3 reasons why a Preferred Supplier List (PSL) hurts your business

October 20th, 2015

In today’s marketplace many firms operate a PSL (Preferred Supplier List) in their recruitment team. Most companies use a PSL as a barrier to protect them from unwanted recruitment agency calls.  It provides a structure for selecting suppliers and stops managers from acting alone, using their own criteria for selection.  

No one solution fits all! However with effective supplier management you can make much better use of your PSL.

There are 3 reasons why your PSL is hurting your company:

  • Recruitment agencies should not be your first choice for recruitment

Recruiters are expensive and you should be looking to explore all other avenues before going to them. If your company is using a list of set suppliers you can negotiate set rates but what about other, direct ways of recruiting?  Recruitment agencies used to be the main way of finding good talent but in today’s 21st Century marketplace with more internet savvy candidates, there are more cost effective solutions available. You should make sure that your hiring process has multiple tiers. We recommend first selecting some direct sourcing options and allowing those to have a chance to fill your role for at least the first 2 to 3 weeks. Should these options not work you can then invoke a PSL agency.

Going directly to agencies is going to be a very expensive way of hiring and you should not have agents as your first and only option.

  • Lower rates often means lower quality candidates

When implementing PSL’s it’s common for the primary negotiating point to be the placement fee. When you commit to use an agency for the next 12 months with a low fee, potentially a lot of the competitive pressure which would have encouraged your agent to deliver every time is no longer present. Additionally if you have negotiated a particularly low rate and your agent has other clients on their books with higher fees, it’s possible they will just send all the best candidates to them.

  • PSL lists need to be combined with a robust procurement and review process.

Good supplier management processes mean you can have all of the benefits of a PSL without the bureaucracy that sometimes comes with them.

Your company can set up your own Service Level Agreement, designed to match your needs and ask your suppliers to sign up to this.  You can agree payment and supply terms to suit you and give you a base to compare your suppliers and the quality of service you are receiving.  The marketplace is constantly evolving and it’s vital to keep track of what is happening to make sure you are getting the best candidates for the best rates,  recruitment agencies are no longer the best way to help you find your candidates.

So is the PSL good for your business? The answer has to be no unless you have implemented some lower cost options which you initiate before invoking the PSL. In the 21st century, with technology driving a much more open and transparent job marketplace, we are seeing new generations of internet based options that provide smarter, quicker and cheaper ways to access talent. Simplified recruitment is one of those new channels!

Simplified offer a 21st century method for all your hiring needs and we will work with you to find the best solution. We’re a pre-PSL option and we help companies achieve 50-80% reductions in their hiring costs.

Working with us helps you avoid all the above risks and allows you to start developing your own pool of industry talent. Talk to us today on how we can help your business.

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