Using VMS Technology To Achieve Diversity Goals

Have you ever thought how HR and recruiting technology can help with corporate diversity spending initiatives and programs? Read on to find out how vendor management services (VMS) technology for HR and recruiting departments can help companies achieve these corporate diversity spending objectives through the acquisition of contingency labor. What Is Diversity Spending? Diversity spending is the aggregate value of purchases in the acquisition of materials and services from minority vendors and suppliers, in relation to a company’s overall spending. These minority businesses are usually designated or certified with a M/W/DBE (Minority/Women/Disadvantaged Business Enterprises) or SBE (Small Business Enterprises) status. The goods and services classified under diversity spending initiatives can be unlimited ó from offices supplies to catering services to contingency labor. Historically, diversity spending efforts have been the responsibility of procurement or supplier diversity departments. Many of the larger, publicly held Fortune 1000 companies have strong programs to help diversify their spending in an attempt to at least offer an equal opportunity for these M/W/DBE suppliers to participate. Other companies have gone as far as to designate a percentage of overall spending for M/W/DBE companies in order to level the playing field. While these programs stand alone as excellent initiatives to promote supplier diversity within companies, finding the qualified suppliers that can compete and provide these services is another obstacle. The vast majority of M/W/DBE’s historically have been privately held, smaller suppliers and vendors with limited resources and infrastructure. Many of these suppliers do an excellent job in servicing small- to mid-size businesses, but find it a challenge to service larger, more complex organizations. Smaller M/W/DBE companies can get lost in the bureaucracy and logistics of larger conglomerates. A Fortune 500 may open up the field to provide the opportunity for M/W/DBE’s to participate, but their complex internal processes and sheer infrastructure size alone can eliminate interest of these types of suppliers. Of course, there are always exceptions to the rule. But I have found this to frequently be the reality, particularly within the staffing industry, as smaller, regional M/W/DBEs try to compete with the majors for a piece of Corporate America’s business. There are a few national M/W/DBEs with the infrastructure and experience to service Fortune 1000 companies, but these companies comprise of a small fraction of the overall market of diversity staffing suppliers. Why Is VMS Technology Important to Hr Professionals? As most of us know, it is estimated that anywhere between three to five percent of the country’s workforce is contract or contingency labor. During recovery, that number typically increases, as some full-time workers once downsized usually come back into the workforces as contract or contingency labor. Some Fortune 1000 companies estimate the volume of their contingency labor spending to be in the billions of dollars. Some of the more progressive companies have organized and reviewed the way contingency labor is not only acquired within their respective organizations but also tracked and reported through the use of technology. This is where the use of VMS technology can make a significant impact in not only reducing direct supplier costs, but also help achieving diversity spending objectives for a company. The first solution is the most obvious, but we’ll state it for the uninitiated. There are several VMS providers that not only provide a good tool and service for the acquisition of contingency labor, but also are M/W/DBE companies! Again, they make up a small fraction of all VMS providers, but they are out there. In an earlier article for ERE, I mentioned the five different elements of an enterprise VMS solution ó namely 1) requisition management, 2) vendor management, 3) time and expense capture, 4) consolidated billing/invoicing and 5) management reporting. Let’s focus on the consolidated billing piece for a moment. Through consolidated billing, a VMS vendor usually manages the contracts a company has in place with their staffing suppliers. This relationship is more of a partnership around the billing process. Since the VMS provider consolidates all approved contractor time and expense, the VMS will usually manage the entire billing process. In short, the VMS receives payment from the client for all contingency labor spending and, in turn, pays all the staffing suppliers. Now, if your VMS provider is a M/W/DBE, you have an opportunity to capture a significant amount, if not all, of the spending under one roof. For example, if your company does, say, $100 million in contingency labor spending through the VMS provider, then your company has the opportunity to capture all of those expenditures as diversity spending, as long as the billing is going through the vendor’s technology. Some companies I have worked with do up to $500 million in contingency labor spending annually and are able to reap the benefits of consolidated diversity spending under a M/W/DBE provider. The bottom line is, by doing what your business would normally do anyway ó such as the acquisition of contingency/contact labor ó you can help your company achieve diversity spending goals. Tracking Diversity Spending Even if your vender is not a M/W/DBE, there is still an opportunity to at least track the diversity spending of your staffing suppliers. First, diversity spending can be captured particular to those staffing vendors that are minority owned. Since there is a far greater supply of staffing M/W/DBEs than VMS M/W/DBE’s, at least some of your contingency labor spend can be tracked and captured as diversity spending. Having a VMS in place guarantees this spending to be captured real-time with a high degree of accuracy. Without a VMS in place, this spending can still be captured, but it is generally a manual process that involves ongoing participation from several different parties in the billing process. If there are any errors in coding, tracking, monitoring, and reporting with staffing suppliers, A/P, or Disbursement, Supply Chain, HR, etc. ó then tracking of your company’s diversity spending will be inaccurately reported. Normally, each invoice, whether manual or electronic, needs to be specially coded in order to designate minority suppliers. What VMS technology does is to automate this process on the front-end, so all diversity spending is captured at approval, usually on a weekly or monthly basis. Capturing this spending real-time supports the reports-on-demand feature of this technology. Companies can report under the VMS technology at any given time the percentage of diversity spending in relation to overall spending at any moment. In conclusion, HR and recruiting folks have the opportunity to make a greater impact on diversity spend initiatives with the use of technology in today’s world than ever before. By rethinking the way your organization acquires contingency labor, you’re likely to find greater positive impacts on your organization than you originally realized on your first pass of the technology.

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J. Gregory Donovan ( has over eight years of experience in HR and recruiting, including particular experience with Applicant Tracking Systems (ATS) technology. His specific areas of expertise include global staffing, recruitment strategies, and HR and e-recruitment solutions. Formerly a founding member of an e-recruitment technology firm, Greg has held various recruitment and consultant roles with such companies as iXL, the John Harland Company, and Geac Software. He holds an MBA from Duquesne University and a B.S. from Penn State University.


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