By the time Paul Thatcher built his company’s HR tech capabilities from the ground up, the organization had grown to the point that he now has to start the process of assessing vendor solutions all over again. Such is the nature of seeking workplace software solutions, as technology evolves at mind-bending speed and employers’ needs change nearly as rapidly.
When Thatcher took over the HR team at Orem, Utah-based Jive Communications
in 2014, the department was still using Google Docs and spreadsheets to corral its employee data. The hosted communications firm had expanded rapidly since its founding in 2006, but its HR infrastructure had not kept up. In fact, the infrastructure was virtually nonexistent.
That blank slate gave Thatcher lots of practice vetting HR technology vendors. In less than four years, he implemented a human resource information system (HRIS) with integrated benefits, time and attendance, and payroll functionality, as well as automated applicant tracking and onboarding systems. The business’s investment in HR technology is far from over. “Now that we’ve almost tripled the size of the company,” Thatcher says, “it’s time to re-evaluate.”
So Many Vendors, So Little Time
Vendor selection is more challenging than ever due to the proliferation of new products and services—and the concerted effort it takes to separate sales hype from actual performance.
“The sheer volume [of HR technology vendors] adds complexity,” says Brad Mandacina, vice president and director of the HR technology and outsourcing practice at Lockton Benefit Group
, a Kansas City, Mo.-based insurance brokerage.
Today, advances in technology, particularly the growth of the cloud-based software-as-a-service model, have significantly lowered the barriers to entry for both vendors and employers. As a result, new vendors are emerging daily, and many will offer their services at far lower rates than their more established competitors. That raises the level of risk for unsuspecting HR professionals who aren’t experienced at conducting thorough evaluations of new products or services. And while lower rates mean the direct cost of a bad decision may be lower, the overall expense to the business of a botched implementation often is dramatic.
“The cost of a bad decision can be significant,” Mandacina says. “It’s beyond the cost of the technology. It moves into soft dollar costs like system downtime, loss of productivity … and the hours HR, finance, etc., dedicate to manual workarounds or resolving issues.”
Fortunately, you can improve your chances of making a sound decision by learning from the experience of industry experts and seasoned HR professionals and by following these steps in your next vendor selection process.
[SHRM members-only How-to Guide: How to Select and HRIS System]
Know What You Want
To get what you want, you must first understand what that is. “You’ve got to understand the requirements and needs of your business,” Thatcher says.
Spend time upfront itemizing your environment’s parameters and listing the problems you want the technology to solve. The number of employees, locations and users may all be factors in weeding out inappropriate solutions. You also want to think beyond functionality to issues such as customer service and user support.
When Jacksonville, Fla.-based temp firm Agility Staffing was looking for technology that would manage both payroll and time and attendance, its leadership struggled to find a solution that could meet its industry’s unique needs. “Temp staffing is tough because you need access to people who aren’t employees,” says Mike Rolewicz, president of Agility. “A lot of systems just aren’t set up for that, or they want too much personally identifiable information.” Because Rolewicz was clear about his company’s requirements, he quickly eliminated vendors that were a bad fit and focused on the few solutions that could meet Agility’s needs.
Remember that no department is an island. “Sometimes HR leaders are so focused on meeting the needs of their department that we forget we’re part of a bigger business,” Thatcher says. He recommends seeking clarity by asking, “How does this tool help us reach the strategic goals of the business at large?” When building your requirements list, be sure to solicit feedback from other areas of the business that may be impacted by the decision, such as finance or compliance. You’ll also want to include representatives from IT and legal, to gain their expertise. “They [IT and legal staff] raise questions that you may have forgotten to ask,” Thatcher says. “It’s super valuable to get their input. I like to engage other groups to see what questions they have.”
Once you’ve identified the variables that matter to your enterprise, rank them by importance. Some items may be non-negotiable, while others are just nice-to-haves. “With these requirements and weighting of critical factors, an organization can use a checklist to ensure the vendors being considered meet the minimum requirements and provide pricing on the exact services needed,” Mandacina says.
Know Your Audience
There’s another set of important stakeholders to remember: users. Particularly for self-service solutions, consider your workforce’s unique needs, characteristics and cultural challenges.
When Sarah Huber was selecting a time and attendance solution for professional soccer club FC Cincinnati’s 60-plus employees, she recognized that few of the associates sat at a desk. “Our main office is downtown, and the team plays at a stadium at the University of Cincinnati campus,” says Huber, senior vice president at the United Soccer League-affiliated soccer club. FC Cincinnati also operates a retail store selling club gear in another location. “Our employees are not always in front of a computer, they’re out and about,” she says.
That’s why one of Huber’s main requirements was an easy-to-use mobile interface—which she found when she selected Paycor’s tracking platform. “Now our employees can punch in and out wherever they are,” she says.
