5 myths of supplying talent through a third-party provider model. A guide for third-party talent managers and suppliers

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1 5 myths of supplying talent through a third-party provider model A guide for third-party talent managers and suppliers Thorsten Koletschka

2 /02 Suppliers that play a proactive part to deliver genuine talent supply chain management to clients in assisting third-party Program Offices will undoubtedly position themselves best for growth opportunities across multiple client programs. Teresa Carroll, SVP & General Manager, KellyOCG

3 Introduction /03 Is this paper for you? Whether you are a recruiter, an HR outsourcing firm or a niche talent supplier, this paper outlines the key issues and misconceptions of delivering your service through a third-party versus directly to an employer. While many talent management agencies still provide their services directly to clients, third-party programs are becoming more common in developed and rapidly emerging economies. The third-party model for managing talent falls into a number of different categories, including those managed by Managed Service Providers (MSP), Master Vendors (MV), Recruitment Process Outsourcing providers (RPO) and Business Process Outsourcing providers (BPO). Regardless of what the model is called, the experience of being a supplier within these models can be significantly different to sourcing and managing talent directly for the client/employer. Many suppliers have genuine concerns about operating through a third-party, and too few third-party management firms understand these concerns and how to proactively address them. Regardless of how you are providing talent to a client and where you sit in the talent supply chain, this paper will assist in understanding how to deliver maximum value within a third-party model.

4 /04 Definitions Talent Supply Chain Managed Service Provider Master Vendor (MV): A staffing Business Process Management (TSCM): Is a (MSP): A company that takes supplier that takes overall Outsourcing (BPO): the proactive approach to securing on primary responsibility for responsibility for providing outsourcing of specific business and optimising talent supply managing an organisation s clients with temporary staff. All processes or functions to a third and services through all input contingent workforce program orders will usually go first to party based on concrete results channels. It integrates the and the various sourcing models the master supplier to either be or milestone plans rather than management of both the within it. Typical responsibilities of filled or distributed to secondary on time and material (often back- permanent and contingent an MSP include overall program suppliers. Sometimes a master office functions such as HR, workforces to determine the management, reporting and supplier will not only provide IT and some customer service- optimal mix and strategic value tracking, supplier selection and a significant portion of the related tasks). of all human capital within management, order distribution, temporary staff working at the the organisation. and consolidated billing. employer s site but also manage Program Office (for talent management): This is the Direct talent supply: This is when individual recruitment an organisation s contingent workforce program. people, processes and and HR companies work Recruitment Process technology set up by an MSP, MV, directly with an employer to Outsourcing (RPO): A third- BPO or RPO provider to conduct provide talent sourcing and party specialist that undertakes talent sourcing and management. management services. all or part of the end-to-end It is the structure through which recruiting process for clients/ all HR/recruitment suppliers HR departments. It is often are managed. focused on recruiting permanent members of a workforce.

5 /05 Why do clients outsource their talent management to third-party Program Offices?

6 Why do clients outsource their talent management to third-party Program Offices? /06 Organisations make the decision to implement third-party talent management solutions with the central aim of improving the quality and the efficiency of their business. Typically, a Program Office (under an MSP, MV, BPO or RPO agreement) will be tasked with: Improving the access to critical and sought-after talent through the active management and development of the supplier network Enhancing the reporting, performance measurement and operational analytics of a talent acquisition and utilisation solution Aligning a specific service or process with the broader strategic objectives of the organisation Strengthening program-level governance, transparency and risk management Managing change alongside existing business demands. The frustration of talent supply is widespread <10% of leaders outside of North America are satisfied with their access to the right talent for the job.

