Podcast
August 17, 2009
Anthony Vitiello: Hello and welcome to the second in a series of podcasts produced by Volt Consulting Managed Service Programs and slated to continue through 2009.
This series is dedicated to focusing on topics and issues relevant to human capital supply chain management. We’re proud to offer this ongoing venue for the sharing of best practices and industry-leading thought.
We’re honored to host these events which bring together experts in every aspect of human capital management and supply chain management. From executives to analysts, consultants to practitioners, as always, this meeting of the minds will naturally result in spirited dialogue and illuminating ideas.
My name is Tony Vitiello and I will be the moderator of today’s forum which is entitled The Increasing Need for Collaboration Between Human Resources and Procurement in the Acquisition of Human Capital Services.
Joining me on the panel today are two very accomplished experts in this field. Representing Volt Consulting Managed Services Programs is Executive Vice President Janet Whitcomb. Janet is instrumental in fostering solid, fruitful relationships between all the requisite internal departments within client organizations, as well as between Volt Consulting MSP elements and clients.
Janet joined Volt in 1995 and has played an integral role in launching the company today known as Volt Consulting Managed Service Programs. An acknowledged thought leader in the industry, Janet was recognized by the Women’s Business Awards in 2008 as a finalist in the Lifetime Achievement Category. She’s also been recognized in Supply and Demand Chain Executive Magazine’s “Pro To Know” Issue in 2007.
Janet brings 22 years of experience related to information technology, operations and business development management to her position. Welcome, Janet, and thanks for joining us today.
Our guest expert today is representing AMR Research and I would like to welcome Mickey North Rizza, a 22-year veteran in the realm of global sourcing and supply chain management. Ms. Rizza is the Research Director in the Procurement and Sourcing Practice at AMR Research.
Mickey is a key member of the supply chain team and works to communicate effective procurement and sourcing strategies to AMR clients. Mickey’s professional experience also includes time as Vice President of Global Sourcing and Supply-Based Management at Moduslink Corporation, as well as purchasing management roles at Tyco, Innova and Motorola.
Hello, Mickey, and thanks to you as well for being here.
Mickey North Rizza: Thanks, Tony. It’s a pleasure to be here.
Anthony Vitiello: Thanks to both of you for taking the time to help illuminate our listeners on the very important topic of discussion today which is the increasing need for collaboration between human resources and procurement in acquiring human capital services.
Let’s begin today’s discussion with the following question for you, Mickey. Why, in your estimation, are human resources and procurement having to collaborate more right now than ever in the purchase of services?
Mickey North Rizza: Well, when you stand back and you look at some of the companies that we work with on a day-to-day basis at AMR Research, what we find is in this global recession companies are really stressing the need for cost savings, cost improvements, cost reduction and really getting a handle on all their spending.
And one of the largest areas of spends for company are around their human capital costs. Some companies it’s hundreds of millions to billions when you start looking at, you know, their overall workforce as well as their temporary labor and whatnot.
So, really getting a handle on what those costs are and trying to dovetail into that can really help companies understand where their big cost structures are, what they need to look at, try to understand that impact from an overall objective.
But then when you look at it from a procurement services side and tie that in with HR and start looking across the company, what companies find is not only is HR looking at that talent acquisition, they’re trying to control the costs, be very compliant and also want to put some controls around it so they can help procurement and supply-based management, and whatnot, put more spend on their management, they start realizing as they work together they’re actually going to make a bigger impact.
So, what we really see are companies coming together, pulling those two aspects together and understanding that, you know what, there are a lot of costs sitting here, but we can help our company get to our bottom line by helping them put some cost containment and best practices around that services procurement area.
I don’t know. Janet, any thoughts on that?
Janet Whitcomb: Yes, I agree, Mickey. It really is a complex spend category and if we just take a look at talking about the labor component of the human capital side, you know, HR is involved in many things like benefits and acquiring, things along those lines, but when you’re talking about just labor, there’s lots to consider.
You know, you have your full-time equivalents and quite often procurement I don’t think realizes all the intricacies of each of these different categories and how they relate to each other. So, you have your full-time equivalents, you have your temporary labor who quite often turn into full-time equivalents at a later date, you have your statement of work which is mostly a labor component involved in your statement of work categories.
Should you look at bringing your suppliers in in a vendor neutral type of environment or perhaps if you’re a manufacturing firm a master supplier would be a better fit. Perhaps you’re looking at a hybrid solution to handle all of this.
So, it really does take a collaboration between the two key components of an organization—HR and procurement—to understand these different categories.
