VMO stands for Vendor Management Organization or Vendor Management Office. VMOs are implemented by companies to regulate and track spending on third party recruiting and staffing companies. VMO companies essentially track and manage spending on recruiting vendors and ensure discipline and transparency. A VMO is essentially a procurement regulation system applied to the function of recruiting and talent acquisition. However, the notable difference is that VMOs procure human capital and contingent labor, so the cuts in spending are not easily forecast nor consistent.
Instead of simple costing savings in the talent management process, VMO companies often provide data and measurable activity to the hiring process. For example, it is difficult to determine productivity levels of various staffing companies without a formalized system. Third party recruiting firms usually form relationships with hiring managers and individual recruiters and people in Human Resources. The relationship is ungoverned and untracked. VMO companies often apply software systems and regulations to these relationships, guaranteeing regulated spend levels and a rationalized process of recruitment firm selection.
Many large organizations, especially, have implemented certain aspects of recruiting vendor management. It is uncommon now for large organizations not to have some form of “approved vendor lists” for recruiters and staffing firms. However, the amount of organizations utilizing full scale vendor management with sophisticated software tracking systems is expanding rapidly. The cost saving benefits are clear and companies offering VMO services point not only to cost savings, but to compliance and increased and formalized use of metrics in the hiring process.
VMO differs from RPO in that VMO refers to one aspect of the recruitment process. While there is much overlap between recruitment process outsourcing vendors and VMO companies, VMO now usually refers to a particular set of functions. VMO usually implies a software technology interface that third party recruiting firms and staffing companies use to submit, vet, and track the interview process. The primary goal of VMO software is to track the activity of staffing and recruiting firms, coordinate the submittal process to hiring managers, and ultimately, gauge and judge the performance and cost effectiveness of each of the third party recruiting vendors.
Many staffing and recruiting firms criticize the standard implementation of VMO systems and software. Recruiting is a procurement process; however, it is the procurement of human talent, a fundamentally unquantifiable asset. Furthermore, recruiting is an intimate, personal transaction. Recruiters often feel that contact with the direct hiring manager is not simply good for their business, but rather a fundamental requirement to a fully vetted and understood job order and candidate requirement. Many third party firms resent being relegated to submitting candidates and being tracked on a standard of cost, with little human contact or chance at understanding job orders. Hiring managers and executives at the end clients also many times resent VMO software. They wish to procure talent as needed and in the most efficient manner. The VMO software process oftentimes adds certain technical steps and formalities to a process which is time sensitive and important.
However, the market is responding to VMO providers. Organizations both large and now of medium size are implementing these processes at a rapid pace. VMO providers are also responding to the needs of third party recruiting companies and changing the workflow to represent the human element of procuring talent. In an interesting recent development, recruiting and staffing firms often now provide a VMO software system and administrative team of their own. Companies now have the option of a “one stop shop,” with staffing companies providing the software and compliance process, as well as the actual staffing and recruiting function.