7 Why do clients outsource their talent management to third-party Program Offices? /07 Talent supply and the Program Office. The need to compete in a global marketplace where access to the right skills at the right price is now a critical capability means more organisations are seeking innovation in the way they recruit and manage talent. The creation of third-party Program Offices to manage talent supply is a growing trend in most developed (and rapidly emerging) markets around the world. This is largely because: Global access to talent is complex and constrained, requiring detailed demographic and psychographic analysis Access to a higher number of niche talent pools is often required to meet skill shortages. Clients are under increasing internal scrutiny to balance the need for operational efficiency and cost savings in some categories with the need to adapt process to drive effectiveness and responsiveness in other categories. The access to and quality of talent is now a core competitive issue. Buyer adoption of RPO/MSP MSP 80% 60% 40% 20% 0% (p) MSP RPO RPO 50% 40% 30% 20% 10% 0% There is a range of benefits that talent sourcing and management suppliers can access when working as part of a third-party Program Office. Here, we explore the common myths of working through a Program Office versus maintaining a direct relationship with clients/employers. If Program Offices and suppliers are to achieve the talent management outcomes clients are seeking, these are the myths they must proactively address and overcome.

8 /08 Myth 1 Losing the direct client relationship will harm my business.

9 Myth 1: Losing the direct client relationship will harm my business /09 If a recruitment or talent management supplier has previously worked directly with their client, moving to a relationship with a third-party talent management Program Office can seem like a demotion. Often, suppliers work hard to develop strong relationships with their clients across all levels of the organisation from the sales team, account executives and recruiters right through to the managing director. On the surface, the disintermediation of these relationships could appear to limit the growth of the supplier s business. If suppliers adapt to a third-party set up as they do with any of their clients, an MSP can truly be a door opener to more business especially for smaller niche suppliers. Van Nguyen, Pauwels Consulting However, all parties involved must remember that the key reason clients outsource their recruitment and talent acquisition functions is to allow them to focus squarely on their core business. Therefore, the same logic can, and should, be applied to suppliers in the talent supply chain. Developing a strong sales capability naturally draws focus and resources away from the core business of finding, securing and deploying talent. If Program Offices can remove the need for suppliers to do this, more focus can be placed on the talent management and sourcing outcomes

10 Myth 1: Losing the direct client relationship will harm my business /10 that the client is seeking. This will only occur, however, if the following issues within the new relationship are proactively addressed: Each supplier understands the business goals and objectives of the client and how they can support productivity and efficiency goals Suppliers are provided with clear guidelines and expectations regarding their engagement with the Program Office All suppliers have access to the right information and data to assist them in addressing performance issues in a timely way. There was a time that I agreed with this but once it is properly managed and structured it may not harm the business. Michael O Brien, PEGlobal All suppliers in the network must develop a shared understanding of where and how each organisation s strategy overlaps with the others, and how they can address gaps and capture new opportunities. Ultimately, it is in the Program Office s best interests to strengthen those suppliers in the network because a strong supplier base is a key competitive advantage they can and should deliver to the client.

11 Myth 1: Losing the direct client relationship will harm my business /11 Strategy tip for suppliers working with Program Offices: When suppliers develop the same approach to managing their relationship with the Program Office as they would with the client, and they build strong relationships at all levels, they will maintain strong visibility regarding their growth opportunities with the client through a third-party model. Suppliers that wish to actively sell their business in a third-party arrangement should consider ways to demonstrate and showcase their capabilities. Consider developing your own case studies of specific recruitment outcomes that could be used by the Program Office. Far from eroding your competitive edge, this can cement your business as a thought leader and also offers added value in having you as part of any supplier network. Consider too that your third-party provider will likely have diverse relationships with other clients and demonstrating a solutions-oriented and innovative approach can lead to further opportunities. Whilst maintaining a direct client relationship seems instinctively right, we have found that supplying through vendor neutral MSP models increases supplier performance transparency, resulting in high-performing suppliers increasing their reputation and breadth of supply with the client. John Kirby, Sentinel

12 /12 Myth 2 We will not have a clear view of what the client really needs.

