Workforce Management is one of just a few publications covering this years biggest debacle ...so far, the January collapse of vendor management system (VMS), Ensemble Chimes Global, a subsidiary of Los Angeles-based Axium International.

It's a potential [dead] canary in the mine and I'm surprised it hasn't gotten more press.

During the recession in the early 90's several major recruitment advertising firms went under and, when the dust cleared, 10s of millions of dollars paid to the agencies for newspaper ads... never reached the newspapers. Many of the companies that paid these recruitment ad agencies had signed contracts with the newspapers and were liable (a second time) for the money they had paid their agency.

The current problem is similar: many corporations have adopted a single VMS system platform to manage the transactions and flow of the many staffing firms that supply the companies contingent labor, temporary labor, F/T agency hires, etc. The company pays the "system" firm with the assumption that it then distributes those payments to the individual staffing firms that actually supplied the service.

Apparently the "float" (amount of money held by Chimes yet to be distributed) at the time of their collapse was between 100 and 300 million.

In its March article, Staffing Association Issues Vendor Management Guidelines, the Workforce Management writer describes the efforts of the American Staffing Association (ASA) to establish clearer guidelines for choosing and auditing third party vendors. A letter to more than 2000 companies was part of the Association's initiative.

Good luck. The critical issue here is whether the firms using Chimes had any skin in the game. It is likely the companies are all claiming that they "paid" for the service and are not liable for the failure of Chimes- even though they chose the app and essentially forced anyone wanting to do business with them to use it.

The largest staffing firms will simply take the hit and not complain in order to maintain their relationship. Smaller firms may well go under.

The short version of the ASA's VMS guidelines is reasonable and includes obvious buisness practices like periodically reviewing financial statements before deploying a VMS and monitoring cash flow through the VMS.

My opinion is that firms are at least partially responsible for the actions of services and systems that represent them. If they have not conducted a reasonable due dilligence they should be held accountable. If their "partners" are not willing to hold them accountable or discontinue doing business with firms that mis manage "external" applications then they (the staffing agencies) simply reap what they sow.

If the recession deepens, I predict more surprises are likely.