Is MSP just a blunt instrument for cost saving?

I would be surprised if there weren’t a very large number of organizations completing top to bottom supply chain management reviews in every category at the moment, searching for every last opportunity to drive down their external spend. 

Contingent labor spend, for most organizations, is a significant external cost. Economic uncertainty continues to impact budgets across the board. As such, it’s only logical that we see attempts at recruitment supply chain cost savings. For many, this means interest in managed service programs (MSP) that help control contingent labor spend. 

But should cost savings be the only aim of using MSP? 

Should contingent labor spend cost savings be your goal?  

Cost savings are one of the main benefits of using an MSP. But a well-run program will realize a number of hard and soft savings for any organization. The key question is whether a program focused only on cost savings will succeed. 

In many cases, if cost savings are your main goal, you’ll face challenging experiences. 

Issues related to tunnel-vision cost saving strategies include: 

1. Value for your money

The relationship between time, cost and quality is fixed. Move one of these variables and it impacts the others. That means the market is very efficient at setting appropriate hiring costs and salaries for each skill. 

So, if you pay a competitive market rate for contingent workers, you can find skilled support when you need it. But underpaying contract staff can lead to negative impacts. It may take a long time to find someone with the required skills who is willing to accept lower pay. Or you may be forced to hire someone quickly with a lower skill set than you need. Saving money short term could impact work quality in the long run. 

2. Internal resistance 

The people responsible for procuring a product or service are not usually the intended users. Instead, the end users are tasked with getting a volume of work done to a time and cost budget. It’s rare to meet a budget holder who wants to compromise on the quality of their work. Cost savings in some instances can damage professional reputations. 

As a result, cost savings are not the highest priority for certain stakeholders. That means when organizations lead with a cost-saving objective, they often face resistance from within the business. 

3. Headcount controls and outsourcing 

Many organizations still think that one of the easiest ways to cut costs is to control headcount. But often, headcount controls lead to outsourcing requirements. And external providers often come at a higher per capita cost. 

What does that mean for your business? If the volume of work doesn’t reduce, then the workforce demand remains constant. If you combine that with headcount controls, then the burden of extra workload is loaded onto other employees. 

Achieving cost savings in the right way

So, if you need to make cost savings, what should you do? You can set your MSP on the path to success by focusing on three key topics during the design stage. 

1. Engage the right stakeholders 

Firstly, talk to those people who use the services of your temporary workers and contractors. Get their views to identify what works well today and what they would like to improve. This way, you create a program that benefits the right people based on their unique needs. The program should be “pulled” by the primary stakeholders – not “pushed” by the secondary stakeholders (Procurement and HR). 

2. Have robust change management practices 

Recognize that change management needs investment. Remember – cost savings aren’t the most important thing to your primary service users. Focus on creating a message that uses the most relevant benefits for each stakeholder group in any communication. 

You can learn more about managing change with our robust Change Management methodology.

3. Make the reasons clear 

Lastly, you should focus on the main reason why the organization should embrace the change. If cash control or cost reduction is the main reason, link it to the impact on shareholders or financial results. By clarifying the bigger picture, the whole organization will understand why cost savings are the most important outcome. 

Three steps to MSP success  

If you’re considering an MSP solution, there are three simple steps to creating the perfect conditions for success:

Engage your primary stakeholders now. Failing to get the right people onboard may delay or even derail your efforts later. 

Avoid focusing on cost savings as a goal in isolation. Leading your change program solely to reduce contingent labor spend will diminish adoption across the company. 

Focus on creating a case for change based on tailoring the benefits to each internal stakeholder group. 

By following these rules, your managed service program can help deliver significant cost reductions for your organization. 

Learn more about how MSPs can help you control contingent labor spend by contacting our experts.