing current price to last price paid, process improvements, tracking contractor tenure, and applying a tenure discount to the total bill rate.
Supplier management
The assessments carried out by the team of the old model found that we had far too many suppliers. In some instances we found that the same supplier was providing contingent labor to several different divisions, but they were working under multiple contracts with varying terms and conditions. As a result, each division was paying different rates to a multitude of different suppliers. Clearly, we were lacking the necessary governance and compliance measures around workforce hiring policies.
The vendor-neutral model requires suppliers to compete for each requisition. But while this is the case, it actually enables them to focus on what they do best, namely sourcing and providing the best candidates. Vendors tend to have a set of disciplines that they specialize in in terms of supply staff, whether that is administration, information technology or more specialist labor. This model helps hiring managers identify the right suppliers to meet their requirements.
I believe suppliers find it a more positive environment to work in as well because they do not feel their proprietary data is being threatened. Indeed, suppliers are happy to go on the record about it.
Sunil Bagai, CEO, Zenith Talent Corporation has said that a“vendor-neutral program is a staffing supplier’s dream” as it“allows us to focus on finding amazing talent instead of worrying about internal competition from an MSP”.
In Novartis’ case, it actually ended up resulting in optimized supplier management because of the experience provided by the solution provider’s staff and their industry experience. They understood the marketplace and knew how far they could push a supplier to obtain the best price, but still ensure the best candidates were supplied. They were also able to work collaboratively with those suppliers who were not performing at the expected standard and either help them improve or remove them from the program and replace with a different supplier.
Co-employment risk
We built a new set of business rules into the VMS regarding length of stay policies, which were determined by division.We elected to use the systems supplier funded model. I would often hear people say that supplier funded “sounded good”, but that they knew the supplier would be “building the cost back into their pricing". We tackled this issue by mitigated this issue by installing a pricing model with the suppliers, which included a maximum markup as well as a rate card. Those questions soon went away.
Rate cards
One key responsibility of our provider was to utilize its analytics team to develop regionally based rate cards for each of the roles within our program.Again, there would be many people saying that it seemed like a conflict of interest for the provider to “develop the rate card and then get paid a percentage of the total cost by suppliers based on the rate in the rate card". However, the analytics team proved to us time and again that they had some very robust process in place to develop these rates. Analytics are ultimately essential to driving a successful program and here they proved a key part of the success because they ensured that hiring managers were paying at or below what the local market tended to dictate. Again, these questions soon disappeared.
These are the benefits we realized.
Cost savings
When an MSP is first implemented, it's relatively easy to attain 8-10% in savings during the first 12 months. However, it's when, after a few years, when the program matures that you really get to know whether those savings are sustainable and you have selected the right solution.
As mentioned, before implementing a vendor-neutral solution, Novartis utilized a staffing agency to serve as the MSP to source and acquire contingent workers in the US. However, that agency could not always meet the complex requests made by hiring managers. This was forcing them to source labor from outside of the process to find what they needed, which wasn’t a good place for either organization to be in. As a result, consistent program adoption suffered and it became very difficult to control maverick spending.This was leading to increased costs, but more than that was concerning us because of the potential increase in liability due to a lack of proper contracting.
After transitioning to the new solution, we managed to bring this maverick spend under control fairly quickly and increase program adoption, which helped us to consistently deliver around 8% year-over-year savings.
To ensure that we weren’t missing out on any other savings opportunities, every year during the budgeting cycle, we would meet with key stakeholders from the solution provider to brainstorm ideas. The provider brought to the discussions a market-wide view and an idea of how some of their other clients were making savings. They were able to offer a variety of potential different strategies and tactics, which we took into consideration. Additionally, because they were vendor-neutral, they were in a position to reach out directly to suppliers and request objective input without them feeling their ideas would be shared with competitors. Again, this brought with it a new set of ideas and initiatives, which we took into our thinking and discussions.
Ultimately, a company’s rules for savings will dictate how you can calculate them. At Novartis, we were able to capture savings through comparing current price to last price paid, process improvements, tracking contractor tenure, and applying a tenure discount to the total bill rate.
Supplier management
The assessments carried out by the team of the old model found that we had far too many suppliers. In some instances we found that the same supplier was providing contingent labor to several different divisions, but they were working under multiple contracts with varying terms and conditions. As a result, each division was paying different rates to a multitude of different suppliers. Clearly, we were lacking the necessary governance and compliance measures around workforce hiring policies.
The vendor-neutral model requires suppliers to compete for each requisition. But while this is the case, it actually enables them to focus on what they do best, namely sourcing and providing the best candidates. Vendors tend to have a set of disciplines that they specialize in in terms of supply staff, whether that is administration, information technology or more specialist labor. This model helps hiring managers identify the right suppliers to meet their requirements.
I believe suppliers find it a more positive environment to work in as well because they do not feel their proprietary data is being threatened. Indeed, suppliers are happy to go on the record about it.
Sunil Bagai, CEO, Zenith Talent Corporation has said that a“vendor-neutral program is a staffing supplier’s dream” as it“allows us to focus on finding amazing talent instead of worrying about internal competition from an MSP”.
In Novartis’ case, it actually ended up resulting in optimized supplier management because of the experience provided by the solution provider’s staff and their industry experience. They understood the marketplace and knew how far they could push a supplier to obtain the best price, but still ensure the best candidates were supplied. They were also able to work collaboratively with those suppliers who were not performing at the expected standard and either help them improve or remove them from the program and replace with a different supplier.
Co-employment risk
We built a new set of business rules into the VMS regarding length of stay policies, which were determined by division.We elected to use the systems supplier funded model. I would often hear people say that supplier funded “sounded good”, but that they knew the supplier would be “building the cost back into their pricing". We tackled this issue by mitigated this issue by installing a pricing model with the suppliers, which included a maximum markup as well as a rate card. Those questions soon went away.
Rate cards
One key responsibility of our provider was to utilize its analytics team to develop regionally based rate cards for each of the roles within our program.Again, there would be many people saying that it seemed like a conflict of interest for the provider to “develop the rate card and then get paid a percentage of the total cost by suppliers based on the rate in the rate card". However, the analytics team proved to us time and again that they had some very robust process in place to develop these rates. Analytics are ultimately essential to driving a successful program and here they proved a key part of the success because they ensured that hiring managers were paying at or below what the local market tended to dictate. Again, these questions soon disappeared.
Author Bio
| Jack Schink is Founder and President of Sandcastle Consulting and former director of procurement at Novartis. Connect Jack Schink |
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