Mickey North Rizza: So, it’s really about those two functions coming together and bringing their best practices and thought leadership to the table to try and make a difference, right?
Janet Whitcomb: Absolutely. And as you start to look forward – and many companies are going global these days, so when they’re starting to think about labor arbitrage across the globe, it becomes even more complex.
Anthony Vitiello: Those are very insightful answers, which brings us to the next question because I would imagine that this sort of issue might pose some very interesting challenges to both HR and procurement. Can you, Janet, characterize, perhaps, what some of the challenges are that companies are having addressing this need for collaboration?
Janet Whitcomb: Sure. You know, the needs for HR and procurement to work together really has become so much more important these days, as it has in the past. I think more and more companies are starting to really focus on their indirect spend.
Over the last several years we’ve seen organizations investing in e-procurement-type systems to manage their material spend, but as they start to take a look at – as Mickey mentioned before, it’s such a large part of, you know, what organizations spend on an annual basis that indirect spend has become a focus and they’re realizing that it, human capital, doesn’t really fit into the nice little niche that material spend can fit into.
So, how do you control these costs in an organization and not effect quality? Years ago people thought of procurement kind of buyers. You know, they were really good at negotiating the price down, but it probably was seen as an impediment to some of the users in the organization, you know, who want to do things their own way and not have to worry about what that price is.
Today, procurement has transformed themselves. You know, we hear terms like strategic sourcing and spend management. So, procurement doesn’t want to be seen only as cutting costs and making the process more difficult; they want to be seen as adding value as well.
Well, HR wants to be seen – you know, they’ve always been traditionally about the value, about the quality; they need to be seen as considering the bottom line, too.
Right now these two organizations have worked in a silo. We’re seeing them start to come together especially as more organizations are going out and looking to bring in some managed services, some outside firms to come in and to help them to manage the human capital spend. But there needs to be a strong understanding between the two and a trust developed.
You know, we’ll talk a little later about some recommendations, but I do think the more that HR and procurement get brought together—even if it’s just on the sourcing side to start—the more they’ll start to understand each other and start to talk the same language. Mickey?
Mickey North Rizza: Yeah, I would agree with you. I also think, though, that – you know, you put that well around the indirect procurement and companies have been looking at those indirect procurement aspects for so long. But part of the thing is they’ve ignored some of the larger spend categories where they were, perhaps, sitting in other functions such as marketing or HR or whatnot.
And part of that has been the fact that it’s a cultural issue for them to actually – the procurement and other functional teams, to come together and work together collaboratively to help and get at the bottom line for companies.
But when you’re sitting in this recessionary environment we’ve been sitting in, no stone goes left unturned. So, therefore, the services start to come to the table and it’s like “What a minute. We need to work together. We need to get our arms around those supplier relationships. HR’s doing all these things, but we don’t know some of this. We don’t know how to measure these particular suppliers. Are there other ways we can leverage and pull together? What are the best practices within our facilities and the way we communicate with our HR teams? And how does our HR team work with the requisitions that they need to fill? And what can we do to help that process?”
But while we’re doing that, help them get more spend under management, leave it to the experts, but work collaboratively with them to help them get to that next standpoint.
And, you know, many of the times your HR goes down this whole standpoint and they work so hard securing these relationships, working with them, ensuring that the relationships work within their facilities. But the datasets and the information flow that they need to actually help measure and monitor some of that aren’t necessarily there and that’s some of the strengths that procurement brings to the table.
Janet Whitcomb: Oh, I absolutely agree. If they could combine some of the tools that they both bring and work collaboratively, they really become very powerful in the organization.
Mickey North Rizza: Yeah, I agree with you.
Janet Whitcomb: And after all, we both know, both groups are seriously wanting to be at that executive board table; they want to be seen as strategic in the organization and I think ten years from now you’ll see a melding of the two, I think, in many areas, especially in the areas of sourcing for human capital.
Mickey North Rizza: Yeah. Well, you’ll definitely see that and I think you’ll see that across some of the other functions as well; it’s just a matter of how that spend is actually managed within organizations.
Janet Whitcomb: I agree.
Anthony Vitiello: Can we perhaps discuss, you know, for folks that may be listening in either of these constituencies, either human resources or procurement, what they might expect by way of tangible benefits of this collaboration, you know, in a more specific sense?
Like, for example, why should most companies focus on bringing HR and procurement together to work together?
Mickey North Rizza: Well, we look at it at AMR. Basically what we’re finding is the benefits of collaboration really are around working from a common platform, working towards the same goal and ensuring that as you look across your supply base, whether you’re HR or procurement, that you’re streamlining the business processes, you’ve been able to rationalize the supply base based on what you perhaps need.
