How to Create Vendor Partnerships Based on Trust

EDITOR'S NOTE: Our online version of this article contains information that has been updated and corrected since the print edition was published.

When Jessica Lee, a talent acquisition executive at Marriott International, wanted to launch a customized mobile site two years ago through which candidates could apply for open positions, she didn’t share the details of her plan with her existing vendor partner, Oracle—even though Oracle provided mobile products. She didn’t see why she should. After all, Oracle didn’t offer the beautiful employer branding her team sought, nor did it deliver the user experience Marriott wanted to provide. Plus, she already knew that, as a software-as-a-service (SAAS) provider, Oracle didn’t create customized mobile solutions for its clients.

“We wanted to implement a specific mobile experience and didn’t think that [the Oracle] product was where it needed to be,” Lee says. Although she felt guilty about the decision—like she was “cheating” on Oracle—Lee moved forward with exploring other options.

That turned out to be a mistake. The mobile product they were considering with another vendor would likely have been incompatible with the company’s existing Oracle software—a potentially catastrophic problem that should have been addressed from the outset. As a result, Marriott wasted time focusing on technology that would have been too complicated and costly to implement.

Few corporate partnerships are more fraught than those between HR and its vendors. That’s because human resources is hugely dependent on these relationships. According to the Sierra-Cedar 2015-2016 HR Systems Survey, more than half of all core human resource management systems are now SAAS solutions in which the technology is externally hosted. The employee relations space is transforming at breakneck speed, and HRIS is taking center stage in everything from recruiting and onboarding to retention and benefits. As a result, it has become increasingly critical for HR’s relationships with vendors to be managed strategically, with trust and transparency on both sides.

For Lee, it was a lesson learned. Once the teams from Marriott and Oracle sat down to talk openly about needs and expectations, they were able to move forward.

“It’s almost like you need a Venn diagram,” Lee says. “What are your needs? What are your priorities? ... Then on the [vendor] side, they have to map out their strategic priorities and the things they’re looking to do. You have to find the overlap with one another—the sweet spot where you really get your great results.”

Fortunately, Lee’s story has a happy ending. Working toward mutual transparency turned out to be a win for both organizations. Marriott’s demanding requirements for the mobile site spurred Oracle to accelerate its development process. “In addition to Marriott being happy with the results, so were our other clients,” says Deepak Rammohan, Oracle’s vice president of product management. “We like customers that push us to innovate.”

Getting on the Same Page

Jessa Kilgore has experienced the HR/vendor relationship from both sides. Previously employed at a vendor, she is now director of HR technology at G&W Laboratories Inc., which manufactures pharmaceutical products. She has seen the HR department at her company evolve from having face-to-face meetings with employees about onboarding, benefits selection and other HR functions to offering online programs and 1-800 help-desk numbers.

As HR has moved toward more vendor partnerships, Kilgore has observed a lack of clarity about roles and responsibilities on both sides, particularly in agreements that involve small and midsize organizations. Sometimes this occurs because in-house HR professionals are accustomed to more transactional work. They need to understand that digital services—and the relationships that enable them—require care and feeding. The vendor doesn’t go away after the purchase is made.

A recurring problem, Kilgore says, is that HR and its vendors have incongruent expectations—and often those don’t come to light until after the ink has dried on the contract. “What happens very often,” she says, “is that contracts are set up and they’re vague.”

For example, while working at a vendor, Kilgore once began providing position management—an analysis of the organizational structure needed for each business unit—because that appeared to be part of the contract. During a more thorough vetting of the agreement, however, she realized that the vendor was only supposed to supply technology. She had to pull back, creating a problem for the client, which hadn’t thought through the organization’s needs on that level.

Sometimes HR professionals don’t realize that they’ll need any in-house resources to maintain vendor services, Kilgore says. “Unless you’re hiring a vendor to also be a consultant, that creates a really big gap.” And even if you do go the consultant route, Kilgore advises caution: “You always need somebody in-house who can drive and manage whatever project or services that you’re looking for. You can’t just hand it over to a vendor.” That’s where having a strong competency in relationship management plays a key role.

Another problem can arise if HR relies solely on other internal departments, such as IT, to make decisions and those teams have a limited understanding of HR functions. To ensure that the software meets its intended goals, HR needs more control over its digital footprint. That doesn’t mean the department must become immersed in the details of the technology, but it should understand how a program works and how it fits into the business ecosystem.

However, selecting a vendor must never occur in a vacuum. To create the best RFP, HR must partner with IT sooner rather than later to ensure the document accurately captures the company’s technical needs and limitations. Finance must also be kept in the loop so that necessary expenses don’t come into question late in the decision-making process. And getting the CHRO’s buy-in from the start is a good way to ensure that the agreement won’t fall apart under higher-level review.

Crucial Communication

Communication is particularly critical when it comes to layering increasingly complex HRIS programs and applications, not only within the HR space but in the context of the rest of the company’s IT framework. How successfully this happens is contingent on many variables, not the least of which is understanding everyone’s requirements and establishing trust with vendors.

