Making Sure Your Payroll Needs Survive the Procurement Process
Aug 1, 2019
Many global organizations hire suppliers and make strategic sourcing decisions based solely on capabilities and cost. But is there more? Research and experience tells us the answer to that question is a resounding yes.
“If you’re going to work with a strategic supplier to fill gaps in capabilities, skills are essential,” Kate Vitasek wrote in a recent article in Forbes. “However, if you pick a supplier solely based on skills, you will likely end up frustrated. You'll ultimately waste time and money by needing to switch suppliers because of lack of cultural fit.”
Especially in large, global organizations, the request for proposal (RFP) and subsequent review process can be involved and lengthy. In fact, research reported by the Harvard Business Review shows that the average number of people involved in B2B purchases is 6.8 – and that figure is growing. “These stakeholders come from a lengthening roster of roles, functions, and geographies,” the researchers state. “The resulting divergence in personal and organizational priorities makes it difficult for buying groups to agree to anything more than ‘move cautiously,’ ‘avoid risk,’ and’ save money.’”
It's natural for the procurement process to challenge a function’s wants and needs when reviewing a potential deal. With everything involved in identifying vendor options, paring down the list, negotiating pricing, and obtaining approval from Procurement, it can be all but impossible to make it through the process with a “culture fit.” To increase your chances of getting approval for a first-choice vendor, keep the following three things in mind.
1. Articulate the difference between a solution’s cost and value
Your motivations in finding and selecting a global payroll vendor won’t necessarily match those of your procurement team. The long-term viability of a solution, successful deployment, happy customers, and compliant processes are not top of mind for them. Instead, procurement professionals are focused on cost. Their strategic role within the organization is to concentrate on the intentional selection and negotiation of services that are important to the organization’s success—and which meet financial constraints.
To help ensure Procurement approves your vendor, you have to explain the unique value that vendor offers, especially if your chosen vendor is higher than the best price. Systems designed to process payroll can often include additional fees and hidden costs that aren’t necessarily identified in the quoted price, such as extra fees for supplemental runs or additional IT labor requirements. If your first-choice solution is priced higher but includes or helps avoid such added fees, the procurement team needs to know that.
2. Know what to look for when you measure "business chemistry"
You may know what you’re looking for in a vendor partner, but it helps if you can articulate the more subjective value they add, to help expand the conversation beyond what a solution costs. Recent research into how companies can assess a supplier's cultural fit or determine the level of “business chemistry” between two organizations identified five factors to look for when measuring vendor compatibility:
- Trust: Performing as promised and meeting commitments
- Communication: Open sharing of information
- Innovation: Sharing risks and rewards
- Team Orientation: Committing to mutual benefit
- Focus: Upholding common purpose and direction
The theory is that when these five factors are present, the two organizations are more likely to prosper from collaboration. When two groups are aligned in these ways, the buyer-vendor relationship becomes stronger. When they aren’t a good match in these areas, it’s more likely they will run into difficulties. Ideally, organizations can measure this type of business chemistry early in the selection and procurement process, rather than realizing too late that a vendor is not a good fit.
3. Anticipate the risks when business chemistry doesn’t exist
A poor cultural fit between buyer and vendor can lead to extra work, additional fees, risk management issues, and potentially the need to select a new vendor. That’s why it’s important to help procurement see beyond the annual costs and properly assess the benefit of selecting the right global payroll provider.
To do this, you must consider the total cost, which includes items such as the labor required to administer the system, ongoing vendor management and performance management, and the rates for solution updates and maintenance. You’ll also want to ensure that the procurement team understands and assesses each solution based on possible changes in employment legislation or expansion plans for your organization. If a given solution doesn't currently address new requirements, upcoming changes could require additional investment to meet new regulations.
If your global payroll vendor isn't a match, it’s not difficult to imagine the potential issues risks which can arise. You may find yourself looking for a new solution in a short amount of time. You may notice that engagement is dropping with administrative users, as well as the end employee user. There could be an adverse impact on your overall payroll business processes and accuracy. Frankly, there's a lot at stake.
Begin by Understanding the Challenges
With every purchase, the procurement team receives an abundance of data, and they must answer to many stakeholders and a variety of options. It's understandable why deals take a long time—and why payroll buyers can feel overwhelmed or discouraged about making the right selection for their global business needs. So keep the bottom line in mind from the start of the purchasing process.
As you work with your procurement team to find the right provider, look for a payroll solution that operates from a single platform and meets your global workforce needs. You also want a provider who offers access to knowledgeable, in-house payroll experts who can assist you throughout implementation and as your payroll needs evolve. Most of all, keep in mind that you want a payroll solution that gives you visibility to the information you need. The right vendor will help you harness the power of technology and people to help you accurately process pay and meet regulatory requirements. While the procurement process can feel arduous, taking the time to get the right fit will benefit the organization for years to come.