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null Cost savings on contingent labour spend with MSP

IS MSP JUST A BLUNT INSTRUMENT FOR COST SAVING?

Managed service programme experts view cost savings as an outcome, not an objective

I would be surprised if there weren’t a very large number of organisations completing top to bottom supply chains reviews in every category at the moment, searching for every last opportunity to drive down their external spend.

Contingent labour spend, for most organisations, is a significant external cost. Economic uncertainty continues to impact budgets across the board. As such, it’s only logical that we see attempts at recruitment supply chain cost savings. For many, this means interest in managed service programmes (MSP) that help control contingent labour spend.
 
But should cost savings be the only aim of using MSP?
 

Should contingent labour spend cost savings be your goal? 

 
Cost savings are one of the main benefits of using an MSP. But a well-run programme will realise a number of hard and soft savings for any organisation. The key question is whether a programme focused only on cost savings will succeed.
 
In many cases, if cost savings are your main goal, you’ll face challenging experiences. Issues related to tunnel-vision cost saving strategies include:
 
1. Value for your money
 
The relationship between time, cost and quality is fixed. Move one of these variables and it impacts the others. That means the market is very efficient at setting appropriate hiring costs and salaries for each skill.
 
So, if you pay a competitive market rate for contingent workers, you can find skilled support when you need it. But underpaying contract staff can lead to negative impacts. It may take a long time to find someone with the required skills who is willing to accept lower pay. Or you may be forced to hire someone quickly with a lower skill set than you need. Saving money short term could impact work quality in the long run.
 
2. Internal resistance
 
The people responsible for procuring a service are not usually the intended users. Instead, the end users are tasked with getting a volume of work done to a time and cost budget. It’s rare to meet a budget holder who wants to compromise on the quality of their work. Cost savings in some instances can damage professional reputations.
 
As a result, cost savings are not the highest priority for certain stakeholders. That means when organisations lead with a cost-saving objective, they often face resistance from within the business.
 
3. Headcount controls and outsourcing
 
Many organisations still think that one of the easiest ways to cut costs is to control headcount. But often, headcount controls lead to outsourcing requirements. And external providers often come at a higher per capita cost.
 
What does that mean for your business? If the volume of work doesn’t reduce, then the workforce demand remains constant. If you combine that with headcount controls, then the burden of extra workload is loaded onto other employees.
 

Achieving cost savings in the right way

So, if you need to make cost savings, what should you do? You can set your MSP on the path to success by focusing on three key topics during the design stage.
 
1. Engage the right stakeholders
 
Firstly, talk to those people who use the services of your temporary workers and contractors. Get their views to identify what works well today and what they would like to improve. This way, you create a programme that benefits the right people based on their unique needs. The programme should be “pulled” by the primary stakeholders – not “pushed” by the secondary stakeholders (Procurement and HR).
 
2. Have robust change management practices
 
Recognise that change management needs investment. Remember – cost savings aren’t the most important thing to your primary service users. Focus on creating a message that uses the most relevant benefits for each stakeholder group in any communication.
 
You can learn more about managing change with our robust Change Management methodology.
 
3. Make the reasons clear
 
Lastly, you should focus on the main reason why the organisation should embrace the change. If cash control or cost reduction is the main reason, link it to the impact on shareholders or financial results. By clarifying the bigger picture, the whole organisation will understand why cost savings are the most important outcome.
 

Three steps to MSP success 

If you’re considering an MSP solution, there are three simple steps to creating the perfect conditions for success:
 
  • Engage your primary stakeholders now. Failing to get the right people onboard may delay or even derail your efforts later.
  • Avoid focusing on cost savings as a goal in isolation. Leading your change programme solely to reduce contingent labour spend will diminish adoption across the company.
  • Focus on creating a case for change based on tailoring the benefits to each internal stakeholder group.
By following these rules, your managed service programme can help deliver significant cost reductions for your organisation.
 
Learn more about how MSPs can help you control contingent labour spend:
 

 

AUTHOR


Jon Mannall
EMEA Managing Director, Enterprise Solutions at Hays

Jonathan is the EMEA Managing Director for Enterprise Solutions at Hays, leading Enterprise Solutions teams across 11 countries. With a team of over 400 resourcing professionals, Jon ensures that our clients are provided with the workforce engagement solutions that meet their human capital needs, including permanent recruitment, contingent labour and outsourced services.

Having been with the company since 2011, other roles have included Client Director, Service Delivery Director and Head of Sales for the UK.

Prior to joining Hays, and after completing his Masters in Philosophy and Management, Jon worked in the RPO and MSP sector for 10 years with a range of Financial Services, Public Sector, IT & Telecommunications, and Insurance clients in Sales and Operations Director roles.