We all know that the Procurement team in any company works hard to achieve crucial financial objectives while supporting the specific the demands of the various departments within the organization.
For a function with such a mandate, a Vendor Management System brings significant value by increasing visibility into actual spend, streamlining interactions with suppliers, automating time-consuming processes, and enforcing compliance with corporate policies. However, we find it curious that Procurement executives often have difficulty selling the value of a VMS-based contingent workforce management program to their internal constituents.
In an earlier post, we discussed how savvy procurement officials manage to carry everyone with them, just by taking responsibility for the results and assuring everyone ‘The Benefits Will Come, Let’s Build it First”. In this blog, we described the success achieved by a Procurement official who convinced his colleagues to trust his vision and suspend judgment. In most situations, the roots of resistance are too deep for a “trust me” strategy.
We assume that, as trained negotiators, Purchasing personnel are expert in applying the principles outlined in Getting to Yes and all of the best-selling business books on negotiation that followed. This would lead to the conclusion that the difficulty lies in not understanding the priorities and concerns of each stakeholder group. Without this understanding, overcoming objections becomes impossible.
Today, we want to talk about overcoming resistance to a VMS-based enterprise-wide CWM program. For each objection, we will offer approaches that have effectively been used to minimize concerns.
“The program, and the application, will be too expensive.”
In considering the cost of vendor management software, attention tends to focus on funding models. The most prevalent approach is to pay a monthly management fee which is a small percentage of spend under management. We suggest that the most appropriate evaluation of the expense associated with a VMS solution is to view cost from the perspective of your Chief Financial Officer, which emphasizes the total cost of ownership. Contingent workers represent up to a third of the workers in many companies. If you can convince your CFO that you can accurately determine how much is spent on contract labors, how many suppliers are being used, and the range of rates being paid for the same services, the CFO will be a willing proponent of a VMS system.
In establishing the true cost of ownership, be sure to ask each VMS vendor to specify the costs of implementation, initial and ongoing training, supplier onboarding, support personnel, or any other ‘hidden’ costs. You must know all of this to conduct an accurate break-even analysis.
“We will lose our best suppliers if we ask them to pay the management fee.”
The management fee is typically supplier-funded, meaning that a percentage of the staffing agency’s mark-up is diverted to pay for the use of the VMS. Would that fee be enough to discourage a supplier from continuing to provide staffing services? Again, compare the mark-up reduction to the lowered administrative costs and potential increase in supplier business. VMS systems measure supplier performance and can automatically reward top suppliers by moving them to a higher tier that gives greater or earlier access to requirements. The best VMS suppliers will also give high performing suppliers opportunities to be included in the programs of the VMS vendor’s other clients. Select a VMS system that automatically generates an invoice from an approved time card, eliminating the administrative costs associated with billing for services rendered.
“Reduced direct interactions between hiring managers and suppliers will reduce candidate quality.”
The decision to allow or discourage direct interaction between hiring managers and suppliers is a business issue that must be made by each company. What is important is to have all transactions flow through the VMS. This is the only way to achieve an enterprise-wide view of actual spend and program performance. To ensure candidate quality, the best VMS systems include sophisticated systems for candidate comparisons that not only compare and rank skills and experience, but incorporate specific questions to be asked of each candidate to ensure cultural fit. Your VMS system should provide an easy way to provide feedback on submitted candidates. In addition, the system should share information on upcoming projects or business cycles, enabling suppliers to build talent pools of onboard-ready candidates.
“Implementing a VMS system will be very disruptive. We can’t afford to distract our staff right now.”
Anyone who has directly participated in a complex ERP implementation is likely to cringe at the notion of adding any enterprise-wide applications. However, the leading VMS providers have developed tools and methodologies that enable you to be up and running in a few weeks with minimal disruption. In evaluating vendors, ask to see their implementation methodology, information gathering techniques, and tools used to integrate with back-office systems or expedite data entry. Carefully consider their implementation team. How is the team trained? Are they exclusively dedicated to implementing that VMS? Are they backed by the actual software developers? What is expected of your team? Can the vendor tell you how many hours of effort are required from each function within your organization? How will initial and ongoing training be provided to you and your stakeholders, including your suppliers?
In reality, the greatest challenges in implementing a VMS are associated with change management, not with technical issues. In your organization, there may be additional concerns that would discourage program participation. You must be convinced that the VMS vendor views the implementation as a change management initiative, giving significant attention to issues of inclusive planning, ongoing bi-directional communication, and project performance tracking.
When asked to assist in convincing a company of the need for a VMS, we always offer this final advice.
Please share your experience in getting internal buy-in for a VMS system.
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