For all the differences between procurement, with its pragmatic, quantitative and best-price-for-best-supply mindset, and human resources, with its qualitative approach to the organization’s people and relationships, a lot more thought should be given to where they come together.
In fact, the functions have far more common ground than those stereotypes would suggest, and building on their connections can provide big benefits to growing businesses over time.
This is especially true as supply-chain strategy and management become integral to the organization.
An efficiently performing supply chain is one of procurement’s main charges, as it negotiates and manages contracts, and ensures that all related tasks are performing optimally. To the extent that it takes people to make that happen, and finding and keeping them is a key H.R. charge, there’s sizable common ground for shared interests.
If joining of interests isn’t occurring organically, it’s being promoted by senior management, especially at larger organizations with more than 1,000 employees. And when the two teams learn to work with, not around, each other, it can lead to positive outcomes.
How can this happen? The most obvious starting point involves contracts, which are especially important in light of H.R.’s need to support organizational cost containment. Healthcare plan costs have been on a steady upward trajectory for years, amid muddy expectations of how employee benefit programs are executed. It becomes critical to evaluate brokers with a proven track record of controlling costs, negotiating contract terms and managing the fine print. Both H.R. and procurement have a lot of value to add.
If there’s reluctance by H.R. leaders to invite procurement to this particular table, it’s usually rooted in worries over the ability to meet in the middle, given each team’s sharply divergent perspectives. Procurement’s perceived tendency to lean toward “lowest possible cost” is perfectly fine for a year’s supply of widgets. Negotiating terms for a business relationship, though, requires more nuanced parameters.
Moreover, as H.R. and legal specialists in workplace compliance will stress, “low-cost” can be a dangerous default when applied to employee benefits. There’s a risk, according to warnings by the U.S. Department of Labor, that using it will violate the plan’s fiduciary responsibilities under ERISA rules.
The nuances of negotiating a broker and benefits relationship might be a bigger concern. That makes it critical for H.R. to ensure that as procurement takes its seat at the table, its team has been equipped to understand the less tangible qualifiers that can make or break a deal. Objectives and expectations should be hammered out before broker presentations commence, covering such territory as:
Advance internal planning to focus on such details will help create a strong, long-term partnership between H.R. and procurement. This provides a time to learn each team’s particular strengths. It’s also an opportunity to identify where maximum value can be created before, during and after the selection process. Certainly, procurement can be invaluable for shepherding through contract requirements, for cost and service alike, once the new adviser is selected.
If nothing else, organizations can benefit from a blended, phased-in approach during the request for proposal (RFP) process. For example, one organization’s H.R. specialists managed the front end of the broker RFP process, including establishing expectations on deliverables and the relationship. Procurement stepped up to be an integral team player during the second phase, taking on responsibility for shaping the contract’s financial terms and managing internal compliance, including confidentiality agreements.
Procurement definitely has a role to play as a partner to H.R. Think of it as helping to relieve stress and provide an extra set of hands. When the burden is shared, clearly defined shared objectives become more achievable. In the end, the doors open to the best opportunity for an optimized H.R. and employee experience — and a smoothly functioning supply chain, too.
Joseph Torella is president of the employee benefits division at Hub International Northeast, an insurance brokerage firm and part of Hub International Limited.
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