That was a slow process for Mike Regulski, head of shared services in HR at T. Rowe Price, a global investment management firm with more than 5,900 associates. “Where we’ve been as a firm is very paper-oriented and, some would say, very conservative,” he says, “so we’ve taken extra care.” As the firm looked to create a better digital experience for its associates, it took a broad approach. “We’ve not gotten hung up with a traditional HR/vendor thing, but looked at it as the same as how we deliver to our T. Rowe Price clients,” Regulski says. “We are aligning the associate digital experience to the full digital capabilities of the firm.”

Of course, asking a vendor to provide technology that can seamlessly traverse the company’s digital space is a pretty tall order. “We probably wanted it customized too much for us,” he says. “And I think, at the time, the vendor trust wasn’t there because we hadn’t been able to do much as far as comparisons with other companies or even the industry in general.”

One of the biggest stumbling blocks came from HR being too siloed, according to Regulski. Engaging in a lengthy dialogue with the vendor helped Regulski’s team to realize that, if the vendor had met its needs at 100 percent, problems would crop up in T. Rowe Price’s larger digital ecosystem. To ensure the optimal solution for the whole company, HR had to be more flexible. “Now that we’re looking at it horizontally,” Regulski says, “I can say, ‘How can I get to 80 percent of what I need in order to fulfill 100 percent of what the firm needs?’ ”

Similar questions may arise when an existing enterprise product can supply only a portion of what HR needs. Should HR chuck the enterprise solution that isn’t creating the one desired result and find a new system? Or would it be better to integrate add-ons? To find out, HR must talk with the vendor early in the decision-making process to assess the technology and align the priorities of both parties.

Being Transparent

Assimilating HR systems into the larger enterprise requires transparency about what each stakeholder needs—particularly in a company with a culture or procedures that depart from the norm.

At Carfax, for example, a Centreville, Va.-based company with more than 500 employees that provides vehicle history reports, HR’s approach within the organization is as far from siloed as you can get. According to Adrienne Webster, vice president of HR, her team engages in an internal process akin to crowdsourcing to make choices. It’s a model that is built into the company’s DNA. To ensure that the department’s goals align with those of the organization, the whole company is involved in all decision-making.

“We know what may be seen as a traditional HR function impacts many people around the business, and we approach it that way, getting input and feedback from others before making a collective decision,” she says.

Carfax’s holistic approach has confused some of its technology vendors. For example, when the company converted from its legacy customer relations management system, the HR team didn’t fully brief the new partner, which was unfamiliar with its culture. The lack of communication made for a bumpy transition. “Today we start any [discussion] with a clear and forthright conversation about goals and expectations,” Webster says. “We also work to onboard our partners much like we do new employees.”

Maintaining Confidentiality

Security is a concern for any digital environment, but it’s particularly crucial for personnel systems. That said, transparency and confidentiality need not be mutually exclusive.

Janis Simat, chief human resources officer at Risk Strategies Co., a midsize national insurance brokerage and risk-management firm headquartered in Boston, views vendors as extensions of the internal team. “I think it’s important for them to understand the challenges and opportunities we have and how their partnership fits into our overall strategy,” she says.

Nevertheless, she takes the requisite precautions. “While it’s important to have an open dialogue,” she explains, “[the company-vendor relationship] still remains within the protections of confidentiality [just as] we would always have for our employees.”

Simat ensures discretion by having vendors sign nondisclosure agreements at the outset of the RFP process, before she reveals any detailed or proprietary information. “If they would not have signed, I would not have gone any further,” she says, “and I haven’t had any refuse to sign.”

At a prior company, Simat had an exceptional experience with a change management vendor that was privy to inside information. She spent an entire day with the vendor representative and business heads exploring the challenges the organization faced. No stone was left unturned.

“We brought [the vendor] into the fold of our entire strategy, as well as our obstacles, and it really helped us customize a plan for that business,” she says. “We had so much transparency with her that we were able to get a really good result for the people and the business.”

This kind of open dialogue helps to avoid missteps with vendors that can negatively affect return on investment. For example, a bungled negotiation can place HR directly in management’s crosshairs. In a large corporate environment, such a mistake is less likely to occur because HR is typically well-represented among senior management. For countless others, however, it can impede the process of finding and implementing the best solutions.

Over the years, Kilgore has seen many vendor contracts driven by a CFO or CEO. Her perception is that management is often thinking about cost reduction and shortcuts, and not necessarily the services that are needed. She has also heard vendors criticize HR, grumbling that the department can’t even make its own decisions, let alone figure out what it wants from a partner. To gain the respect it deserves, Kilgore recommends that HR insert itself into the discussion early and often.

That means moving beyond the day-to-day tasks that consume the department and working diligently to build relationships with upper management. Kilgore strongly advises HR to act first in recognizing the business issues and researching the vendors that can provide the best options. Along the way, let management know that the department understands what’s needed or is actively seeking providers that can deliver cost-effective technology. “Don’t wait until the CFO says, ‘You know what? HR doesn’t know what they’re doing,’ ” Kilgore says. “Come to them with solutions.”

Elisabeth Greenbaum Kasson is a freelance writer and editor in the Los Angeles area.