Which MSP models are best in this challenging talent market?

Master vendor, neutral vendor, hybrid. Which managed service programmes (MSPs) provide the best access to talent given the current challenges facing talent acquisition teams?

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Talent attraction professionals are facing an unprecedented struggle to find contingent resource at present.

A survey of 1,000 business leaders and hiring managers by Reed Talent Solutions found that almost half of businesses with over 1,000 employees are finding it hard to recruit, while 50% of all companies indicated that finding the ‘right’ people was their biggest talent attraction challenge.

The lack of available talent is down to both a fall in numbers – the Institute for Employment Studies estimates there are over one million fewer UK workers compared with pre-pandemic – and the acceleration of labour market trends driven by inflation, different working models and digital transformation.

This is leading many organisations to re-evaluate and adapt their existing managed service programmes, and those adopting new MSPs are selecting different models based on the current environment.

Choosing between master vendor, neutral vendor and hybrid MSP models

The benefits and drawbacks of master vendor, neutral vendor and hybrid MSPs are well documented.

In the current market some organisations have become more inclined to opt for master and neutral vendor models.

This shift is being driven by the following schools of thought:

Neutral vendor: In the current climate, opting for a neutral vendor model allows organisations to spread risk and diversify their talent supply chains. Engaging a range of specialist, niche talent sourcing organisations in theory gives companies wider access to talent – with these types of suppliers also being used to fill roles requiring more generalist skills given the shortage of available resource.

Master vendor: Companies gravitating towards master vendor models are doing so based on the scale, expertise and trust offered by the managed service providers who supply these solutions. While there may not be the diversity of suppliers provided by a neutral vendor model, having one organisation charged with supplying the majority of requirements offers greater accountability and puts a focus on the provider to deliver talent requirements – which can help to drive results when it is difficult to source candidates.

Critically, many master vendor arrangements do not include separate management fees and as such the supplier is incentivised to maximise their own supply to ensure commercial returns.

However, hybrid models continue to be the solution in a large number of cases. Such models involve the best of both neutral and vendor models. Many organisations had realised the benefits of such a solution in ‘normal’ times and this has become even more apparent now.

One size rarely fits all, and with a hybrid model different sourcing models can be leveraged to solve different questions around potential issues such as location and flexibility.

Neutral vendor versus master vendor – which works better when talent is scarce?

As illustrated above, there are valid reasons to adopt a master vendor or neutral vendor programme when resource is difficult to find. However, in practice, the master vendor model can offer better results.

While diversifying a supply chain through a neutral vendor model containing multiple suppliers sounds like an ideal way to cast the net as wide as possible, how accountable will these companies be when it comes to meeting requirements?

Even in less challenging recruiting environments, there are occasions where suppliers will refrain from filling some roles when competition, lack of scale and smaller margins make it less economically viable for them to get involved.

This is exacerbated in a tight market, with recruitment firms spending greater time and effort to source candidates, yet receiving a fixed price. In this scenario, suppliers will often prioritise their own contingent business where fees can be negotiated – meaning organisations don’t receive the access to talent they expect when selecting a neutral vendor model.

Decision to work roles are made at a consultant level, even if you get commitment at an organisational level. As a result, opportunity cost of where to place their best candidates when their personal remuneration is at stake will be considered.

A MSP providing as a master vendor has tools within its arsenal to mitigate this, rewarding direct fulfilment through fulfilment bonuses rather than revenue.

Developing a relationship with a master vendor ensures that organisations have a much better chance of securing the right talent. A master vendor will be focused on delivering the requirements set out in the terms of the contract – and held accountable to them.

A master vendor solution will work exclusively for a client, recommending candidates that fulfil all their demands. With only one supplier to meet recruitment demands, hiring becomes faster and more personalised.

Such a solution will come with a dedicated recruitment process, data analytics and a communication strategy. Managing costs will be easier and a master vendor model provides more accountability.

The hiring process will be shorter in a master vendor solution, while clients may need to pay more to additional recruitment firms with a neutral vendor model.

The master vendor model offers greater scalability and custom staffing solutions, with the ability to tweak service offerings based on client demand. Such a solution will also save money and time because of the single point of contact.

Additionally, the service being delivered is still fundamentally a managed service with other organisations within the supply chain, albeit operating on a tiered basis.

Therefore by adopting a master vendor solution customers can still enjoy the ‘safety net’ of an enhanced and diverse supply chain if needed.

Not only will the provider have greater motivation to meet sourcing requirements, but the nature of the partnership means that it also has a greater understanding of the skills best suited to the organisation’s needs – providing access to talent which suppliers in a neutral vendor programme may overlook.

With talent scarce, selecting the right MSP model is crucial for organisations. Failure to do so could further hinder organisations’ ability to acquire the skills they need in this challenging landscape.

Need support with your contingent workforce needs? Reed Talent Solutions offers a range of solutions to help you engage the right resources

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