http://www.harbourhr.com/services/why-your-psl-may-be-costing-you-money
Why your PSL may be costing you money
It seemed like such a good idea at the time. The early 2000’s saw a wave of HR departments grasping the concept of preferred supplier lists (PSL) with both hands (and a certain amount of relief). It seemed to provide the perfect solution to those involved with in-house recruiting. You could pick the agencies you wanted to work with, level the fees you paid to the lowest possible rate and stop all those pesky recruitment calls.
Except… well, it hasn’t quite worked out like that. Increasingly the recruitment industry is finding that PSLs are no longer the perfect method of managing the recruitment process and, surprisingly, both companies and agencies are benefiting from this.
The driving force behind PSLs has always been the budgets available to recruiters. Tough times in the early 2000’s saw recruitment levels drop, a proliferation of hiring freezes and it left recruitment agencies struggling across the board. The introduction of PSLs, especially to higher profile companies such as investment banks and blue chip companies, added a certain amount of prestige to the recruitment agency who secured a place on their PSL. However, prestige came at a price. Being on a PSL meant that, in the vast majority of cases, the recruiter was working for a greatly reduced fee and would still be competing against a number of other companies for the same vacancy. So, effectively, the same work for less money. PSLs began to look much less attractive to agencies.
Yet, in a difficult market being on a PSL was better than struggling to secure vacancies. The recruitment agencies persevered, fees were slashed, financial penalty clauses for agencies who did not (or often could not) deliver were introduced. Service level agreements became the modus operandi. For the HR departments there were demonstrable benefits; they had a set list of approved suppliers to call upon who had already agreed terms and conditions for all possible vacancies. They were able to turn away constant recruitment calls by insisting that they had a PSL. More importantly they were cutting a not insubstantial cost on their budget.
A PSL did not necessarily dissuade recruitment agencies intent on securing a vacancy. Often they would circumnavigate the holders of a PSL and go direct to the line manager with a speculative CV. Occasionally this would pay off and HR would be put in a position where a line manager was adamant that they wished to see a candidate irrespective of whether they were a PSL agency or not. This type of scenario began to highlight the weaknesses in the PSL system, what happens when the right candidate does not come through the right agency?
It became evident as the recruitment market began to stabilise that the PSL was not a complete solution and areas of weakness began to be exposed in the concept. With a larger candidate pool to draw upon and a greater number of vacancies to fill recruitment agencies found that the more lucrative roles were not to be found on a PSL. Building relationships with other clients meant that they were able to place candidates in higher fee paying roles than the PSL would allow for and that the volume of work from the PSL was not sufficient to offset this cost.
This has inevitably led to a decline in both the quality and availability of candidates being sent to PSL roles. While there is still recognition that being on a high profile PSL is a prestigious position, recruitment agencies at their core are a sales motivated industry and even with the best customer relations in the world encouraging a candidate to take a low fee paying PSL position as opposed to a higher fee paying position is a business decision.
The impact of this upon PSL driven recruitment has been two-fold. Firstly the quality of candidates has diminished somewhat as agencies encourage higher calibre candidates into higher fee paying roles. Secondly, it has increased the length of time it takes to fill a vacancy which can have a detrimental effect if the incumbent of the role is on a short (e.g. one month) notice period, as the vacancy will either be left vacant until a replacement is found, thereby decreasing the productivity of colleagues who are left to cover the responsibility or the vacancy will be covered by a temp, incurring additional costs to the recruitment process.
However, abandoning the PSL concept entirely does not present a suitable alternative for the HR professional either. So what is the solution? Increasingly, in-house recruiters are turning to niche suppliers to provide their resourcing solutions and developing Master Supplier Lists (MSLs). The difference between an MSL and a PSL centres on the following:
• Suppliers are chosen through demonstrated ability to fill vacancies based on the type of role
• As each agency is not expected to fill roles they are not specialised in the volume of roles for each agency reduces and as such the fees are not driven down,
• Having proven their ability to recruit for the company the in-house recruiter is able to build the relationship and negotiate lower fees based upon an on-going and productive relationship.
Companies are increasingly finding that building solid, ongoing relationships with the recruiters on their MSL will pay longer term dividends to them in terms of lower fees, a better calibre of candidate and vacancies being filled faster. They are also not tied into formal agreements with agencies and are able to be more flexible with regard to whom they choose to work with. This in turn encourages the agencies to continually perform in order to maintain their relationship with the company but at the same time they are able to agree an acceptable fee structure where reductions recognise an ongoing, productive relationship. In this way both the in-house recruiter and the recruitment agency maintain a balance and are able to drive both businesses forward.
