An Introduction
Formal vendor management, however, has largely been a business practice for large enterprises with vast amounts of spend - allowing them to invest in expensive technology and dedicated procurement departments.
That’s not to say that smaller organizations don’t have vendors. They do. They just historically haven’t had access to the technologies that allow them to truly, and strategically, manage them. Thankfully, this has now changed. With a number of new technological solutions on the market to manage those vendors, smaller businesses are now discovering that they have the capabilities to implement more strategic vendor management practices.
Are you struggling with the complexities of managing your external workforce and the vendors associated with it?
In this guide you’ll discover some proven best practices and solutions designed specifically for getting better results from the vendors within your non-employee workforce program, simply by improving how you manage those vendors.
This page will help you to better understand the importance of managing the vendors used within your contingent workforce program, and how technology and best practices can result in a huge return on investment (ROI).
Where Does Vendor Management Come into the Contingent Workforce?
Vendor management refers to a strategic process that involves managing suppliers from a range of industries, whether it be your company’s marketing consultants, IT vendors or software suppliers.
This guide, however, will be specifically looking at how vendor management applies to your organization’s non-employee workforce.
With around 40 percent of the US workforce currently made up of contingent workers (independent contractors and temporary workers) and the average organization having 18 percent of their workforce hired on a contingent basis, vendors are becoming an increasingly important success factor for any business that’s leveraging non-employee workers.
Staffing agencies, also known as staffing vendors or staffing firms, are used by organizations to ensure they are able to meet real-time workforce requirements.
A staffing vendor will work on behalf of a business, matching temporary job candidates with relevant positions within the organization. This helps to ensure that companies are able to scale up and down rapidly depending on current business requirements, as well as access hot skills within their industry.
Yet just using a staffing agency doesn’t guarantee a ROI. That’s where vendor management comes in.
Why is Vendor Management Important for the Success of Your Contingent Workforce Program?
When it comes to a company’s non-employee workforce, successful vendor management is important for a number of reasons.
Vendor management plays a key role in selecting the right vendors that lead to program success. Vendor management is a crucial step in achieving your workforce requirements, and, ultimately, your business goals.
Through an effective vendor management approach that puts centralization and insightful data at the forefront of business decisions, your organization will be able to effectively manage vendors to improve workforce quality and reduce costs.
The result? Your business will be perfectly prepared for long-term growth in a cost-effective manner.
Vendor management benefits:
- Smarter vendor selection
- Significant cost savings across your non-employee workforce program
- Improved workforce quality
- Reduced risk
- Improved visibility into your contingent workforce program
- Centralization across the entire organization
What are the Top Vendor Management Challenges?
Managing vendors involves a large amount of data and analytics. On top of that, it’s likely that you are using a number of staffing agencies to source non-employee workers - making vendor management even more complex.
To make this even worse, organizations are still using manual management processes such as spreadsheets, in-house databases or sharepoint-like websites.
Performing these manual processes lead to a number of vendor management challenges, which all result in poor decision making, hidden costs and a complete lack of visibility into your non-employee workforce program.
Here are just a few of the top vendor management challenges that organizations face:
Lack of visibility: When managing vendors, it’s crucial your entire company is singing from the same hymn sheet. With manual processes, it’s almost impossible to prevent department leaders from engaging staffing agencies on their own terms, hiring non-employees at a rate they think is acceptable and not the company-set rates.
Vendor compliance risk: Setting standards for your vendors is a crucial component of making sure they are helping your company to achieve its objectives. If you aren’t managing your vendors correctly and recording data properly, there’s no way of knowing whether your staffing agencies are meeting your company’s standards or adhering to their agreements and local statutory laws.
Vendor data storage: To place temps and independent contractors across your organization, it’s likely you are dealing with multiple vendors, hiring for multiple projects and multiple team leaders are hiring these workers. To avoid fragmented processes, it’s crucial that vendor data is consolidated into one centralized location and updated in real-time for your entire organization to see.
For Successful Staffing Agency Management, a VMS is Crucial
To address the above challenges, businesses have to move away from manual spreadsheets. Instead, they should use vendor management software.
Your business is relying on vendors to source, engage and place the non-employee workers into your organization that will drive business growth and meet your current workforce requirements.
