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Vendor Consolidation — Survival of the Fittest

The theory of natural selection explains how certain life forms survive over others within a changing environment. As the top 10 in-demand jobs in 2010 did not exist in 20041, the theory of natural selection is particularly relevant when considering which organizations will win the war for talent over the next decade. To survive environmental changes, and outperform the competition, organizations must stay agile. Specifically in terms of contingent labor management, organizations need to “trim the fat” of their staffing vendor base, narrowing their providers to a select few that can truly help to attract top performers, increase productivity and deliver high-quality products and services to the market.

A Step-by-Step Guide to Successfully Competing in "The Wild"

I recommend the following approach to organizations seeking to consolidate their vendor base:

Start With the End In Mind

Vendor consolidation is a complex process that requires organizations to consider and manage many moving parts. As such, organizations need a guiding set of principles to ensure they remain focused and ultimately accomplish objectives that organizational leadership deems critical for long term success. I have found it particularly helpful for organizations to start with the end in mind by answering the following questions:

  • What is your organization’s mission and values?
  • What are your organizations strategic priorities? How will it accomplish its mission and live its values? 
  • How will various functional areas (Procurement, HR, IT) play a role?
  • Given your priorities, what specific roles, skill sets and competencies will be strategic, key and core over the next three to five years?
  • Which skill sets will be full time, part time or contingent? 
  • How will you attract, engage and retain the top performers needed to accomplish your goals? How will you align your talent acquisition processes and activities to maximize productivity and effectiveness? What metrics will you use to determine successful outcomes?
  • What role will your staffing vendors play in building and managing a talent pipeline? What competencies must your vendors have to successfully partner with you in this way? How will your operational metrics cascade to monitor vendor performance?

Clarifying your organization’s answers to these questions will provide the necessary context to your vendor selection and consolidation criteria.

Consult with Key Stakeholders

One of the biggest pitfalls to a successful vendor consolidation process is failing to gain the full support of stakeholders impacted by vendor services. Such stakeholders typically include key members within Executive Leadership, HR, Procurement, Vendor Management Organizations (VMOs) and End Users. It is important for your organization to identify the needs of each group and prioritize the many criteria used to judge vendor performance across stakeholders. For example, end-using managers tend to care most about a vendor’s ability to provide quality resources, while HR frequently prioritizes compliance to policies and procedures. In contrast, Procurement seeks competitive rates, and many VMOs value reporting capabilities or range of services. Performance criteria deserving the highest priority are those that most closely align to the organization’s strategic goals clarified at the start of the vendor consolidation process. While there will inevitably be trade-offs required, bringing such issues to light early on will facilitate a more successful end result.

Know What to Look For in Vendor Performance

The performance criteria your organization agrees upon set the foundation for vendor evaluation. Consider the following questions as a basis for assessing which vendors should remain on your list:

  • Which trends and business drivers will likely change your industry landscape? Will demand rise or fall? Which new skills will be needed to sustain competitive advantage?
  • What is each vendor’s strategy to meet your needs? What operations exist within the vendor to support these strategies?
  • How well does the vendor understand your business, your priorities and your strategy? Is it vertically aligned? How does it stay abreast of key trends in your company’s industry?
  • Which vendors are more proactive and consultative to your specified needs?
  • Does the vendor have knowledgeable resources dedicated to your organization? 
  • What are each vendor’s core competencies and skill sets? How can it prove its focus in these areas?
  • What unique tools and processes do your vendors possess that will provide greater efficiency and optimize productivity for your organization? 
  • How does the vendor ensure service consistency across your locations and divisions? 
  • How will each vendor ensure geographic coverage to meet all of your needs now and as you grow? 

Many organizations require their vendors to respond to these questions through a formal RFP process. When reviewing vendor responses, statistics supporting vendor claims can be impressive; however, organizations should be wary of numbers because they can sometimes be misleading. Instead, try to focus on the operational processes that vendors say will be used to actually deliver promised outcomes. If input activities are sound, the outcomes are bound to follow. You may want to consider conducting a site visit to validate that stated vendor processes are performed regularly.

As you evaluate your vendors against established criteria, also give strong consideration to how well your internal vendor management processes enable your best vendors to deliver the level of service you require. For example, if you value vendors that act as true business partners, your vendor management processes should facilitate open lines of communication and strategic information sharing. No-contact policies or completely electronic / automated processes for vendor-to-hiring manager interaction will severely limit your vendor’s ability to be proactive and consultative.

Differentiate Sourcing from Recruiting Paradigms

Companies considering vendor consolidation must differentiate between sourcing and recruiting activities. The philosophy that “all staffing providers are the same” is just not true. Some vendors merely source candidates. Some are actual recruiters.

Sourcing-centric strategies simply require vendors to submit a high volume of candidates to fill an open position. Vendors held to sourcing standards alone are thus able to submit many candidates quickly. Yet, their speed comes with a price as these types of submissions typically average a one to 15 or 20 hit ratio for quality placements. Hiring managers are left to sift through piles of resumes and take the time to screen those candidates who are and are not right for the job.

In contrast, recruiting-centric strategies require providers to emphasize candidate quality over speed. Under these terms, recruiters must develop and leverage understanding of a client’s business to attract and screen candidates. While this approach may take more time (recruiters must execute a cultural fit assessment, a technical fit assessment and references at a minimum), it saves time and money in the long run by encouraging providers to submit only the resumes of those candidates deemed fully qualified.

Consider the Perspective of Vendors

Last, but certainly not least, it is important to consider the provider perspective when developing an effective process by which to optimize vendor performance. For example, organizations with a large vendor pool often do not provide individual vendors with a significant amount of business. As many staffing vendors are structured to provide support to their largest customers, organizations are wise to think of how they can motivate commitment and dedication in their vendor population to achieve true partnerships and the quality outcomes desired. Organizations can help fuel a high performance vendor management operation by regularly communicating with vendors, providing clear expectations, listening to their feedback and offering other creative incentives.


Within an increasingly competitive and volatile business environment, only the strongest organizations will survive. To build a lasting enterprise, organizations must remain agile. Partnering with the right vendors, in the right way, can help enhance agility while simultaneously driving strategic priorities.

Organizations can help fuel a high performance vendor management operation by regularly communicating with vendors, providing clear expectations, listening to their feedback and offering other creative incentives.

Author: Allen Kriete, Executive Director, Healthcare Services Vertical at Allegis Group

1 “Did you Know? 4.0,” version released in September 2009. Licensed by Karl Fisch, Scott McLeod, and XPLANE.