13 Myth 2: We will not have a clear view of what the client really needs. /13 Knowledge is power. Suppliers that lose the direct access to the client often feel they are losing access to knowledge and that this will impact their ability to perform well. However, clients often seek to establish Master Vendor or MSP programs to improve transparency and reduce siloed access to data. RPO and BPO programs are often tasked with standardising access to knowledge to ensure a more level playing field for suppliers. Every business that manages multiple supplier relationships knows that performance varies. Understanding why this occurs, and what the barriers to success really are, is critical to any highperforming HR outsourcing arrangement. Even though direct access to the client is often removed from individual suppliers when a Program Office is established, access to the right knowledge to ensure high performance from suppliers should improve, not deteriorate. This will only occur, however, if the following conditions are met: With respect to understanding client needs, supplying through an MSP model is of course no different to supplying through any centralised recruitment function such as a HR department or recruitment team. In recent years we have found that communication channels have opened and we have enjoyed greater access to clients line managers and more frequent and enlightening briefings on clients businesses. A good communication structure and information culture is key to a successful third-party provider model as it simply takes us one step closer to a system that works. John Kirby, Sentinel 1. The Program Office must regularly share relevant client information in a comprehensive way to enable suppliers to understand and adapt to the changing requirements of the client, and to fully comprehend the impact those changes will have on their workforce plans. 2. The Program Office must provide thorough briefs or requisitions for candidates that are properly researched and matched to client needs as they evolve.

14 Myth 2: We will not have a clear view of what the client really needs. /14 3. The Program Office must have a process to deliver regular, timely and consistent feedback to all suppliers on key metrics, including the quality of candidates. 4. Suppliers must be willing to engage in conversations with the Program Office to provide feedback on market demand and supply of talent. A clear benefit that a good program office can add is the setting of the rules that will ensure the full visibility to all suppliers. Kieran Coughlan, Life Science Consultants Data should be used proactively to drive continuous improvement when Vendor Management or Applicant Tracking Systems are used effectively. Suppliers and Program Offices should look to generate reports that will assist suppliers to make continuous improvements and adjust their recruiting approach (which will result in higher fulfilment rates). Importantly, the timing of reporting is the main issue here waiting for a regular report may be too slow. Data should be used in a timely way to inform the entire supply chain and to deliver a better result. Strategy tip for suppliers working with Program Offices: Take a second look at the ways in which information is shared between your organisation and the third-party Program Office. How can this be improved? What data could be shared to ensure the quality and timeliness benchmarks of talent requisitions are met?

15 /15 Myth 3 A good supplier just does the job without asking questions.

16 Myth 3: A good supplier just does the job without asking questions. /16 Maintaining a focus on consistent learning and innovation is a central challenge for those managing any supply chain, including the talent supply chain. Knowing what the right questions are is a competitive advantage. Kieran Coughlan, Life Science Consultants Nowadays, clients consistently challenge third-party Program Offices to improve the speed and veracity with which learning is absorbed by supplier networks. This is a complex task, particularly if we consider that talent supply networks now often have the following characteristics: they draw on talent pools that are global in scope they include an increasing number of niche providers with specific access to unique talent communities they operate within the context of declining talent pools in key markets (in part due to the ageing population and rapid development in key growth economies) they need to adapt rapidly to changing regulatory environments as well as changing business strategies and their related talent solutions supplier business models are changing; brick and mortar operations and centralised models co-exist in most talent supply chains each delivering their own unique value propostion With the complexity of many client talent requests increasing, and the pressure on talent strategies to deliver higher performance at lower cost, third party Program Offices must take a leading role in educating and motivating their supply chain to change and innovate.

17 Myth 3: A good supplier just does the job without asking questions. /17 Ideally, a central aim of a Program Office should be to educate suppliers to develop a clear talent access strategy that supports the client s business objectives. Often, this is the difference between suppliers being able to provide clients with talent, not just people to complete the scope of work. Managing on-going change to talent supply as well as dynamic regulatory environments requires a higher level of insight to ensure that every talent decision is a quality decision. And clearly, this requires suppliers to engage in more dialogue, not less. A culture of innovation and continuous improvement is a goal that Program Offices should set within their supplier network. If suppliers outperform, that performance and the associated learning should be leveraged by the entire network. We live in a growing sharing economy, where reputation and knowledge are everything. How supplier networks leverage knowledge for the benefit of the whole will become an increasingly relevant issue for high-performing supply chains. Awards and recognition programs are a key element of many successful centrally managed supplier programs, simply because great ideas improve the performance of the entire network. Selecting the best candidates for a particular requirement can be quite nuanced. Balancing skills, experience, personality, availability and cost involves compromise and to achieve the best possible compromise we may need to ask a few questions. On occasions, we may simply be conveying legitimate questions and concerns from candidates, which should be given some consideration as candidate engagement can make a big difference to the success of a hiring process. John Kirby, Sentinel

