Why You Should Never Do Business With A MSP

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Dec 17, 2015
This article is part of a series called Opinion.

You’ve got a great relationship with a long-established client where you’re the exclusive staffing provider. You understand them and they understand you. Like that eerie, normal calm at the beginning of a horror movie, the sun is shining, birds are chirping, and you and your client are sharing a picnic lunch and discussing tomorrow’s job orders in a grassy meadow full of butterflies and bunnies. Like all horror movies, though, things are about to take a grisly turn for the worse … far, far worse. (cue ominous music)

Somewhere, in another state, the decision makers at your client’s corporate headquarters are sold a bill of goods by a Managed Service Provider (MSP). The MSP rep promises uniformity, easy billing, staffing agency screening, and more time for HR and plant managers to focus on their primary job functions rather than dealing directly with all those crazy staffing agencies. The client will get better results with less effort and, best of all, the staffing agencies, not the client, will pay for the service. Some faceless VP decides to make her mark and give it a shot. After all, what could possibly go wrong?

Suddenly, and without warning, the edict from on-high is handed down to your client contact. No more picnic lunches. No more grassy meadows. No more bunnies. It’s to the curb for you, and the only way back in is to send your people to the client through the MSP. Except things have gotten much, much more complicated.

You are virtually forbidden to speak to the client contacts you’ve known for a decade. Instead of a position you know you can actually send someone to, you must now go through a portal to submit candidates who may or may not be accepted depending on the whims and requirements of the MSP (which may or may not be in line with what your client once required) and those other agencies may have submitted. It often takes days and mountains of red tape just to get a candidate approved, except by then he/she has likely found work elsewhere.

Billing Nightmares

Billing has become a nightmare. Instead of directly invoicing the client and getting paid in a week or two, you are lucky to get paid in 90 days, and what does come in isn’t necessarily structured to the invoices you submitted. Depending on the order of approval, you could receive a check for parts of several invoices, creating a nightmare for accounting and often making it necessary to hire someone extra just to keep track. In addition to your own payroll, you must submit hours through a bulky, non-user-friendly MSP portal, creating double work for your staffing managers.

Profits have taken a turn for the worse as well, considering that the MSP is taking their fee for services rendered directly from your bottom line. (That’s part of how these snakes get in the door – no expense to the client, except somebody has to keep the lights on and the toilet flushing, right?)

Accounts Payable

Your A/P risk doubles, because not only does the client have to pay the MSP, but the MSP has to then turn around and pay you at some undisclosed later point. Should one of them falter, guess who’s left holding the bag?

In short, there is clearly nothing, absolutely nothing, good about the MSP/VMS from a staffing agency perspective.

The MSP would, of course, turn around and make the argument that even if staffing agencies take a hit, the arrangement is good for the client.

MPCs Go Elsewhere

Let’s examine this claim, shall we? Suppose we get a fantastic candidate in the door and we have, say, three positions the candidate would be perfect for, except one of them is at an MSP managed client. Do we risk submitting the candidate to the murky MSP portal wherein he may or may not be hired and, even if hired, we’ll get paid significantly less, or do we take the more lucrative bird in hand and send him to a client with whom we have a direct relationship? After all, the four other staffing providers can service the MSP client just fine, right?

Except, what if they are all thinking the same thing? Who loses out in the end? That’s right, the client.

As a recent StaffingTalk parody opines, “Every year seemed some sucker agency would step up and accept the abuse. Low rates, ridiculous data re-entry. Slow payments. One-sided contracts. Never understood it It appears other agencies finally found real clients who are happy to pay a premium for great employees.”

A Twisted Lie

I don’t have to advise staffing agencies to focus their energies on their real clients instead of wasting excess energy servicing clients who use MSPs. Whether or not they are technically in an MSP contract, they are already doing this. It’s just human nature and business sense. The claim that the client will receive better service through an MSP is a twisted lie because, by utilizing an MSP, clients unwittingly put themselves at the bottom of every staffing agency’s priority list, right below that one-day, rock-pile shoveling assignment.

During my time as a branch manager the story at the beginning of this post pretty much actually happened to my office (minus the picnic and bunnies). That particular horror story had a happy ending because we were able to finally convince our client that the MSP actually hurt, rather than helped, the service they were getting. Sadly, this isn’t always the case.

MSPs are a a scourge — a completely needless cancer to our industry. With every fiber of our being, our job is to fight them. If you don’t have to do business with an MSP/VMS, don’t. If you are already doing business with one, stop if you can. If you are faced with the prospect of doing business with one, run, run like you’re being chased by an angry horde of ISIS terrorists. (Sure, ISIS may not have nearly the red tape, but no, they aren’t the answer either!)

If enough staffing agencies fight back and expose clients to the truth, we can beat down this horror story and restore the peaceful bliss we once had with our clients.

This article first appeared on StaffingTalk.
This article is part of a series called Opinion.
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