And that way, as you come together, you’re gaining adoption of those particular suppliers, the best practices, the methodologies in the way you bring particular talent into the company, how long they stay. It all becomes standardized in an optimized process, but in addition to that you’re not bringing one-off suppliers into the mix where you don’t need those particular suppliers.
You’re really putting the corporation onto a – I keep saying “platform” here. I don’t necessarily mean, in all cases, systems and technology, but it gives you that visibility aspect across your organization with those standardized processes to help you get your arms around the whole spend.
So, you’re not necessarily just wasting time or money pulling on the wrong suppliers or you have one-off suppliers that, you know, you should be using somewhere else within the organization.
Some of the other things we see are improved performance. Basically you can actually control those business processes, you can ensure compliance to the aspects that you need to, you get pure visibility across the organization, you increase your quality and your cost savings really become part of that organization, to what Janet said earlier, as, you know, you see these two groups merging on some of the services’ side.
You’re actually going to get that cost savings that goes – it’s maybe recognized by both organizations but the reality of it is it gets into one organization and one enterprise and you’re making a difference there.
And I guess the last point I would leave around the collaboration and the benefits are is that everyone sees what’s going on, everybody’s working together to that common goal. So, no one’s unhappy, no one sees a concern that they aren’t getting their job done, that they’re missing something. Everything comes to the table the way it needs to. Janet, what are your thoughts?
Janet Whitcomb: Yeah. I think you’ve really covered it very well, Mickey. I think, in addition, the benefits that an organization will also see are more efficient workforce planning which really becomes key. A lot of decisions are sometimes made reactively instead of proactively. And, you know, for HR that’s a real key part of what they do is to really be on the front end of the workforce planning.
So, a lot of the information that procurement typically has as a result of their efforts can assist HR in planning for geographic expansions, if they’re thinking about where they’re opening up a new facility to be able to have real data, as you mentioned before, to understand not only where the, perhaps, low-cost markets are around the globe, but also what skills are available. And, you know, what are the extra cost components that go into opening up into some of these other regions besides, perhaps, just the domestic facilities that they have.
So, understanding what mix of full-time equivalents to temporary or supplemental labor becomes really important and we hear this question being asked by organizations all the time: “What is that right mix? You know, what percent of temporaries should I have to my full-time workforce?”
And I think as we start to come out of this economy, more and more organizations will take a look at – we’ve seen it in the past and I do believe that we’ll see it again: companies will be fearful about bringing some labor in and committing to that cost. They’ll bring them on as consultants, as temporary labor, as outsourced projects and start to be very selective of who they’re bringing in as their full-time skilled labor. So, I think the need for quality really becomes a key part of what procurement needs to look at as well.
So, again, they bring so many benefits, the two organizations. I think that coming together it’s really going to make a more efficient workforce for them. And ultimately that will give them advantages over their competition and hopefully increase their market share.
Anthony Vitiello: Excellent. Well, that sounds very exciting and if I were in HR or procurement, I would certainly want to know more about how to effectuate this. Janet, can you perhaps give some recommendations on this you would suggest folks could do to ensure successful collaboration along these lines?
Janet Whitcomb: I think one of the things that I would highly recommend and continue to promote is cross-functional teams set up within an organization. We’ve seen it work at my own company as well. As groups come together and they have a representative from the different areas working together closely on a day-by-day basis, they start to understand what drives the other organization to perform the way they do, you know, understanding their terminology, understanding why something is important that if you’re an arm’s distance away you might not necessarily take that time to understand.
And I think you’ll start to see the blending of the skills that each group brings almost into the formation of a new group which is a blended representation.
Now, I think that bringing a pure cost savings’ mentality to HR procurement can hinder an HR procurement team’s relationship from the onset. So, I think that promoting value and helping to understand what value is important.
Now, we often see service levels that are given to agencies or given to companies that are receiving a contract, but are those service levels really important? Are they really going to make the difference? And I think companies need to pay attention to those service levels and understand what’s going to drive the most efficient suppliers that you’re bringing on.
So, as we wait for the economy to begin to grow, that this collaboration will become even more important and that they have time now to plan. And we start to see companies that are going out and putting bids out onto the street to perhaps bring on a managed service provider, they are being more collaborative. They are bringing to the table cross-functional teams to develop the bids going out and to evaluate the suppliers.
So, I have hope that I think this is happening and I think the economy has given us a little pause to be able to really start to drive the collaboration before everybody’s, you know, off and running in their own silos again.
