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Rethinking the RFP
When Veyance Technologies was being sold in 2007, it faced a daunting task: migrate HR services around the world from its former parent, Akron, Ohio-based Goodyear Tire & Rubber Co., to external service providers in just a year. For Laura Domchick, the director of global HR BPO at Fairlawn, Ohio-based Veyance, there were myriad issues to contend with -- everything from addressing the HRIS platform of record to executing change management in 15 countries. But instead of being overwhelmed, she and her team stayed focused on priorities, kept to a rigid schedule and borrowed a familiar page from the Confucian playbook that reads: "A journey of a thousand miles begins with a single step." That single step for Veyance was preparing the request-for-proposal document sent out to prospective vendors. Domchick recalls that the company worked with a sourcing adviser to define scope of service and to more rigorously vet suitors. The consultant, Houston-based EquaTerra, also provided templates on which the RFPs were built, further expediting the process. In the end, a disciplined approach, fortified with outside expertise, helped Domchick and her team fast-track the process, meet their deadlines and sleep better at night. As complicated as some view the RFP transaction, it can be just as straightforward, Domchick says. "Stay away from analysis paralysis. The RFP process is as long and lengthy as you want it to be," she says. For as long as there have been corporate-purchasing decisions, RFPs have been a part of that process. And for as long as there have been RFPs, there has been accompanying frustration, in part because of the long and drawn-out steps involved. When the process goes awry, it can lead to unfulfilled expectations for buyers; in really bad cases, it breeds mistrust between vendor and client. Recently, the process has grown even more Byzantine as companies lean toward drawing in representatives from finance, procurement, operations, legal, and even lines of businesses when acquiring HR products and services. Moreover, this cacophony of voices can muddle the process further when HR organizations turn over too much of their decision-making responsibilities to third-party consultants. Clearly, the RFP process is lengthening, according to a number of industry observers, but is it broken and how can HR leaders avoid the dreaded "analysis paralysis?" Are experiences such as Domchick's really just anomalies? Increasing Complexity For most HR organizations, issuing an RFP is a necessary undertaking to ensure they are acquiring the most appropriate product or service at the best price. Unlike requests for information, RFPs usually contain detailed questions aimed at finalizing numerous issues such as scope of service, a statement of work, pricing, service-level agreements and more. Typically, RFPs are issued to a handful of vendors -- some experts say no more than a half-dozen vendors should be invited to submit -- with the goal of narrowing the field to one or two finalists. However, the RFP process in recent years has grown increasingly complex, cumbersome and, according to some, less efficient. Some buyers and vendors say companies are having to spend more resources on putting together and responding to RFPs, resulting in a longer, more costly procurement cycle and delaying implementation of products and services. Others believe that some HR organizations are shirking their responsibilities in the process and abdicating to their consultants the tough choices they should be making. Not only does this corrupt the RFP exercise, but it also means only vendors favored by sourcing advisers are ever asked to vie for their clients' business, shutting out others that might have a better solution. "I think it's something that happens in every industry, where a small group of people define who's visible [in terms of industry exposure] and who's not," says Wesley Wu, who publishes the Systematic HR blog. "It's pervasive, no matter where you go." Wu cautions HR organizations not to rely wholly on consultants to develop and decide which companies receive the RFP. Although advisers are usually familiar with most vendors in a particular field, buyers need to educate themselves about the marketplace, he says. More importantly, HR organizations need to better define the scope of the acquisition and implementation approaches, Wu adds. "The resolution is, in any project; the more you invest up front, the better the result will be," Wu says. Specifically, buyers, in their RFP documents, should address issues such as implementation design, strategy and change management. Unquestionably, some organizations rely too much on their consultants. Just ask Kim Billeter, a principal at Stamford, Conn.-based Towers Perrin specializing in HR delivery solutions. She concedes that some HR clients don't even read written analyses the firm has prepared for an RFP; instead, they simply want verbal recommendations from the consultants. She says it's just one example of how some organizations try to short-cut the process. However, as Billeter points out, good consultants must serve as guides to redirect wayward clients back on track and define each party's role. As she says: "[The client's] responsibility is to articulate to us what are their requirements, their business case and their goals. We are bringing in templates to facilitate this. Ultimately, they approve the finalist selection, participate actively in the demonstration and select the vendor of their choice." Making a Business Case While sourcing advisers can help steer their clients in the