The use of Preferred Supplier Lists (PSL) was originally intended to support and strengthen relationships and performance and to reduce the administrative burden of recruitment on a company’s HR or in-house recruitment teams, but as the number of recruitment companies in the UK increases, including large numbers of small, specialist, niche agencies, and the increasing polarisation of the recruitment market, it can be difficult for a company to know whether a PSL is in the interest of best hiring practices.
The JobPost recently released a study investigating the use of PSLs in today’s market which quotes statistics of ‘almost 1 in 2 unable to fill specialist roles via their PSL’ and ‘64% of respondents [having] rejected a suitable candidate from a non-preferred agency’.
There are, of course, both pros and cons to using a PSL:
- Long-term, stable relationships between client and supplier – this can create greater understanding between client and recruitment agency, which leads to better quality recruitment.
- Build-up of trust
- Reduce administrative burden on in-house recruitment and HR teams
- Reduce costs/fees, sometimes by negotiating preferential arrangements with agencies in exchange for a place on the PSL
- Suppliers can become an extension of your business, advocating your employer brand
- Places structure around the use of external suppliers, enables measurement and encourages regular review
- Known quality of suppliers
- Limiting the number of suppliers limits the number of candidates, which can lead to lower quality hires, longer time-to-hire or even simply not finding the right candidate for the job.
- A client struggling to find a candidate may veto a suitable one on the basis that he is not represented by a preferred supplier, which could remove a great candidate from the possibilities, which is less than ideal.
- Lists can often become long and unmanageable, which can make it difficult to identify your best-performing suppliers.
- The increased specialisation of hires may mean that agencies on your PSL are not, in fact, equipped to deal with every diverse position you need to fill. This is particularly true of generic agencies without expertise in specialised or unusual roles.
- Greater opportunity (without a PSL) to find new and possibly better partnerships, which can mean less stagnation and reliance on old connections, alongside more innovation and the cultivation of new contacts.
Using a PSL can be useful in many ways, but it is important to keep in mind the limitations they place around your recruitment function: today’s PSL should be a flexible framework: one which allows deviation to achieve the best results.