By Joe Torella

Successful businesses often rely on their Procurement team’s vital ability to secure the best prices for the highest quality parts and supplies. But do traditional, commodity-based negotiating skills extend to support an organization’s more amorphous HR-driven employee benefits (EB) needs when it comes to negotiating broker relationships and healthcare contracts? Much will depend on the expectations and quality of the Procurement process. 

Seating Procurement teams at the table to assess historically HR-zone decisions is an idea that has been gaining momentum – particularly in recent years among larger organizations with 1,000 or more employees. Given unrelenting health plan cost increases, unclear EB execution expectations, and with hopes of infusing disciplined oversight into the implementation process, supporting HR by adding Procurement experts to negotiate pricing is an idea that seemingly makes sense. 

Still, if Procurement’s sole concern is driving to the lowest possible cost it can easily miss the mark when it comes to the bigger picture. Specifically, selecting a benefits consultant who can deliver a quality benefits program that provides long-term strategic value may not be the lowest cost choice. Reflexively defaulting to lowest cost choice can be a problem. In fact, the U.S. Department of Labor has repeatedly stated that the lowest cost option may, in some circumstances, actually violate a plan’s ERISA-born fiduciary duties. The DOL has repeatedly warned that “lowest cost” can never compliantly represent the plan sponsor’s sole, solitary consideration.               

Given those seemingly opposite perspectives, how should HR respond when mandated to add Procurement to the team? Resist, or lean in? By all means, I fervently believe leaning in and finding a way to make it work embodies the best long term solution. Having said that, once a commitment is made to join-forces, what’s the most appropriate starting point?

Although intellectually understanding the contrasting dynamics between engaging services and buying widgets is well-understood, outlining HR’s optimal selection criteria for the Procurement team ahead of time should flag key nuances that a buying team seldom otherwise considers. 

Along with the ‘cost of consultancy’, your objectives will work best if you can help Procurement understand the importance of partnership engagement and setting relationship expectations including service guarantees. So, while cost is a critical target objective, a few (but not all) examples of additional objectives might include the following:

  • Expertise and experience of the client relationship lead (and her/his team);
  • Account team’s knowledge of your particular industry including your organization’s specific data, pain points, KPIs and related detail;
  • Access and availability of specialty advisors that will provide targeted support and solutions (Compliance, Communications, Medical/Pharmacy, Wellness, etc.); and that would be typically omitted from stripped down, cheaper, competing bids;
  • Quality and strategic depth of the candidate’s plan guidance;
  • Client management protocols for executing with precision and discipline;
  • Innovative analytics to better understand and deliver EB to a multi-generational workforce;
  • Tools and skills to flag particular EB needs based on your organization’s diverse, multi-generational makeup;
  • Availability of meaningful service fee guarantees; and,
  • In the shadow of COVID-19, the ability to develop and deliver a best-in-class virtual open enrollment experience for employees. 

Although there’s so much more we could cover, the overarching theme is partnering with, not around, Procurement. Advance internal planning between HR and Procurement teams affords the time to highlight each team’s particular strengths and an opportunity to pinpoint where each can add maximum value before, during and after the selection process to maximize joint impact. The fact is that Procurement can be invaluable in managing the contract requirements that must be met from both a cost and service perspective once the new advisor is selected. 

Many organizations have reaped positive outcomes from a blended phased-in approach during the RFP process. For example, one organization’s HR specialists managed the front end of the broker RFP process, including establishing expectations on deliverables and the relationship. But Procurement was an integral team player during the second phase, and absolutely responsible for shaping the financial side of the contract and managing details about internal compliance, including confidentiality agreements.

As a Broker/Consultant who understands that a component of our value to our clients’ HR Teams is to relieve stress and provide an extra set of hands, we urge you to think of Procurement in a similar role. 

To put things in perspective, take a line from a familiar song – ‘Don’t worry, be happy’. Most of the time we do heavy lifting on our own, but with Procurement available as a partner and sharing the burden – clearly defined shared objectives become more achievable. Moreover, while Procurement’s perspective will always drive focus to the ‘pricing’ element, HR’s role to highlight the urgency of selecting the right advisory partner to satisfy broader value considerations offers critically necessary balancing. And when those considerations are correctly blended, you will have the best opportunity for an optimized HR/employee experience. 

Conclusion

Having a targeted price point on benefits costs shouldn’t get in the way of offering a quality benefits program. The right brokers/consultants will differentiate themselves by showing how they can deliver on both fronts. Selecting the wrong advisor at the best price could prove to be the worst decision ever.

Done right – with each side playing to their strengths and knowledge base – an HR/Procurement collaboration can deliver the powerful outcome you seek. 

HUB International’s employee benefit specialists consult with employers of all sizes and in all industries on every aspect of employee benefits program planning and cost management.