As a buyer, before you go out into the market, it is essential that you have done your research to understand exactly what you want to achieve through this process and are aware of how you are going to use procurement through the buying process. Because in reality, the procurement process is expensive for everyone, and if you haven’t done your due diligence beforehand, it becomes an even more costly exercise.
Do your research
Don’t let the procurement exercise be your learning exercise.
Do your research before you engage with the market, so you know exactly what is out there. There are many impartial associations and member orientated user groups you can actively engage with, download webinars, read articles, investigate good and bad experiences with certain suppliers, get impartial advice, liaise within your network.
Too often procurement is used to learn what is available in the market. And, whilst you’re bound to learn more about what’s available in the market through the procurement process, you should aim to walk into this process with as much understanding as possible. This will enable you to spot the cracks, identify the sales plays versus reality and ultimately give you confidence to challenge what you don’t quite understand, at the right level, not at the learner level.
The key to your research phase when procuring HR & payroll services is to determine the specifics of your requirements. What the business might want isn’t essentially what the business might need, and a good procurement process will get right under the bonnet and support the business to target the objective, not the desire.
Conducting this research gives you an idea of costs which helps you budget for the project. There is nothing worse than budgeting for something loosely based on minimal due diligence and then being forced to pick the cheapest option and later realising that your requirements aren’t met.
Don’t replace, improve
When going out to the market, don’t just look to replace something with a shinier something else. It’s a perfect opportunity to shift and consume something far more efficient which adds much more value to your business. Technology and associated services evolve very quickly, especially in the last few years.
Much like buying a new car, you don’t replace the one you have with one of the same age, same colour, and same functionality, because what would be the point of that? A lot of the time I see the requests for proposals (RFP’s) or requests for quotations (RFQ’s) which go into intricate detail for a new solution to cater for archaic and aged challenges based on the current solution and services. Between your procurement processes, the technology alone will have moved on exponentially and the challenges you are facing with legacy technology will more than likely not be there anymore, for example solving manual processes thanks to strides in robotics and automation.
Using procurement as the vessel
Use procurement correctly.
Procurement can be such a powerful tool in supporting the business, taking emotion out of the process, and focusing on facts, needs and the end goal.
Working with buyers who empower the business to take more ownership and interest in the process, products, and suppliers, and who leverage procurement to support the process rather than run the process, are always the most successful. The relationship between the business and procurement needs to be fair and clearly defined so the roles of both are understood and respected. Ultimately the business will be left consuming the technology and services, so empowering them earlier in the process will inevitably increase engagement and encourage adoption.
It’s expensive (for everyone)
The procurement cycle, especially for HR & payroll services, is not a cheap one. In fact, the cost of conducting a competitive procurement process may even cost more than purchasing the HR & payroll services itself.
According to CIPS.org, the UK’s public sector competitive procurement process averages around £45,000 compared with £23,000 in Europe (“averages” – yikes!). And it isn’t just the buyer’s costs at stake here, responding to a competitive procurement process also costs suppliers a significant investment. It is not uncommon to see costs of responding exceeding £10,000. A significant effort goes into the responses and when faced with a magnitude of questions, often in the hundreds (and they are not just ‘yes’ and ‘no’ answers), suppliers are forced to pick and choose where to place that investment and who to respond to, which is often driven by how the client is going about their procurement process. For small and medium sized suppliers, the decision to spend a five-figure sum in pursuing the new business is a difficult one to make and will often result in excluding the best supplier because the process is so costly for those suppliers with tighter business development budgets.
I am not for one minute suggesting that the procurement costs are not necessary but what I am saying is that they are undoubtedly excessive for both buyers and suppliers, and we need to find a smarter and more efficient way to procure HR & payroll services which still maintains fair and open competition while minimizing risks such as exposure to fraud and collusion. As a start, I firmly believe if businesses come into the procurement process having undertaken adequate market research, understanding exactly what they want to achieve through the process, and understanding the best way to work with procurement, the process ultimately will become smoother and more cost effective for both sides.
So, now that you have done your due diligence and you’re ready to go to market with your procurement plan, how do you ensure you get what you want? In the next article I highlight lessons I’ve learnt over the years on how to get the most out of an efficient procurement process.