Posted on 3 July 2007

Year of the Vendor Manager?

Adam Smith, Author of Wealth of Nations, coined the phrase Invisible Hand to explain how capitalism allocates resourcesYet another large Utah company is moving to a vendor manager solution to help them (hopefully) rein in their contingent workforce management. This makes no less than three I know about over the last few months.

These company’s websites are full of boastful, synergistic qualities they bring to the clients they service:

  • Contractor Compliance, W-4 and 1099.
  • IT Services
  • Outsourcing support
  • Payroll Services
  • Timekeeping and tracking
  • Multiple recruiting vendor support
  • etc, etc, etc.

This appears on the surface to be win-win, except for one key-critical side of the table:

The Staffing Service(s)

I have yet to find someone in my company, or someone in my network, who LIKES vendor managers when you’re working from the supply-side of the equation. A few things that seem to go unnoticed:

  • Vendor managers are yet another layer of bureaucracy that deadens the potential for true relationships.
    • That means the quality of candidates will not have the same focus as thy otherwise could.
    • That means the Vendor Manager gets the praise when things go well, not the staffing service that provided the people.
  • Vendor managers often lop huge percentages off the rates for their suppliers, showing instant cost-savings to their client. It makes them look really, really good to their client (and some people in the client company will look really, really good to upper-management!)
    • But that causes a shock to the supplier’s market, which already operates on razor-thin margins. To take drastic cuts in fees and still hang in there is a risky proposition at best, one (I can tell you personally) that is met with stern criticism from the supplier’s management.
  • Vendor managers charge their fees to the suppliers. That makes the whole thing FREE.
    • But noting the above bullet, that suppliers are already cutting costs, this just seems to add insult to injury. Some have told me it feels like doing business with the mob. You gotta pay on both sides of the equation… and that hurts.
  • The idea of “perfect competition” sounds great from the vendor’s side. Have everyone FIGHT to submit the right candidate! Then, you’re sure to get the right one.
    • But the sheer facts of this process requires there to be an arm’s length relationship between the vendor and the supplier… deadening the relationship and loosening the focus on quality candidates (see bullet 1)
    • Plus, in a market like this, when you’re also being cut off at the knees by low margins AND fees (see above), it’s excruciatingly tempting to seek recruiting opportunities elsewhere.

The bottom-line, I believe that the same Invisible Hand that drives companies to want Vendor Managers to help them keep everything in line will also drive those very same suppliers to find additional business revenue streams and alternative sources to send their very best candidates.

Sure, I am seeing this from my own side, but that’s my job. WHAT AM I MISSING? I’d love to hear of a contingency recruiting firm that has actually seen a Vendor Manager step into their client relationship and IMPROVE things.

Your reply??

2 Comments For This Post I'd Love to Hear Yours!

  1. Sean Rehder Says:

    Great post! I wish I had some examples to give you…but I don’t.

    I used to be a “working insider” in this industry in Silicon Valley and much of my involvement came into play when hiring managers “went outside the loop,” which was quite often.

    I look forward to positive examples…but I don’t think you will get too many because the model/process is naturally flawed. To have true success, you would have to go against the model’s design…sounds weird…I know. 🙂

  2. Robert Merrill Says:

    I’m absolutely curious what you mean by “To have true success, you would have to go against the model’s design”

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