So, that, together with make true data-driven decisions, is another key component. Many times, especially as it relates to the services’ component and HR, decisions can be made based on relationships. And today there are tools out in the marketplace that enable companies to have access to real-time data that can help them to make more informed decisions to take some of the subjectivity out of it and to understand not only from, you know, reporting of what has happened in the past, but to be able to use that data to make informed decisions going forward and that’s going to be the real trend in the future and the benefits to organizations.
So, especially as, again, I bring up on a global basis because more and more organizations are moving around the globe; so, access to that real-time data becomes important not only for within the United States, but also for each of the geographic areas that an organization is currently doing business or looking to do business. And finding a partner that can help them to bring this data together in a uniform way and to make that data relevant to the marketplace and your organization is really important.
And the technology and the ability is there in the marketplace now. So, I think it’s a real benefit to companies to be able to understand that they can bring this in and start to make some of those uniformed decisions. Mickey?
Mickey North Rizza: Yeah. I guess I would add just a couple things. You know, you talked a lot about creating a joint strategy and working together from a win-win scenario. I totally agree with that; however, I also think you need to add in reviewing the execution, you know, “How far have we gone towards that strategy? What have we executed on? Has it been favorable? Has it not been favorable? Where do we need to do things differently as a team and understanding our relationships with our suppliers? You know, how can we work better?”
And it’s really about evaluating where you can continuously improve, but while you do that, I would be remiss if I didn’t say as much as you’re trying to continuously improve, you also have to look at it from a standpoint of “What have we done a great job on? What has made a difference? Where has this change really helped our organization evolve? What stakeholder value have we brought back as a collaborative team?”
So, it’s really understanding where you’ve set that strategy, you’ve executed properly and you’re help spreading the success of “Wow, these things are really working. Together we’ve been able to do X, Y and Z.”
You know, but still at the same point in time, understanding what you may want to improve on. Does that have to be shared with the entire world? No. But could it be utilized? Yes, to help you perform better and get additional stakeholder value. I think that would be the only caveats I would add.
Janet Whitcomb: Thank you.
Anthony Vitiello: Excellent. Well, that brings us to the last question for today’s forum and this one will be for Janet. The question is, how might a managed service programs’ firm be able to help execute this sort of strategy bringing HR and procurement together?
Janet Whitcomb: There are certainly many benefits an MSP provider can offer to corporations today. One of the key benefits is to help bridge communication gaps. In many companies, HR and procurement don’t have a history of collaboration. While it may not be adversarial, the process of developing strong interaction and cohesive strategic planning is typically one of trial and error.
I think helping to avoid the error portion of this equation is what keeps many companies from trying. A strong MSP provider has the experience of many implementations across multiple verticals in developing and implementing programs which can foster collaboration between these two groups.
MSPs have worked through the trials and errors already and they have developed best practices they can bring to your organization so you don’t have to waste time and resources learning through trial and error what works and what doesn’t work.
Additionally, an MSP provider comes to the table fully aware of the typical needs and pain points of both HR and procurement and they have already worked out the solutions to areas where conflicts might arise. And they’ve already worked out and learned how to optimize the areas where natural synergies lie.
Another key benefit an MSP can bring is to help facilitate change management and project management in your organization. In today’s scaled-back environment, customers are already running lean organizations and may not have the time and resources to devote to the process of developing new structures for collaboration.
A quality MSP provider will bring to the table refined methodologies for change management. They should have tried-and-true methods with a proven record of success in bringing these two groups together into alignment.
Additionally, I would recommend selecting an MSP provider with strong project management and quality management methodologies like PMI certifications and Six Sigma experience.
I think sophisticated data analysis is another clear benefit that an MSP can bring. If HR and procurement are developing strategies based on a common platform for data analysis, the decisions they arrive at will be rooted on a common pool of analytical results. They will become more reliant on each other to build and strengthen their strategies.
And, I think, in conclusion, I would say that an MSP provider will apply strategies that have worked with other clients. Again, it’s important to ask a prospective MSP provider about their facilities for joining HR and procurement into such a relationship. It is something they should be able to speak about with authority in their responses and should be able to back up their statements with proven results. After all, we know nothing speaks louder than replicable success.
Anthony Vitiello: Excellent. Well, that brings us to the end of today’s forum. I want to thank both of the participants today for some very insightful dialogue and some extraordinarily valuable perspectives.
That concludes today’s recording. Thanks to you both for participating.
Janet Whitcomb: Thank you, Tony, very much.
{Crosstalk}
Mickey North Rizza: Wonderful, guys. Thanks.
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