For further information on building a Master Supplier List or developing alternative Recruitment Strategies for your company please contact us.
Except… well, it hasn’t quite worked out like that. Increasingly the recruitment industry is finding that PSLs are no longer the perfect method of managing the recruitment process and, surprisingly, both companies and agencies are benefiting from this.
The driving force behind PSLs has always been the budgets available to recruiters. Tough times in the early 2000’s saw recruitment levels drop, a proliferation of hiring freezes and it left recruitment agencies struggling across the board. The introduction of PSLs, especially to higher profile companies such as investment banks and blue chip companies, added a certain amount of prestige to the recruitment agency who secured a place on their PSL. However, prestige came at a price. Being on a PSL meant that, in the vast majority of cases, the recruiter was working for a greatly reduced fee and would still be competing against a number of other companies for the same vacancy. So, effectively, the same work for less money. PSLs began to look much less attractive to agencies.
Yet, in a difficult market being on a PSL was better than struggling to secure vacancies. The recruitment agencies persevered, fees were slashed, financial penalty clauses for agencies who did not (or often could not) deliver were introduced. Service level agreements became the modus operandi. For the HR departments there were demonstrable benefits; they had a set list of approved suppliers to call upon who had already agreed terms and conditions for all possible vacancies. They were able to turn away constant recruitment calls by insisting that they had a PSL. More importantly they were cutting a not insubstantial cost on their budget.
A PSL did not necessarily dissuade recruitment agencies intent on securing a vacancy. Often they would circumnavigate the holders of a PSL and go direct to the line manager with a speculative CV. Occasionally this would pay off and HR would be put in a position where a line manager was adamant that they wished to see a candidate irrespective of whether they were a PSL agency or not. This type of scenario began to highlight the weaknesses in the PSL system, what happens when the right candidate does not come through the right agency?
It became evident as the recruitment market began to stabilise that the PSL was not a complete solution and areas of weakness began to be exposed in the concept. With a larger candidate pool to draw upon and a greater number of vacancies to fill recruitment agencies found that the more lucrative roles were not to be found on a PSL. Building relationships with other clients meant that they were able to place candidates in higher fee paying roles than the PSL would allow for and that the volume of work from the PSL was not sufficient to offset this cost.
This has inevitably led to a decline in both the quality and availability of candidates being sent to PSL roles. While there is still recognition that being on a high profile PSL is a prestigious position, recruitment agencies at their core are a sales motivated industry and even with the best customer relations in the world encouraging a candidate to take a low fee paying PSL position as opposed to a higher fee paying position is a business decision.
The impact of this upon PSL driven recruitment has been two-fold. Firstly the quality of candidates has diminished somewhat as agencies encourage higher calibre candidates into higher fee paying roles. Secondly, it has increased the length of time it takes to fill a vacancy which can have a detrimental effect if the incumbent of the role is on a short (e.g. one month) notice period, as the vacancy will either be left vacant until a replacement is found, thereby decreasing the productivity of colleagues who are left to cover the responsibility or the vacancy will be covered by a temp, incurring additional costs to the recruitment process.
However, abandoning the PSL concept entirely does not present a suitable alternative for the HR professional either. So what is the solution? Increasingly, in-house recruiters are turning to niche suppliers to provide their resourcing solutions and developing Master Supplier Lists (MSLs). The difference between an MSL and a PSL centres on the following:
• Suppliers are chosen through demonstrated ability to fill vacancies based on the type of role
• As each agency is not expected to fill roles they are not specialised in the volume of roles for each agency reduces and as such the fees are not driven down,
• Having proven their ability to recruit for the company the in-house recruiter is able to build the relationship and negotiate lower fees based upon an on-going and productive relationship.
Companies are increasingly finding that building solid, ongoing relationships with the recruiters on their MSL will pay longer term dividends to them in terms of lower fees, a better calibre of candidate and vacancies being filled faster. They are also not tied into formal agreements with agencies and are able to be more flexible with regard to whom they choose to work with. This in turn encourages the agencies to continually perform in order to maintain their relationship with the company but at the same time they are able to agree an acceptable fee structure where reductions recognise an ongoing, productive relationship. In this way both the in-house recruiter and the recruitment agency maintain a balance and are able to drive both businesses forward.
For further information on building a Master Supplier List or developing alternative Recruitment Strategies for your company please contact us.
Комментариев нет:
Отправить комментарий