18 Myth 3: A good supplier just does the job without asking questions. /18 Strategy tip for suppliers working with Program Offices: Undertake systemic, regular gap analyses of your own talent demand and supply. What is changing? What insights are you obtaining from candidates that might change the way you source and deploy talent that the Program Office should be aware of? Critically analysing the changing dynamics in your own talent pipeline and proactively providing them to your third party Program Office can ensure the client s expectations are not only well-managed but exceeded and potential issues or bottlenecks are raised early. Rising wages for specific skill-sets, decreasing availability of specific skills and declining candidate quality are all issues that must be strategically addressed before they limit suppliers ability to access and deploy talent to the client. Suppliers are thus asked to engage in more dialogue, not less.

19 /19 Myth 4 The business strategies of individual suppliers are irrelevant.

20 Myth 4: The business strategies of individual suppliers are irrelevant. /20 Many suppliers already understand their clients operate in an increasingly fast-paced and complex business environment, yet few suppliers nor managed service providers task themselves with providing a total solution regarding their talent supply, HR processes and project workforces. Open conversations and mutual understanding are the key to a successful collaboration. Kieran Coughlan, Life Science Consultants The changing global marketplace is a challenge for clients to navigate, and third-party solutions with the right supplier networks will have an increasing role in helping clients see their way through their transition to flexible, operational models. If suppliers and third-party providers Program Offices are going to be able to deliver this, they will need to share and invest in each other s growth to strengthen and ensure talent supply in the right areas at the right price. Then, they will be able to offer the total solution that more clients are seeking. To do this, suppliers need to develop a clear strategy that aligns with the clients business needs too. Implementing new processes and systems, or finding new pools of labour are expensive ways to solve potentially simple problems. So, suppliers and Program Offices must make it a joint

21 Myth 4: The business strategies of individual suppliers are irrelevant. /21 responsibility to find out where these opportunities already exist and where they will grow well in advance. They must consider joint questions such as these on a regular, ongoing basis: What data do you have that can offer a more relevant view of your organisational capabilities beyond what you are delivering to this particular program? Where do you have staff that are under-utilised and could be redeployed across the network? What additional services can we offer the client together? Where can we reduce costs and risks to the client? Where can your delivery capabilities support active revenue generation or improved talent utilisation for the client? How can clients benefit most from your knowledge regarding recent market rates and/or the latest talent demand and supply developments? The business strategy of a supplier is the key to success. Michael O Brien, PEGlobal Strategy tip for suppliers working with Program Offices: Seek to measure and improve your own efficiency in more than just financial terms. Clients may be willing to spend more to attract a specific type of talent if process efficiencies can be found elsewhere. Or, if they understand that there is a need to invest into the creation of talent pools for their most critical roles. Looking for ways to align your own business strategy to resolve current or emerging issues for the client are critical for success over the long term and can assist you in making the right investment decisions.

22 /22 Myth 5 I don t invest in talent, the client does.

23 Myth 5: I don t invest in talent, the client does. /23 While it may be every supplier s job to understand the talent market they are operating within, few consider themselves to be genuine investors in talent. Most suppliers see themselves as access points for talent, but do not recognise how critical it is for them to invest in talent development independently (or at least ahead) of client requests. We invest in the full lifecycle of our talent, which enables us to build strong relationships especially as most of our talent works at client sites. Van Nguyen, Pauwels Consulting Access to quality talent is now consistently the key benchmark for clients. Although speed of requisitions will always be a highly visible metric, quality outcomes are gaining more attention. This is why those suppliers that are operating in niche and low-supply markets must develop longer-term relationships with talent especially as the most critical roles in five years from now may not even exist as a job today. So, accessing and combining the right skill-sets for future client needs is becoming a critical business advantage. This is the only way to ensure suppliers have access to the right talent with the right skills when client requests are made. If suppliers receive the right feedback on the performance of their candidates from the third-party Program Office, they can use those insights to assist talent to fit better with client requirements going forward. Coaching candidates to help them perform well during the selection process is just one example of developing talent, yet there are many others. The opportunities to develop talent in a costeffective way will depend entirely on the market and the type of talent required, but it can include strategies to tap into emerging talent pools, including migrant diasporas and alumni networks.