To ensure they achieve what is expected, it’s important that you build a vendor management process that puts data and visibility at the forefront of your strategy. That’s where a vendor management system comes in.
A vendor management system is a web or cloud-based platform that allows businesses to manage their entire vendor process in one centralized, and automated, location. By consolidating vendors into one place that can be accessed across the entire organization, businesses are able to effectively track, measure and manage vendor performance.
Here’s a comment from Deloitte, on why monitoring vendor performance is crucial:
“Monitoring of vendor services is important to be able to see, communicate and escalate vendor-related issues at an early stage. This requires measurement instruments to reliably and continuously measure and compare performance against benchmarks and between vendors. The challenge is to define and select the right indicators to measure service quality across multiple providers and to have a uniform and consistent view. Vendor monitoring is important because it is the key to continuous service improvement.”
Here are the top five ways a VMS will benefit your vendor management process:
Better workforce visibility - By managing your vendors in one centralized location, you’ll significantly improve visibility into vendor performance and the current state of your non-employee workforce program. You’ll have insight into how much you are spending, and where improvements can be made.
- Vendor consolidation - A contingent workforce program involves multiple vendors and thousands of transactions, making it almost impossible to manage effectively on a spreadsheet. Track and manage every step in each vendors’ lifecycle by automating and consolidating all these processes on one centralized database.
- Better workforce visibility - By managing your vendors in one centralized location, you’ll significantly improve visibility into vendor performance and the current state of your non-employee workforce program. You’ll have insight into how much you are spending, and where improvements can be made.
- Reduce costs and improve workforce quality - Ensuring company-wide compliance with vendor rates and standards leads to significant cost savings and superior workforce quality across each department within your organization. You’ll be able to eliminate fragmented processes or differing opinions on how each department sources, manages and pays temporary workers
- Vendor risk management -Through the improved visibility gained from the use of a vendor management system, you can use data to calculate KPIs such as time-to-fill, time-to submit and turnover. Improving these metrics will lead to better vendor selection decisions moving forward.
- Vendor automation - Using spreadsheets to manage vendors is not only ineffective, it’s also time-consuming. Automating all of these processes with a VMS will free up time for your employees to focus on core business functions that actually help your organization grow.
Top Key Performance Indicators to Evaluate Your Staffing Vendors
Now you have a VMS and the processes in place to successfully manage your vendors, it’s time to use the data you collect to create some Key Performance Indicators (KPIs).
KPIs are the top metrics every organization should track to optimize agency performance in a contingent workforce program.
These metrics will help ensure that the vendors you work with are delivering continued ROI within your contingent workforce program.
1. Time to Fill (TTF)
- What it measures: The time taken from requisition creation to when a position is filled.
- Why it matters: Delays in filling critical roles can disrupt operations and impact productivity. A shorter TTF indicates an agency’s ability to efficiently meet your needs.
- How to use it: Compare TTF across agencies and job categories to identify bottlenecks in overall process, on both client and vendor sides, and incentivize faster placements for agencies.
2. Quality of Hire
- What it measures: The performance and retention of contingent workers placed by staffing agencies.
- Why it matters: High-quality hires are more productive, require less training, and contribute positively to your company’s goals.
- How to use it: Collect feedback from managers and evaluate performance reviews, assignment extensions, conversion to permanent and redeployment rates to assess agency effectiveness.
3. Submittal-to-Hire Ratio
- What it measures: The number of candidate submissions compared to actual hires.
- Why it matters: A lower ratio indicates that an agency understands your requirements and provides well-matched candidates, reducing wasted effort in reviewing unsuitable submissions.
- How to use it: Use this metric to identify agencies that consistently provide high-caliber candidates and to make process, request or requirement changes if ratios are universally high.
4. Bill Rate Compliance
- What it measures: Adherence to pre-negotiated bill rates by staffing agencies.
- Why it matters: Variances in bill rates can inflate costs and lead to budgetary concerns.
- How to use it: Regularly monitor compliance to ensure agencies are delivering cost-effective services within agreed-upon terms.
5. Worker Turnover Rate
- What it measures: The rate at which contingent workers leave or are terminated before the end of their assignment.
- Why it matters: High turnover disrupts workflows and increases costs related to recruiting and onboarding replacements.
- How to use it: Track turnover by agency and assignment to identify potential issues with role fit, onboarding, or agency support. This metrics is also used to drive client side behaviour and identify issues.
