beware of a cost-only focus when adopting an MSP solution

June 24, 2015

 

how a parable about an elephant illustrates the need to consider quality and speed when managing a contingent workforce

When it comes to implementing an MSP program, most businesses seem to have a keen, almost single-minded focus on cost savings. This is particularly true if the MSP program is sponsored by procurement. In order to write a successful business case for an MSP program – by successful I mean a business case that will gain approval from executive leadership – a procurement stakeholder must be able to show a predictable return on investment. Since it is inherently difficult to quantify less tangible MSP benefits such as quality or speed, the focus of the business case naturally gravitates toward hard cost savings. This is where the trouble begins.

tripartite relationship 
Cost is part of a tripartite relationship. In fact, it is co-equal with quality and speed. Upon writing this blog, I am reminded of an ancient Hindu parable wherein three blind men are sent by a benevolent king to examine an elephant. The king instructs the blind men to return to his court promptly at noon the next day to report their findings. The following day, the men return as instructed and the king asks them to relate their experiences.

The first blind man boldly steps forward and exclaims, “Majesty, what an experience! The elephant was like a great tree, as big as my waist, with bark-like coarse leather.”

Upon hearing this, the second blind man stepped forward and says rather emphatically, “Majesty, this is not true! The elephant was like two moveable tree limbs worn smooth like polished marble and cool to the touch.”

At this time, the third blind man stepped forward and exclaimed, “Liars! Majesty, the elephant was like a great immovable mountain, not at all like a tree or the branches thereof!” As the king looked on, the three blind men began to bicker until the king asked them to be silent and patiently explained the incompleteness of their perceptions.

With a little imagination, it isn’t hard to see that the king could represent executive leadership. The elephant could represent the contingent labor market. The three blind men could represent procurement, HR, and hiring managers. Their blindness is analogous to lack of visibility into the contingent market. Most importantly, we might note that the individual perceptions of the blind men were both limited in scope and based only on where they touched the elephant. If one asks which blind man had the correct perception of the elephant, one must recognize that all three had a correct perception (within their limited experience); but none of the blind men had a complete perception of the elephant.

who is right?
If we apply our parable to our original topic, we can see that focusing exclusively on cost savings is like saying that one of the three blind men was correct and the other two were wrong. Or by analogy, if we say “A contingent labor program should focus only on cost savings and not quality or speed,” we fail to realize that cost, quality, and speed are inextricably linked.

If we pull on an elephant’s tail, the head and legs will move. If we pull hard enough, the elephant may fall over (and possibly land on us). The same can be said about a contingent worker program. If we pull too hard on cost, we neglect quality and speed. If we pull hard enough on cost, the program may fall over and, like the elephant, land on us. I think most contingent workforce program managers understand the relationship, but sometimes in their enthusiasm to drive results in one area, they lose sight of the overall goal of the program, which is to deliver to the business the best available talent in the most cost-effective manner and in the shortest time. If hiring managers are dissatisfied with the resources delivered, they may at one point stop participating in the MSP program all together, which inevitably will drive contingent labor costs higher.

It’s important to remember that an MSP is designed to provide great cost savings initially, but the long-term value is improvements in quality and speed. By cementing solid relationships with vendors that are a win-win for both parties, you ensure your supply chain will deliver the quality of talent in the time that your organization needs. And as that happen, your organization will derive much greater benefits from the program.

 

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