Buyers should allow providers to turn their pitches into a therapy session.
By Steven J. Lindner and Gary Bragar
There are lots of ways to buy outsourced services, and those of us who sell outsourced services are not always fans of the request for proposal (RFP) process. We can truly appreciate both the “buyer” and “seller” perspectives—we have been on both sides of the process. We have not only used the RFP process to purchase services for our companies, but have also competed as providers. As buyers, we know that a purchasing decision can be costly if an incorrect choice is made.
It is important to stress that buying outsourced services is very different from purchasing raw materials or packaged products. Unlike products or raw materials—which have a specific market price, can be traded, exchanged, returned for a refund or transformed into a tangible item—services have an inherent “human intelligence” factor that, once paid for, is not easily traded, exchanged, refunded, or resold. Outsourced services can be grouped into two categories: generic, commoditized services and unique services. Whereas commoditized services are sold and bought on the basis of price and features, unique services are bought on the basis of solution value.
According to research by NelsonHall, buyers of outsourced services make their purchase decisions on the basis of vendor selection criteria that include a few key factors:
Service provider experience, reputation, and client references;
Ability to provide a good value price, helping clients lower costs;
Ability to be a long-term partner and provide a good cultural fit with the client organization;
Financial stability of the vendor;
Design and quality of the service.
All of these criteria are what we could call the “ante.” They are what providers must offer just to be invited to “play.” However, they should not form the sole basis for selecting a provider.
With outsourced services like those in recruitment process outsourcing, a great deal of intellect is involved in delivering on the services proposed. Often those services are a solution to a business problem or series of business problems, and buyers need to engage in dialogue with providers in play in order to fully understand the intellect behind the deal.
We have listened to many presentations of buyers telling us how great the relationship is going with the outsourced provider, only to witness that same buyer changing providers two and three times shortly thereafter. And it is disheartening to see clients who previously outsourced services bring everything back in-house. When outsourcing fails, it hurts us all. Buyers conclude that outsourcing doesn’t work and turns prospective buyers away.
In our experience, outsourcing initiatives fail because of the process used to evaluate providers. Anyone who has been in the outsourcing space long enough has a story or two of relationships that did not work out. We are not talking about relationships that failed for flagrant errors or clear disregard and failure to deliver on promises. We are referring to relationships in which providers did as promised but were still discontinued, cancelled, or terminated.
The RFP process has inherent complexities that limit buyers’ abilities to make the best choice or to capture the “secret ingredients” of providers’ capabilities and expertise. Prediction of success based on factors of reputation, fair value, and quality of service are leap-of-faith factors far removed from direct proof that a provider can solve your business problems. To achieve a more favorable outcome, buyers need to directly evaluate the intellect behind the deal that is often lost or isn’t captured in the RFP process.
Let’s take a typical RFP for RPO services. The RFP will state that the main objectives of the proposal are to increase candidate quality and reduce overall hiring costs and time to hire. However, the RFP will not describe the root cause of undue expenses, lack of quality, or timeliness of hiring; nor will it share what the current costs are, the sources of those expenses, or why the company feels the quality is poor and hiring is too slow. Each provider will be given a window of opportunity to ask a series of questions, most of which will be answered by the client in short, non-descriptive sentences. Specific requests for information that allow each provider to better understand costs, sources of cost, or other specific questions that attempt to address root causes typically result in responses such as ones not available at this time. Client responses to submitted questions raise new questions that providers rarely have the opportunity to ask. This then leaves the provider guessing about the underlying problems or the impetus for outsourcing—and clueless about how to best address a buyer’s request.
In responding to the RFP, each provider will describe its service offerings, costs, delivery model, recruitment expertise, and qualifications. An enormous amount of time and expense will be incurred by the provider in completing the buyer’s request. Buyers also will incur significant costs as they spend an enormous amount of time evaluating providers’ responses.
Unfortunately, the information that buyers need to make the most informed decision as to which provider will be most successful is missed. Since providers have not been able to engage in conversation with the buying team and obtain additional information needed to diagnose underlying challenges, cross examine buyer’s data, or understand the buyer’s current and expected future circumstances, providers are left guessing as to the factors that led up to the decision to outsource and what the buyer truly needs. In turn, buyers struggle through making very significant inferential leaps regarding who will best achieve their outsourcing objectives based on the limited information in the RFP and providers’ presentations.
Considerations for the RFP Process
RFPs for outsourced services should state the business case. Some questions to consider: Why are you deciding to outsource? What are the objectives you would like to achieve through outsourcing? Why can’t these objectives be achieved internally? What have you tried in the past that has not worked? What do you feel you need from an outsourced provider in order to achieve economically valuable objectives? What happens once the objectives are achieved? Will you bring the process back in-house, or will you continue to maintain the outsourced relationship? Does the objective have a long-term, continuing economic value? Or is your goal really just a short-term fix? Be clear regarding your data and facts, and allow providers to cross-examine them.
It’s rare to participate in a RFP process in which providers are allowed to ask detailed questions, diagnose causes, and design intelligent solutions that address the real issues and objectives of the buyer. When buyers hold the provider at arm’s length during the RFP process, they miss out on the expert insights or recommendations that providers might have been able to make if the process had provided them the opportunity to do so.
The WorkPlace Group once had a client who requested candidate sourcing and screening assistance. The goal was to hire several hundred individuals to address regulatory compliance issues, which if unresolved would have halted all manufacturing. Before quoting a price for services, The WorkPlace Group requested a consultative dialogue with the client in order to understand how the client expected candidate sourcing and screening services to address the regulatory compliance issue.
During that dialogue, they discovered that the client needed more than just sourcing and screening services. In order for the client to achieve their objectives, a robust recruitment strategy was needed to attract highly qualified talent to an organization that was at risk of being shut down. Part of that strategy involved creating unique positions that guaranteed individuals fixed employment terms and a professional experience that would make them extremely marketable and valuable at the end of that term—to the client or to their next employer. If not given the opportunity to engage with the client in confidential, private, and privileged dialogue during the RFP process, the provider might well have sold the client services that failed to solve their real economic need.
A second example goes like this: A company puts out an RFP to hire 2,400 employees on an annual basis at three different locations in the U.S. It’s a straightforward request. How much will it cost to hire them? How will the provider source, screen, and hire each of them? Why is the provider the best partner for them?
What was left out of the request were only some of the most important facts underlying the outsourcing decision. An analysis of the clients’ data revealed that they had never hired more than 100 employees in any single month and, based on their current interview process, did not have enough hiring manager hours to hire more than 125 individuals in a month. Any selected provider would have failed miserably without redesigning the interview and hiring processes.
When asking questions in an RFP, connect them to meaningful predictors of subsequent success or outcomes. Identify why you are asking the question and what a provider’s response will tell you about the provider’s ability to serve your interests. Your RFP is a standardized exam, and like a standardized exam, you should know exactly how you will evaluate each question. You also should allow providers who match your service requests to conduct private, detailed interviews with you. Let them query your buying team as to the reasons you are outsourcing and the underlying factors that are keeping you from fully achieving economically valuable objectives. Let them carefully analyze your data and assumptions. In other words, engage in consultative dialogue with them. This allows you to know what you are truly buying and gives providers a chance to describe how and why their “solution” is best for you.
Steven J. Lindner, Ph.D. is CEO of The WorkPlace Group®, an RPO provider. He can be reached at steven.lindner@workplacegroup.com. Gary Bragar is the lead HR outsourcing analyst with NelsonHall. He can be reached at gary.bragar@nelson-hall.com
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