6. Worker Satisfaction
- What it measures: The satisfaction levels of contingent workers with their assignments, agencies, and work environments.
- Why it matters: Satisfied workers are more engaged, productive, and likely to complete assignments successfully.
- How to use it: Conduct regular surveys to gather feedback and identify areas for improvement in agency-worker relationships.
7. Fill Rate
- What it measures: The percentage of job requisitions successfully filled by an agency.
- Why it matters: A high fill rate indicates an agency’s ability to meet demand, while a low rate signals inefficiencies or mismatches in capabilities.
- How to use it: Set realistic benchmarks for fill rates and prioritize agencies that consistently meet or exceed them.
8. Compliance Adherence
- What it measures: The agency’s ability to meet legal, regulatory, and company-specific compliance requirements.
- Why it matters: Non-compliance exposes your organization to risks such as fines, lawsuits, and reputational damage.
- How to use it: Implement periodic audits and measure adherence to background checks, certifications, and other critical compliance standards.
Using Metrics to Drive Better Agency Performance
Metrics provide valuable insights into the effectiveness of your staffing agency partnerships. To maximize their impact:
- Centralize data: Use a modern VMS to consolidate and visualize agency performance metrics.
- Benchmark performance: Establish clear performance benchmarks and share them with agencies.
- Foster collaboration: Provide regular feedback and create opportunities for continuous improvement.
- Reward excellence: Recognize top-performing agencies to incentivize consistent delivery.
By tracking and acting on these metrics, you’ll not only enhance agency performance but also achieve greater efficiency, quality, and satisfaction within your contingent workforce program.
Conexis VMS has helped put our contractors in one consolidated place - giving us visibility and control over our temporary workers, enabling us to have more predictability and oversight of our costs.
Global Final Mile Delivery Company
VP People & Culture
We had all the traditional contingent workforce issues that large enterprise companies have, however, we struggled to find a VMS provider that could give us a technology solution within our budget and we felt could attend to our needs properly. Conexis has been a godsend since we implemented it 5 years ago. We now have full visibility to our entire workforce and access to all of our data.
Global MSP Provider
SR VP of Delivery
We had all the traditional contingent workforce issues that most companies have, however, we struggled to find a VMS provider that could give us a technology solution within our budget and could attend to our needs properly. Conexis has been a godsend since we implemented it over 5 years ago. We now have full visibility of our entire workforce and access to all of our data.
North American Pharmaceutical Company
Director of Procurement
We have been using Conexis for three years now, I think we were one of their first customers. When we started with Conexis we were looking to run an RFP, but after a meeting and demo, we knew Conexis was the perfect fit for our organization. It had the functionality we needed, and their client-centric culture was an important deciding factor. They didn’t let us down.
Global Pharmaceutical Company
HR Director
Even though we are a global organization, we had no way of knowing where and how many contractors we had in our organization. Conexis has put all of our contractors in one place giving us full visibility to our global roster of temps. This has allowed us to standardize our costs, manage compliance and drive better performance of our staffing agencies. The system is simple, easy to use, and implementation was quick and painless.
Global Consumer Products Company
Regional Procurement Manager
We were struggling to manage one of our larger professional services clients due to the client's own VMS inefficiencies. We implemented Conexis internally to manage the entire MSP workflow from request to agency payments.
North American MSP
Senior Program Manager
Their customer care is amazing and their infrastructure allowed us to white label the platform. If we need custom changes we don’t wait months like some of the other VMS partners we have. Often changes and upgrades are done in a few weeks at the most. We are now rolling Conexis out in Europe.
Global MSP
North American Director
I have used a lot of VMS systems over the last ten years and I can honestly say that Conexis is the easiest and simplest to use VMS of all of them. Please don’t change!
US Managed Service Provider
Senior Account Manager
Conexis was able to get us up and running so fast and at no cost. We have a lot of unique requirements but that didn’t impact the timeline or the budget. Just a great experience all around.
Global Beauty Products Company
Senior Procurement Manager
We looked at many VMS providers, but the cost was crazy. We had given up until we came across Conexis. They set us up and had us running in a few weeks. The license fees are very reasonable as well.
Global Pharmaceutical Manufacturer
Procurement Directors