24 Myth 5: I don t invest in talent, the client does. /24 Helping candidates to improve specific soft skills, including language and communications skills, may provide access to candidates with excellent technical expertise who may be missing out on opportunities. Where suppliers can assist to improve soft skills either by providing advice or making strategic alliances with other training facilities they will have a competitive edge that clients need. If suppliers expand their reach and access to talent, they will clearly have further growth opportunities with the current client, or with other clients that the Program Office organisation manages. Strategy tip for suppliers working with Program Offices: Look for strategic alliances with other organisations that may assist new talent pools to differentiate themselves. Or, consider expanding your own offering as an organisation to deliver higher quality candidates to the market. By gaining the right feedback on individual candidate performances you should be able to address quality issues regarding talent suitability with a relatively small resource investment.

25 /25 Maintaining a focus on consistent learning and innovation is a central challenge for those managing any supply chain, including the supply chain of talent. John Healy, VP, Talent Supply Chain Strategist, KellyOCG

26 /26 Where to from here?

27 Where to from here? /27 1. Define your unique position within the talent supply chain Talent is still the key differentiator inside every business, every third-party managed talent solution and every supplier and that is why suppliers of talent remain most critical to organisational success. To ensure consistent, ongoing access to talent as a differentiating capability, clients have started to build their unique talent supply chain strategies: This means, they are taking a proactive approach to securing and optimising talent supply and services through all input channels including the best suppliers. It is fundamentally about integrating the management of both the permanent and contingent workforces to determine the optimal mix and the strategic value of all human capital within the organisation. Successful suppliers have already positioned themselves within these talent supply chains and with third-party providers that proactively manage them. As a matter of fact, the client can leverage a strong talent position across every market they operate in. When suppliers collectively understand the fundamentals of each individual talent supply chain and position themselves with their unique value proposition as part of one integrated framework, their service offering to the end client is compelling.

28 Where to from here? /28 Talent Supply Chain Management Temporary Staff C O R P O R A T E S T R A T E G I C Operations Human Resources Workforce AnalyticS Strategic Workforce Planning Talent Supply Chain Management Independent Contractors/ Freelancers Service Providers (SOW) P L A N Procurement Alumni, Retirees and Interns Full-Time Employees

29 Where to from here? /29 The real strength of an integrated talent supply chain solution is not just that it provides reliable, just-in-time access to talent, but that it can be adjusted to meet the changing needs of clients. If cost savings are required, the model responds. If a higher level of skill in one area is required for a short time, the approach is adjusted to access it. When the right people have the right conversations about talent, and they match their needs to the overarching program strategy, they can truly optimise talent supply through all input channels. This ensures the client meets their strategic objectives, and this is what strengthens the competitive position of all suppliers within that network. For more on Talent Supply Chain Management visit kellyocg.com 2. Make strategic investments in relationships The quality of relationships between suppliers and the overarching Program Office is what makes or breaks the outcomes for clients. Suppliers should make strategic investments in talent and their access to it, while Program Offices should make investments that remove barriers to suppliers in achieving these outcomes. The Program Office should look to take the information, administrative and sales burden away from suppliers to ensure they can concentrate fully on their core strength of talent acquisition.

