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Smart selection

PA Consulting Group 
Evaluation Centre
10 July 2008

 

When entering any negotiation, it pays to understand the other party. HR outsourcing is no different, and smart buyers can get the most from service providers if they understand their sales management disciplines and adapt their behaviour to work with, rather than against, those disciplines.

HR outsourcing service providers have well-developed capabilities in a range of sales management disciplines. Three key ones are:

  1. Qualifying opportunities – so they can focus their sales investment on work that they are likely to win.

  2. Understanding requirements – so they uncover the true drivers and requirements of the buying organisation rather than simply those stated in the RFP.

  3. Approving solutions and prices – so their bids are reviewed and approved before being submitted.

Smart outsourcing buyers will help their potential service providers to apply these processes efficiently and rapidly. Ultimately, you will get a better outcome if you understand the tensions that these processes create within providers and learn how to use them to your advantage.

The behaviours that you should adopt include:

Provide the service provider with access to the ‘economic buyer’

A key qualification criteria for most service providers is whether they have met the real decision maker – the economic buyer. If they have not, and the investment required to bid is considerable, they may well disqualify the opportunity if they cannot get access.

This is not an idle threat, I have seen it many times recently in the European HR BPO market. So as a buyer, if you want to get a good response from the market, you should prepare to meet potential service providers early in the process. They will want to hear in your own words what you are trying to achieve.

Help service providers pull out gracefully

You should make it clear to providers that they are allowed to pull out of selection processes, and help them to do this in a managed way, if that is the decision they reach.

Some of the larger consulting and outsourcing companies, which have broad relationships with clients, can find it difficult to disqualify themselves from an opportunity, fearing that it will tarnish their wider work. Sometimes this fear is with good reason.

Unless it’s important to you to keep them in the competition, it is usually better to have them out of the process than participating in a half-hearted manner.

Be prepared to steer the solution

In many cases, it is relatively difficult for a service provider to understand the precise situation that you, the client, find yourself in. There is no point sitting in isolation hoping that the right answer will appear.

You should be prepared to steer providers towards an answer that will work for them, including helping them size their response.

For example, one organisation buying payroll services was recently shocked to find the service provider had estimated that it would require three times the number of employees that the company was using internally to deliver the payroll service. The provider had overestimated the complexity of the situation, reducing all parties’ confidence in the transaction.

In this case, the supplier needed a gentle steer by a mature buyer to help it propose something acceptable.

Be realistic about the level of detail that you need to take your decision

It is tempting when running an RFP process to ask for too much detail. The more that you ask for, the more that the service provider’s sales team will need to get approved.

A good example of inappropriate levels of detail occurs when service levels and pricing units are multiplied across countries. To make a decision between providers, do you really need to know their relative prices for providing payroll, benefits and workforce administration in Vietnam? Or do you actually need a rolled-up price, perhaps for SE Asia or Asia-Pacific as a whole?

The key point here is to think before asking: do I need this detail now and will I be able to process it if I get it?

Allow service providers time to manage their approvals

In any significant outsourcing contract, the approvals process may take up to two weeks to run through. There is frankly little that the sales lead can do if their internal controls require them to go through a series of reviews before submission.

You should understand that these controls are part of the process of being a reputable service provider. And you may be able to help speed this process by again providing access to your decision makers should there be last-minute questions from the reviewing executives.

So the message here is, give a little and you should get a better response back. But the giving needs to be two-way: the providers should make similar room for you to go through your decision processes.

Service providers need to understand that they may need to provide some additional information to support the decision process; and they need to accept decisions that are made, without then attempting to circumnavigate the process if they don’t like the outcome.

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