HR & Vendor Managment
HR has the ability and ready resource to excel at vendor managment. The states are high and getting higher.There is real risk if vendor managment is not done well and significant benefit if it is. If HR fails to take the lead then the odds of failure increase and the odds of getting the benefits can go down.
The Challenge
As HR reliance on outside vendors (including outsourcing providers) spreads there is greather need to manage vendors cost-effectively.
The cost of outside contracts as the share of HR budgets is continually growing - outsourcing, technology, consulting, training, recruiting, employee assistance, managment development, assesment, are just a few of the areas.
The complexity of contracts and the numbers of vendors is becoming overwhelming. In a diversified comapny there may be hundreds of HR service providers.
The risk and dependancy is greater with more transactional work moving away to outsourcers and increased reliance on critical vendors.
HR is itself in transition and called on to provide more customer facing and strategic activities and is losing the operational control of many functions.
Now, HR departments have both an opportunity and a responsibility to assure control of vendor managment
Two Options
Today HR has to choose between two options:
create and enforce standards for vendor management by defining consistent processes and using governance boards to assure compliance and allow for exceptions.
or consolidate vendors and move to a reduced number of providers, thus reducing the number of outsourcing relationships.
Pluses and Minuses of Consolidating Vendors
Many companies are reluctant to go with fewer providers as master service contractors or sole source suppliers due to:
The risk of being dependent on a single vendor
Misgivings about loss of control over key HR functions.
Vendors' lack of the special competences provided by a wider array of suppliers.
Adding to the cost of services by taking a " markup " on subcontractor services.
Potential vendor conflict of interest where they may offer inferior or more costly options than are available in the market.
However, while the risks of reducing the number of suppliers are very real others go forward while taking precautionary measures. They look at the risks as manageable and outweighed by the benefits:
Careful contract drafting helps avoid the risk of " putting all eggs in one baskets"
Careful vendor
selection helps insure vendor's financial stability
Going with one provider makes costing more transparent and easer to grasp the
totality of outsourcing and contractor costs
It is easier to pressure vendors to deliver better value by providing access to emerging best practices and
expertise.
Larger vendors can be made to provide global capability
Some providers may have more ability to accomodate changes, such as employee number fluctuations.
Larger vendors to provide for " one - stop shopping" may be more able to take in HR people and provide them with a better carreer path
Relationship Managment is the Key
Whether companies decide to consolidate vendors or not, vendor managment needs to focus on building a relationship with the vendor. Simple short term price advantages from procurement approaches to HR services don't work long term, especially wherever processes touch employess. Even some simple transactions may seem to be just a mater of which could be managed as a simple procurement agrement, there are fewer ofd them in HR than there are, for example in office supplies or even conventional staffing for an IT position. Very ofen the vendor cannot do the job without:
Understanding the function and industry- do they really know how HR
works in companies like yours
Culture fit-do they care about HR and understand how your people feel about their work
Flexibility-are they and the people they supply willing and able to adjust to the changes that continually hit HR
HR Can Lead
Selecting and managing HR vendors can be managed much like recruiting than procurement.HR staff can legitimately claim the innate ability to determine if a vendor can succeed in your environment for a fair price. HR vendor managment can get results with the same kind of performance managment that is expected of HR employee managment. Relationship building is a competency that can be acquired. Managing vendors is a skill that can be standardized and adjusted to the domain knowledge HR already brings to the table.
While HR professionals may not always have the negotiation, financial, and legal background needed for successful vendor managment these competencies can be readily brought on board or staff can be re-trained. Consultants can provide the initial expertise needed for relationship managment and help train the full time staff that will manage relationship throughout their lifetime.
HR doesn't need to stand above
Every company has professionals who understand negotiating and leverage of buying power. HR can draw on distinctive kinds of expertise that likely already exist in-house: contracts managment, technology expertise, and legal.
In addition to pulling together the required skill base, HR may want to cdreate a continiung governance structure to make the best continuing use of existing resources and to insure organizational aligment. Managing providers wihin HR, often includes managing contracting, software, outsourcing, consulting, or similar reltionships across different functions, i.e. HR, IT, Financeetc. The composition of effective goverance boards varies between companies, but often includes representatives from HR< Finance, IT, Legal, procurement and Service Center managment.
In Summary
HR has the ability and ready resources to excel at vendor managment. The stakes are high and getting higher. There is real risk if vendor managment is not done well and significant benefit if it is. If HR fails to take the lead then the odds of failure increase and the odds of geting the benefits can go down.
HR Tech Team continually tracks the key issues and benchmarks in HRIS staffing, outsourcing. We welcome your comments and suggestions for futrure topics. We can provide support for your business case through customized benchmarking and ROI analysis.Please contact: research@HRTech Team.com
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