VMS – Hated By Virtually Everyone – Why Do Companies Implement Them?

By: John Hutchins, Quantix Vice President, Client Services

When I started in the IT staffing business as a sales person back in 1998, Vendor Management Systems (VMS) were almost nonexistent. Companies had vendor lists or gate keepers, but the monster that is today’s VMS was still in its infancy. Today, most large corporations and many medium-sized companies have implemented a VMS. Hiring managers, candidates and, of course, recruiters hate them – so why do companies continue implementing these systems?

Imagine this scenario – you’re a large IT organization with 35 managers. Each manager has their favorite two staffing firms. The company is now working with 70 staffing firms, each with their own unique way of doing business, including unique contract terms. Sounds like a mess? You bet! I’ve run across companies where no one, not even someone in accounting, can tell the executive staff  how many staffing firms they are working with, how many contractors are on staff or even how much they are spending on staffing services. If I were an executive in that company, I would freak out and demand that we implement a comprehensive system that provides detailed reports enabling me to make informed decisions, negotiate better terms and get everyone on the same page. In walks the VMS sales person, Cha-Ching!

From the executive’s perspective, the VMS sounds great – a centralized system through which every internal hiring manager and every staffing agency has to work. And, of course, the best way to ensure everyone works through the system is to make that same system the vehicle for the staffing agency to get paid.

“Sounds great,” says the CIO, “But it also sounds expensive! I don’t want to spend the money to buy or implement this system. We’re already spending too much on IT staffing.”

“Not to worry,” responds the VMS sales person. “This system will be free for you to use and implement. We’ll make the staffing agencies pay for it!”

“Well then, if it isn’t going to cost me anything, make it happen,” says the CIO with a big smile.

And that is how it works… and one of the reasons IT staffing firms hate VMS. The VMS is paid for by charging a fee to the IT staffing firms who are required to utilize the system – typically between two and five percent of gross revenue. In other industries, that may sound like a kickback, not in our world.

PullingHairOutOther reasons why IT staffing firms hate VMS is because it becomes the communication conduit with hiring managers. If everything has to pass through the VMS, why not initiate the job order process from the VMS? And why not require all feedback to be passed through the VMS? And since, everything is going through the VMS anyway, let’s free those hiring managers from the pesky IT staffing sales people and forbid any interaction between the two! 

It may sound great in theory, but the IT staffing business is a “people business.” For the recruiter to find quality people, they need to have quality information regarding the job order and quality feedback throughout the process. If there is no personal interaction permitted, that quality communication quickly degrades. The job order added to the system becomes sparse (or outright incorrect), the feedback quits being added because hiring managers are busy people and don’t have time, and the recruiter begins to make assumptions – essentially trying to make educated guesses about what the hiring manager really wants. Sounds like a mess? You bet!

Hiring managers may like the idea of implementing a VMS, but most begin to complain when they see the quality of candidates start to slide. The savvier managers begin working the system by going around the VMS and talking to their favorite staffing agencies about job orders. Some even go through the entire interview process and choose their candidate before entering the job order into the VMS and having the staffing agency go through the VMS with the one candidate that actually already has the job. This works for the savvy hiring manager and the lucky staffing agency, but actually creates the reason candidates end up hating the VMS without even knowing why.

If you’re one of the lucky candidates working with the lucky staffing firm that works with the savvy hiring manager, you’re golden. You’ll receive quality information about the job order, good feedback from your recruiter and may even get the job without knowing a VMS exists. Unfortunately, the vast majority of the time, candidates are working with a staffing firm that isn’t a favorite or isn’t working with a savvy manager. As a result, they don’t receive good information about the job order, don’t receive good feedback and ultimately feel like their application ended up in a black hole.

The answer to the original question is that the VMS satisfies the needs of the company and its executives. It gives them information they use to track and control the use of IT staffing services. The fact that the VMS companies have figured out how to offer it to the company for free seals the deal. Unfortunately these benefits trump any dissatisfaction expressed by hiring managers, candidates and recruiters.

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