Sunday, July 19, 2009

Entwining Procurement and HR

The tipping point has been reached for the increased collaboration between HR and procurement -- but creating value is not as easy as bringing the teams together. A strong relationship starts with a foundation of mutual understanding and respect for one another's competencies.

The worlds of human resources and procurement have become increasingly entwined as the greatest cost to most organizations these days is that of human capital. To better manage this important and complex resource, HR and procurement professionals have had to collaborate and strategize more than ever before.

The traditional procurement organization has evolved into a "sourcing and procurement- service organization" or strategic sourcing organization." This elevated, more-strategic function of procurement is working closely with HR now more than ever before.

Sourcing professionals usually handle the high-value, high-risk, high-reward and highly complex types of purchases (mainly focused on services or specialty items) while procurement is focused on the operations side ("procure to pay" and "invoice review and recovery").

The trend is clear and is likely here to stay -- more HR services are now purchased with sourcing and procurement departments used as an intermediary. To be effective, HR and procurement teams must understand how to unlock value from one another by building a relationship that helps generate efficiencies and, ultimately, more effective acquisition of talent and other HR-related services (i.e., healthcare insurance) for their companies.

The Tipping Point

No longer new to one another, HR executives and procurement professionals are at a stage where their partnership has reached a certain level of maturity. HR executives -- once used to managing their own supply base, developing relationships with vendors and negotiating their own deals -- are bringing their procurement counterparts to the table.

Likewise, procurement teams are striving to add value and show that they are not just a formality that needs to be managed in the purchasing process.

Creating value is not as easy as bringing HR and procurement teams together and asking them to collaborate. The teams must establish a strong working relationship that starts with a foundation of mutual understanding and respect for one another's competencies.

Here are five ways HR and procurement teams can best collaborate to unlock their combined value:

1. Speak the same language.

Anyone who works amongst peers of the same discipline every day has a tendency to speak in their own language. To set clear objectives and manage processes effectively, HR/procurement teams must understand one another clearly.

Avoid HR/procurement- speak and, in instances where it's unavoidable, explain what terms mean. If you don't understand what something means, ask. For example, if the procurement team is discussing "aggregation" (combining buying power in specific categories within the various business units within a company), it may not be a familiar term or idea for the HR executives with whom they are working.

It would be important when discussing aggregation to be sure everyone in the room understands the concept so that they can provide input on where aggregation would be optimal.

2. Trust and value one another's expertise.

Procurement and HR teams must engage with one another without one side trying to dominate the other. Both parties must come to the table with the understanding that the ultimate objective is to meet the business goal (i.e., secure the right talent and HR services for the company's needs) and that, in partnership, they will deliver a more valuable solution.

Without this foundation of trust and respect, working together toward that end goal becomes increasingly complex and tedious, which can create detrimental results.

3. Remember your soft skills when establishing your partnership.

HR procurement is an area where a hard-skills approach must be balanced with a soft-skills approach. The procurement team must position itself as a strategic partner to HR, guiding the department in the direction it recommends vs. "taking over" negotiations or vendor relationships.

HR must remember that procurement's agenda isn't necessarily contradictory to its own, and should be open to other ideas and recommendations. Having a candid dialogue and leveraging the expertise, experience and knowledge of both parties will lead to a more effective solution for the company.

4. Create a consistent approach to vendor relationships.

Uniting HR and procurement has provided companies with a single view of their supply base, rather than each HR specialty knowing only about its own suppliers. This can lead to cost efficiencies due to scale/scope of services provided to the overall organization. However, most organizations that have procurement teams still have a large portfolio of HR services providers to manage.

Creating a consistent approach to vendor relationships not only helps the vendors come to expect a certain working relationship with your company, but can help ensure consistency in management of that relationship between procurement and HR as well.

A consistent approach to managing and negotiating with suppliers can eliminate gray areas between HR and procurement during the process, while also helping to generate efficiencies throughout the partnership.

5. Bring services purchasing expertise to the table.

HR procurement is vastly different from materials purchasing. Service purchases are more often based on relationships and are not returnable. Bringing a pure cost-savings mentality to HR procurement can hinder an HR/procurement team's relationship from the onset; value, not cost savings, is the ultimate goal. Staff quality and agency service levels are just as important as generating cost efficiencies.

At the end of the day, clearly defining roles from the onset and throughout the decision-making process is critical to a combined HR/procurement team's success. Who makes the final decision? Who has the lead on the decision timeline? Who is in charge of the process? Those organizations that get it right stand to improve in their efficiency, value and risk management.

Those organizations that allow ineffective procurement/ HR relationships to continue are missing a great opportunity to unlock value in their human-capital strategy.

[About the Author: Bernadette Kenny is chief career officer and senior vice president of human resources for Adecco Group North America. She is responsible for the human resources functions for Lee Hecht Harrison, Ajilon Professional Staffing, Ajilon Consulting and Adecco General Staffing.]

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