CEO’s Letter: Commoditizing Procurement Processes

There is nothing more frustrating for an HR service provider than to be told that all products offerings in a category are basically the same and that the only way to get ahead is to meet the lowest price in the market. How would HR leadership feel if their department heads shopped for other HR departments for better budget allocations? HR would argue their specialized knowledge of the company and the managers makes them unique and that the quality of their
customer service makes the additional cost worthwhile.This month, we cover the pre-employment screening service companies in the annual HRO Today magazine Screening Baker’s Dozen Customer Satisfaction survey. This is a category of service under extreme pressure to commoditize, but the cost of bad service is incalculable. New FCRA regulations make the liability issues enormous (ask Avis about their class action suit). Failure to deliver accurate information is not the only potential area of liability, it is also now highly time sensitive. Service is the ephemeral quality that most clients do not think about until they sense something lacking or until they get a document referring to them as the “defendant”.One of the frustrations I had when I was in the service business was the purchasing function, whether inside or outside HR, conflating everyone as the same. Service practices differ widely even inside an industry. To be fair, all of the marketing from these companies sounds alike. There are sources that can offer you more perspective, and that better service should be worth more money than the cheapest provider in the market. For example, the Baker’s Dozen is one such source. Network with your contacts in the HR suite and get referrals (providers always offer references but they never refer the deals that went badly).You can also attend conferences and network or, if you are interested in a particular company, attend their users conference and talk to current customers. But no matter what you do, if you are unhappy with your current service, do not assume that shopping for better service will result in a savings opportunity. Assuming this may leave you in a budgetary predicament and a self-fulfilling prophecy of future failure.

Often, the most important parts of service culture are ones that cannot be quantified into a master service agreement or a service-level agreement. We all can think of a vendor who has been elevated to the echelon of “trusted advisor”. It’s that ability to elevate their service to help you solve the unexpected problems that is most valuable. The key word in the prior sentence is “unexpected”. It is the unanticipated moments that make all the difference. And, the wisdom and quick reactions of a “trusted advisor” to an emergency are not things you would want to trade for a three-percent lower fee per transaction.

HR needs to buck the trend and fight the commoditization of HR service providers if for no other reason than so that HR is valued MOST for its ability to be the “trusted advisor” in an emergency and a steady provider of services during normal operations. HR needs to back down the procurement and financial resources that would venerate price above other considerations and remember, if you cannot rely on your partners in a crisis, can your clients rely on you?

Elliot H. Clark

Tags: November-2016

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