right direction, many organizations don't have the luxury to employ a third-party consultant in this cost-conscious environment. Without outside guidance, it's up to the internal team to perform the heavy lifting, learn about the marketplace and ask vendors appropriate questions, such as what the best practices for their particular industry are and how the vendor can bring about innovations to the organization. But as the business climate has shifted in the past couple of years, HR organizations are being impacted by two clear trends. First, with more stakeholders at the table, consensus-building has become more critical than ever to clarify exactly what the organization is seeking. Secondly, HR must demonstrate to senior or sponsoring executives that an initiative will improve business outcomes in order to justify the investment. The latter is a point HR leaders often fail to state in their RFP documents, says Sreeni Kutam, vice president of HR operations at Franklin Lakes, N.J.-based Medco, a pharmacy-benefits manager. A former executive at HR consultancy Hewitt Associates in Lincolnshire, Ill., before joining Medco, Kutam has been involved in many RFPs as both a buyer and a vendor. He says HR leaders are good at comprehending operational issues, but they sometimes are at a loss in expressing their business imperatives. When that happens, the responses they receive from vendors may not be the right solutions. "From a client standpoint, the biggest problem area is the confusion over what, internally, the client wants to achieve from a business perspective," Kutam says. "I define the main problem on the client side as not clearly communicating, in the RFP document, what the problem is that you are trying to solve." He notes that the confusion may be compounded by the other trends affecting HR -- namely, additional stakeholders in the decision-making. As groups such as procurement, finance and IT weigh in with their requirements, identifying the most pertinent goals gets more difficult. As a result, RFPs tend to grow in complexity and lose clarity. To guard against this pitfall, Kutam says, he approaches an RFP by starting with a one-page document clearly stating the problem HR is trying to solve. There is no mention of how the organization will achieve this; rather, it serves to maintain focus on the business issue at hand. Value vs. Price But as procurement professionals and other non-HR leaders take a more active role in the selection process, one of the dangers is trading pricing for functionality. After all, procurement is accustomed to buying staplers, copy paper and other commodities, so price is usually the differentiator for this group. However, HR products and services are almost never homogenous, and procurement's influence in authoring the RFP could result in a failure to select the optimal vendor or product. Some industry observers attribute this to a lack of understanding about the market and its active vendors. "Many procurement people and some HR people know how to buy on price. We don't see the same level of expertise, roundness, care and knowledge about buying quality," says Lowell Williams, executive director of global human resource services at EquaTerra. "The procurement and client HR people, and their counsel, will often only have the ... RFP paper to look at. "What they are going to miss in that setting," he says, "is due diligence about the provider's culture, process depth, history and how the organization is put together." According to Williams, HR professionals are geared toward fixing employees' problems, but when it comes to delving into specifics around how an outsourced service or software is implemented, they don't ask enough detailed questions to differentiate one vendor from another. And procurement typically has less of an appreciation for the nuances between, say, one performance suite from another or the difference between applicant tracking and candidate sourcing. As a result, buyer education and consensus-building end up consuming a large portion of the RFP cycle. Even so, having more stakeholders at the table might not always be a bad thing, at least not from Lisa Knutson's perspective. As senior vice president of HR at E.W. Scripps, the Cincinnati-based media company well known for its national spelling bee contest, Knutson led the company's efforts to outsource HR services to ADP in 2007. In undergoing that process, she involved as many as 25 colleagues throughout her company, soliciting input from professionals within the legal, finance, HR and IT departments. Although that required a lengthier RFP process, Knutson says, she believes the company achieved a better outcome in the end. "We put together a really great group of folks who were committed to the process. Not everyone was on board with outsourcing at first, but they were open-minded," she says. Not every HR organization will have the patience or consensus that Knutson was able to eventually build, but that's not to say their RFP process will be doomed to failure. As she and other buyers advise, the key is to remain focused on the business goal, involve the input of other key stakeholders and be clear about your end-state. Working with third-party consultants can help facilitate the process, but guard against abdicating HR's responsibilities to the advisers. If these fundamental steps are followed, the RFP process is sure to move along briskly and yield good outcomes. December 1, 2009 Copyright 2009© LRP Publications |
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© Copyright 2012 LRP Publications. All rights reserved.
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