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Preferred Supplier? So why are you not preferred?

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I’ve had a feeling for a while now that Preferred Supplier Lists (PSL) are not always what they are cracked up to be.  And before anyone says, “oh oh, who’s not been making the cut recently?” let me say that Peace Recruitment is on a good number of PSLs: it’s just that the word “preferred” seems to have lost its meaning in recent years.

Let me put it more bluntly.  What does the P actually stand for?  I can suggest some possible things: procured poorly, price cuts, penny pinching, preferably not them, pest.  Moreover, it’s common for recruiters who are not on the list still to get work, especially on the perm side rather than temp/contract, often at off-contract (i.e. higher!) rates.  But for those that are part of the agreement, “if you break the rules, we won’t pay you, so play ball if you want to stay preferred.”

With the big companies, PSLs are too often regarded simply as a way to save money. The thinking seems to be “let’s drop our rates by 2.5% and tell all the rec-cons that if they want to work with us that’s the price.”  In other words, they are procuring recruitment based on how can they get us to work as cheaply as possible.

While I understand that saving money is part of procurement’s job, surely the most important thing is getting the best candidate?  Now I know that there is a balance to be struck, and this is not a request for sky-high fees, but it’s obvious that if prices are continually reduced then service will suffer. I’ll return to this later, but clearly this puts recruitment consultants off delivering through Preferred Supplier agreements.

That said, the recruitment industry has not helped itself.  With the huge upsurge in employment, too many rec-cons have become “spray and pray” businesses and a lot of the quality has drained out of the sector. This is reflected in those agencies who drop their prices and hope that they can make money by throwing as many candidates as possible at the client and hoping something sticks.

This puts the whole recruitment industry on a circular and cumulative downward spiral: clients, especially those operating PSLs, expect cheap prices, get poor results and, unsurprisingly, wonder if they could do better themselves (of which more in my next blog).  

What do we do about this?  Well, for a start, P has actually to mean preferred for the right reasons, so that those who pass the criteria for inclusion are given their status first and foremost because of the quality service they provide.  Preferred agencies must be given the chance to develop relationships and not simply be selected for their willingness to confuse price with value. And, of course, prices should reflect the quality of the work done. 

We have one client who pays us a very high percentage of starting salary and - surprise surprise! – they happen to have secured the best talent available in the market at that time. Conversely, if the agreed price is cheap then often the calibre of candidate is poorer (as the good people have been “snapped up” by the higher paying employer) or the potential employer is one of maybe six other firms (as they all got the CV at the same time) who want to entice the person to their organisation.  This then turns into a bun fight and a bidding war which is in nobody’s interests.

When recruitment agencies’ worth is recognised financially, we have more money to invest in providing an even better service.  When it’s not, it’s harder to provide the quality service the PSL agreement expects.  Service is vital from the agency side, for without customer service no agency is cheap, at any price.  

We ought to change the entire PSL model. As I wrote above, P actually needs to mean preferred for the right reasons.  If you have a preferred restaurant that you go to regularly then they know you, treat you well, provide a quality product and service and are unashamed to charge you the going rate for all this. You trust them, they trust you.  That’s “preferred,” not a situation where you go to your preferred restaurant and say, I want to pay less but I want the same quality of food and service.  Agencies are too often not preferred but rather are procured and poorly considered.  I fear this will fall on deaf ears but it needs to be said.  I shall have some more thoughts on how we might change all this in my next blog. In the meantime, I welcome any comments?

Chris Peace, MD, Peace Recruitment

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