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How HR can work with procurement to deliver better supplier relationships

HR’s suppliers typically administer business functions such as payroll and employee benefits programmes. Developing a formalised supplier management practice can help to ensure that they are delivering value to the business.

HR’s suppliers typically administer business functions such as payroll and employee benefits programmes. Developing a formalised supplier management practice can help to ensure that they are delivering value to the business. 

By implementing some of the practices and methods developed and proven by Procurement to work with suppliers, HR can significantly enhance their supplier relationships.A jointly developed innovative approach between HR and Procurement should include the following steps:

Develop HR’s contracting fluency 
Work together to develop a clear understanding of the services the supplier provides and their and your obligations under the terms of the contract. What service levels have been agreed (SLAs) and are they unequivocal? Essentially do you understand what you are signing up to and what you are going to get from your service provider?

Develop cross-functional teams
Procurement and HR should meet to develop an understanding of each-other’s areas of expertise.  They should breakdown the key issues, e.g. what is your current supplier’s level of performance? Could it be improved? Finally you can share intelligence on market trends and how the service providers within that market are performing.

Develop appropriate performance metrics 
Frequently suppliers will provide clients with their standard terms and conditions and/or performance metrics. By working together as a team you can become the ‘intelligent client’ by working with the supplier to develop achievable and sustainable metrics for the contract. Procurement should develop an understanding of the needs of HR and the anticipated performance of its suppliers so assessments can be made on where gaps exist and implement improvements to service levels where needed. Where there are service issues, but no metrics have been put in place, it presents the opportunity to establish an SLA.

Develop your relationship with your suppliers
The key to a good relationship is how well your supplier understands your business. Do they respond to your needs promptly? If not, then you need to ensure that they adhere to the terms of the contract you have with them. It is important that you ensure that your supplier is aware of your needs. Set out and agree explicit expectations in the contract. Look for customer service representatives who answer calls quickly; provide accurate information; and resolve issues promptly. Ensure that you agree the metrics and review them with the service provider. They should be monitored throughout the life of the contract.

Metrics will vary depending on the nature of the services provided. The important thing here is that you measure performance and work with your suppliers/service providers to get the most from the relationship. Performance metrics or SLAs are an indication for suppliers to ensure they are aware of their obligations. The purpose of the metrics is not for them to be punitive to the supplier, but to have them focus on those items that are most important for your business – if your brand depends on your ability to deliver, so should theirs. It is also sensible to assign a level of risk to the metric in terms of a percentage of the fee retention. Again this brings focus with the percentage of fees at risk letting the supplier know that they could forego 15% or 20% of the fee as a result of poor performance.

Ensure that your supplier is reporting and managing their services to achieve the pre-determined levels you worked with them to establish. You could elect to have quarterly meetings – a good idea for your strategic and critical suppliers. At these meetings you can review the performance metrics and discuss any strategic changes or needs that may have arisen during the period of the contract. If you are looking to do something on a grander scale,for example if HR is implementing a new initiative across their supply base or to share key changes impacting their function, then consider hosting a supplier summit. Invite your suppliers to come together to communicate key messages and discuss how you can work together to improve the services they provide. Finally choose a good time to review contracts and metrics with your suppliers and to re-allocate the risk/default aspects of your arrangements. You could establish this as part of an annual supplier review process.

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