Download - ISM Indirect/Services Group Web Seminar
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ISM Indirect/Services Group Web Seminar
Successful Procurement of HR
Services ―What You Need to
Know!
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Don Glade is the industry’s leading authority on determining the TCO of HR, benefits, and payroll service delivery.
Hundreds of organizations have engaged with Don to use his proprietary financial analysis tool to understand the true costs associated with HR, benefits and payroll service delivery. His firm analyzes, quantifies, recommends and monitors solutions his clients have implemented to optimize their investments. Ultimately, clients reduce service delivery costs while increasing efficiency, mitigating risk and streamlining their regulatory compliance.
Immediately Prior to founding Sourcing Analytics in 2003, he was director, global human resource solutions for PricewaterhouseCoopers where he established a human resource administrative consulting practice that assisted clients with all aspects of the delivery of HR, benefits, and payroll services to employees.
A frequent public speaker, Don has addressed the Society for Human Resource Management, the International Society for Certified Employee Benefits Specialists and more and has published several articles and white papers on TCO in his field of expertise.
He earned a B.A. in Economics and Political Science from Duke University.
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Agenda
Procuring HR Services – The Differences
Service offerings in the HR Area
The procurement professional as facilitator
The role of cost dynamics in HR procurement
Building a business case
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Web Goals
What will we accomplish today?
Understand how HR procurement is different
Provide ‘food for thought’ for better
effectiveness in the next HR procurement
process
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Procuring HR Services – The Differences
What makes Procurement in HR so
“special?”
The People!
Pay (Labor) Benefits
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Procuring HR Services – The Differences
For many organizations, Labor is the
number one expense HR’s mission is to attract, RETAIN and ICENT
employees
Any activity that touches the employee group makes
HR apprehensive
“Touch” can be more important than technical
expertise to an HR professional
Often-times, HR professionals don’t have expertise in
the traditional business drivers such as cost analysis,
ROI, and risk
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Procuring HR Services – The Differences
And the impact on the procurement
professional is? HR tends to get defensive towards “outsiders” getting
involved in decision making around the delivery of HR
services
Process bottlenecks in sourcing and selection become
commonplace
Business case development is inadequate and often
misses the mark with executive decision-makers
Ultimately, “do-nothing”, or status quo becomes the
de facto course selected
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Service offerings in the HR Area
What are the services offered in the HR Area?
Traditional 401(k)
Pension
Benefits Administration
Payroll
Time & Labor
Management
Emerging HR Administration
Talent Management
Recruitment
Work Force Management
Learning & Development
Compensation
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The procurement professional as facilitator
Procurement to the rescue!!! Understanding the sensitivities of the HR department is
a great start
Come in as a partner in the process, rather than an
expert in procurement
Use the expertise of the HR professional rather than
isolating that expertise
Be flexible to allow for variation from the traditional
RFP approach
Provide ‘food for thought’ to for better effectiveness in
the next HR procurement process
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The procurement professional as facilitator
Example I - Isolating the expertise: A large organization was searching for a benefits
administration outsource provider
The procurement department controlled every aspect of the
traditional RFP process, isolating the service providers from
the service buyers – all questions had to go through
procurement
Result: The best providers bowed out of the process, the second tier
providers were the only respondents
HR wasn’t able to find a suitable provider, and the process
failed
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The procurement professional as facilitator
Example II - Flexibility: A large organization was searching for an HR BPO provider
Recognizing the intricacies of the market and complexities
of the services desired, the organization determined that a
“reverse RFP” was the best approach
Procurement became the managers and facilitators of the
project
Result: HR was able to more quickly and with less cost secure the
services of a top-tier provider and successfully implement
sooner than ever anticipated
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The role of cost dynamics in HR procurement
Procurement in the HR area is all about services Although HR service providers “productize” their offerings,
make no mistake, you are purchasing services
Whether it’s premise based technology, SaaS,
administrative outsourcing or anything else, HR is about
servicing its clientele: the employee and management
Unlike purchasing raw goods, or “widgets”, in the HR area,
services purchased impact the People-Process-Technology
trinity
Pushing on costs in one area will impact the other
Understanding the dynamics of the cost shifting is critical!
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The role of cost dynamics in HR procurement
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The role of cost dynamics in HR procurement
TCO is an approach for quantifying the end-to-end costs of a process
One Time Costs
Initial system installation
Upgrades Consultant
feesTCO
Ongoing Costs Labor for
administration Labor for system
maintenance Non-labor costs
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Great Moments in Cost History
1626 – Dutch purchase Manhattan Island for $24 million
1803 – U.S. purchases Louisiana Territory for $15
million
1982 – Pentagon purchases hammer for $435
1997 – Windows 95 PC TCO calculated at $9,784
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Building a business case
Critical to the success in any procurement is
driving the process across the goal line! Financial acumen is not a typical trait of the HR professional
Procurement can be a great partner by involving the
financial resources early in the process to assure the data
necessary for ROI analysis later in the process
Procurement has the experience needed to translate the
goals and analysis into a language the executive decision
makers speak (Business Case!)
HR has the in-depth knowledge for building the case for
change
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Building a business case
What is “The Case For Change” The cost and ROI discussion has been illuminating, but it
isn’t yet a business case. First and foremost comes
establishing why any action is necessary.
Executive decision-makers need to know why “do nothing”
is not an option.
There are always competing requests for capital
improvements, and most will be viewed as more critical to
the future of the business.
HR hasn’t traditionally been able to demonstrate
contribution to the bottom line performance from a
revenue or cost perspective.
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Building a business case
The case for change includes how and why
the chosen provider was selected Typical reasons for selection, beyond cost, include:
Culture, Vision, financial ability to meet the vision,
leading edge or fast follower, proven track record
Avoid the “checklist” mentality that boils everything
down to metrics and weightings. Remember, this is a
“high touch” area
Procurement’s best role is to facilitate and provide the
structure and guidance for HR to navigate the
approval process
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Building a business case
The business case is much more than a
simple numbers analysis: The Case for Change - Why is the status quo not an
acceptable option?
Presenting / Evaluating the Alternatives - What
options were explored?
The Selected Alternative – What has the team
determined as the best option?
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Building a business case
The business case is much more than a
simple numbers analysis: Making the Case for the Selection:
– The Financial Case– The Non Financial Case
Implementation Plan
Corporate requirements such as: Capital
Appropriations Request, Procurement requirements,
etc.
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ISM Indirect/Services Group Web Seminar
Questions????
Donald Glade
President, Sourcing Analytics
770-509-4816