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August 14, 2017

Why Best Staffing Firms Say “NO” to MSPs

Why Staffing Firms Say “NO” to Low Margin MSPs

August, 2017, Tom Ramsey, V.P. / CEO
Total Placement Staffing – Waco, TX.

“Staffing firms are non-responsive. All they send is subpar candidates.”
Have you felt this way before?  Do you know companies that seem to churn staffing agencies hoping to find better performance?  If you utilize an MSP or a low margin vendor, then you are likely experiencing this phenomenon.

From a high performance staffing firm’s prospective, MSP (Managed Service Providers) vendors treat agencies like they are selling a commodity (people) with little respect for their contribution, are slow pay, and they view agencies as a source to shift their own liability in areas in which the staffing firm has no control. However, to the MSP’s client, Managed Service Providers present themselves as saviors promising only upside possibilities while failing to mention the nightmare of working with low paid inexperienced low-bid recruiters who all too frequently lack the personal investment and motivation to be successful.

Client companies want the best employees the market can provide, correct?  They need it affordable, right? Lastly, they want a high performance premium agency that can and will produce results when called upon for staffing assistance.  On these points, I think we all agree.  Let’s examine each of the three areas on their own merit.

High Performance Staffing Firms
For a high performance staffing firm to survive, they must first present their best quality candidates to their better clients.  Not necessarily their highest markup clients, but clients that support them with mutual loyalty, a fair return for services, prompt payment, and can recognize all the benefits trickling down to their bottom-line. These are premium clients.  It is all about nurturing long-term relationships and mutual benefits. Both parties assisting the other to control costs and assure success.

High performance staffing firms are successful because they have the best recruiters, extensive recruiting channels, and a work ethic second to none.  Good recruiters are experienced professionals with strong recruiting networks. These attributes are not inexpensive. Divide a good agency’s operating expenses by the number of employees placed annually and it will cause you to drop in your seat, shake your head, and order a drink.  It is that expensive per W2 head count.

Ask yourself, what would your company do faced with a limited supply of scarce product, more orders than you can fill, and rising costs?  Would your company first sell this limited supply of product as a commodity to the lowest margin client with the longest pay cycle? Hardly. Best business practices prohibit this scenario in any industry, especially when more product is not available.  In the real world, product trickles top-down through the ranks of clients like every other industry. Think about it.

What about Affordability
Strong staffing partners greatly improve your bottom line, but this consideration quickly becomes lost in the pricing game.  During the bidding process, staffing firms are asked questions pertaining to benefits, superior processes, general reputation, and of course markup.  However, staffing firms know the focus is on markup. Perhaps, this is because it’s near impossible to realize anything more when an MSP (Managed Service Provider) is in the middle.  Much the same occurs when procurement specialists “shop” for a staffing agency. Instead of shopping for a successful partnership, they shop for price. Their expertise is commodities, not people or their hidden costs, and are ill-equipped for success. Granted, it is difficult to describe a superior process and recruiting team  over the phone or through an email without sounding like everyone else, but how about actually looking at the agencies processes, visit their offices, and interviewing a client or two? Ask the staffing firm for information concerning client relationships and longevity.  “Winning” an RFP with anything but the lowest bid is extremely rare.  In fact, I have never seen it.  This three party relationship has an average life of 2.8 years before firms start shopping again.

Comparing those Averages
Over 52% of our clients have been with us for about 9 years and many of those for 14 years or longer. These averages are not necessarily unique to us, and can be found in any agency dedicated to their client’s success and satisfaction. Our company is recognized as the premium agency in the area delivering attractive bottom line results. These were not my words and to be thought of in this manner is  humbling. It is a testament to the loyalty shown to clients and the positive effect we have on their success and profitability.  This vote of confidence is not taken lightly and we do our best to never let them down.  So the question is, how can one expect these relationships to develop in a low bid situation and with an MSP in the middle?

Want to experience that kind of love, stability, and an improvement in profitability?  At some point,  you must step up to the plate.  After 28 years in the business I have learned one thing,  long-distance hands-off relationships at low bids are never pretty, the most demanding, and the least productive for all parties involved except for the MSP.  If this ever changes, we might reconsider.