30 Where to from here? /30 The right relationships must be developed so that suppliers and those in the Program Office work as consultants to each other. For example, recruiters should closely interact with the Vendor Management Specialists (those in charge of order flow), while account managers should work closely with the Program Office Managers. Both tiers of the supplier framework should have executive sponsorship and visibility, and this united front should be the basis upon which the client s business can grow, become more efficient and innovate. Both parties must focus on doing what they do best, and this is what the growth trajectories of both organisations should be tied to. 3. Know what a high-performing program looks like Some of the key issues suppliers should consider when joining or engaging in a specific program include the following: 1. How many suppliers are/will be in the program? An unusually high number of suppliers can be the sign of a poorly performing Program Office or a client unwilling to change to the new rules of the talent market. Often, having more suppliers increases the cost structure of the program and limits the ability of suppliers to fill a profitable share of orders. A successful program is a sustainable one where suppliers can deliver efficiencies while still making the profit they need to make to grow, innovate and deliver excellent service.

31 Where to from here? /31 2. How will requisition requests be made and how targeted will they will be? Job titles and labour categories need to be targeted to the right suppliers in the right locations to ensure the suppliers have a good opportunity to fulfill them. 3. What is the margin risk? To achieve maximum efficiency, suppliers need to have control over their margins. Suppliers should know if the margins will be calculated as a mark-up rate or a bill rate before committing to a program. This transparency will help determine if supplier efficiency will also improve supplier profitability. 4. How tailored will the program be? Where it makes financial sense, suppliers should be able to align their service delivery model to the needs of the program(s). This can entail anything from dedicating resources to service third-party managed accounts, aligning compensation plans to the objectives of the program, or making adjustments to recruiting plans and account management structures. The greater the ability for suppliers to respond to the program, the better.

32 conclusion /32 Client organisations want and need a broader, more holistic view of their talent supply and demand. They need to know how (and if) various talent strategies will help them meet their business objectives. As a result, the evolution in the supplier-client relationships continues, and now third-party Program Offices are tasked with implementing a Talent Supply Chain Management approach with the help of all suppliers within their talent sourcing and management network. In high-performing programs, suppliers benefit from the continued guidance and consultancy delivered by their third-party workforce solutions partners, which has proved to deliver economic impact to the bottom line of the best performers and qualifies them for additional opportunities within existing or new programs. Clearly, the proactive management and optimisation of talent supply to meet the business strategy is what clients need. However, this can only occur when all links in the chain of talent supply understand how responsive their strategies need to be.

33 conclusion /33 Whether you are a direct supplier to a client now, or you already work through a third-party Program Office, addressing these key strategic issues in the business models of each organisation will ensure a better outcome for all. After all, a well-managed third-party program can be a secure, supportive environment for new investments in talent and in expanding the reach and scale of individual suppliers. Suppliers that play a proactive part in assisting third-party Program Offices to deliver genuine talent supply chain management to clients will then undoubtedly have access to growth opportunities across multiple client programs. Did we miss the point? Do you agree/disagree? What are your personal experiences when engaging through a third-party provider model? And what can be learnt from them? We are genuinely interested in your feedback and invite you to further conversations. Please contact us at with 5 myths in the subject line.

34 References / November-2012/Straight-Talk White_Paper_Jan2010.pdf

35 For more thought leadership go to talentproject.com About the author Thorsten Koletschka is Director EMEA Supplier Development and takes care of our strategic supplier development in EMEA. He focuses on building strong relationships with our supplier community in order to serve as its voice within Kelly and drives respective innovation and constant improvement initiatives to ensure joint successes within our clients talent supply chains. Prior to his current role, he held different business development, marketing and practice lead roles since joining Kelly in 2007 and has more than 10 years of experience in different management and consulting roles within the HR/Education sector. About KellyOCG KellyOCG is the Outsourcing and Consulting Group of workforce solutions provider Kelly Services, Inc. KellyOCG is a global leader in innovative talent management solutions in the areas of Recruitment Process Outsourcing (RPO), Business Process Outsourcing (BPO), Contingent Workforce Outsourcing (CWO), including Independent Contractor Solutions, Human Resources Consulting, Career Transition and Executive Coaching, and Executive Search. KellyOCG was named in the International Association of Outsourcing Professionals 2013 Global Outsourcing 100 list, an annual ranking of the world s best outsourcing service providers and advisors. Further information about KellyOCG may be found at kellyocg.com. EXIT

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