One of Ashley Land’s challenges in selecting a health and wellness tool for the City of Grand Prairie, Texas, was satisfying a diverse group of users. The city’s 1,300-plus employees include people of every age, from teenagers to senior citizens, so the app it chose needed to easily adapt to a variety of health goals, exercise interests and fitness levels.
“We were looking for new ways to engage people and encourage them to make that health change” in response to health insurance claim and utilization trends, says Land, the city’s HR manager.
In addition, she wanted the analytics the solution could provide to help the city assess the connection between employees’ usage of the tool and their utilization of health care benefits. But she recognized that this type of feature would be helpful only if employees actually logged in to the system.
In the end, Land chose a cloud-based solution called Peerfit
, based on its app’s ease of use and flexibility. The tool allows employees to “customize their own wellness program, rather than using something cookie cutter that they may not be interested in,” Land says.
Once you’ve outlined your requirements and prioritized them, identify a handful of vendors to vet. There are many ways to go about this, but experienced HR professionals say the best way to gather intelligence is still word-of-mouth.
“Talk to your peers,” Rolewicz says. “If people like their system, they want to shout it from the rooftops.” Getting information from peers can be especially helpful in finding vendors that work well for your specific industry or company size.
You can also identify possible vendors through Web searches, reading industry publications and buyers’ guides, connecting with members of your local Society for Human Resource Management chapter, and attending trade shows. You’ll probably hear and see certain vendor names again and again—those are ones you’ll want to put on your list, experts say.
Consider at least three candidates, but don’t feel the need to investigate every vendor in the space. “Typically, we start with four or five candidates,” Thatcher says. “We usually narrow the list down to two from there.”
After you’ve settled on your initial list, identify a core group of people from different areas of the business to evaluate and rank providers. Consider including representatives from different user divisions within the HR department, plus staff from IT, finance and senior leadership; for employee-facing solutions, engage a few end-users as well.
Instruct each team member to use your prioritized requirements list as a scorecard for assessing and ranking the solutions based on customer feedback, product materials and demos customized for your organization.
Don’t let yourself, or other members of your evaluation team, get distracted by the bells and whistles of a solution that doesn’t really meet your needs. “Don’t chase it just because it’s new and sexy,” warns Matthew Kaiser, managing director at Lockton Benefit Group.
“There are hundreds of things I could throw in there. [But] the more I throw in, the more confusing the whole package becomes.” Instead, he says, stick to the checklist. Then bring the group together to compare notes and decide on two or three finalists.
Take a Test Drive
The next step is to bring the finalists in for a more extensive demonstration of the solution’s capabilities, with an opportunity for different user groups to try out the solution.
For foundational programs such as an HRIS or payroll system, plan to devote significant time to the finalists’ presentations. “We suggest that most in-depth demos [should] take four to six hours per vendor,” Mandacina says. Even for less complex solutions such as health and wellness tools, build in time for end-users to try the technology in realistic scenarios.
“We believe it is important to demo the system focusing on how the organization will use it, not just rely on a canned presentation,” Mandacina says. Thatcher agrees: “Test and verify whether it will function like the salesperson says it does.” Ask the vendor to provide a “sandbox,” an open-ended test environment that your evaluation team can navigate on its own.
This process may bring issues to light that your team had not previously considered. This is the time to ask pointed questions, to find out how much (if at all) the solution can be adapted to meet your preferences and whether doing so will incur additional costs.
Do Your Homework
You’re getting close to the finish line, but there’s still more to do. One of the most important steps in the vetting process is to talk with a handful of current and former clients to gauge their real-life experience using the solution.
Ask finalists for a variety of references, including a client currently in the implementation phase, one that implemented the tool a year ago and one that has stopped using the vendor, Mandacina advises. This will give you a broader perspective on the solution and the vendor. Also reach out to user groups and social networks such as LinkedIn and SHRM Connect
or websites like Software Advice to gather customer feedback from sources not provided by the vendor.
Above all, “don’t trust the salespeople,” Thatcher says. “You need to do your own research.” In a recent selection process, Thatcher’s team did some independent work to identify companies that were using the solution being considered. After contacting several of them to inquire about their satisfaction, Thatcher got some valuable insight. “What we found was that almost every one brought up the same issues [with the solution].” The insight was enough to disqualify the vendor.
6 Steps to Solution Selection Success
1. Identify requirements and priorities
Outline the problems you want the system to solve. Don’t just consider the HR department’s needs; seek feedback from other groups that will use the system or depend on the data it provides. Ask for input from the legal and IT departments, and ask yourself, “How can this tool helps us realize the strategic goals of the business?”
2. Focus on employee experience
Think about the unique characteristics of your users and industry, such as demographics, work environment, compliance issues and culture. This is particularly important for self-service solutions that depend on quick and complete employee adoption.
3. Gather vendor candidates
Word-of-mouth is still the best source of referrals. Ask colleagues at firms of similar size and sector which vendors they are working with. Don’t get distracted by cool high-tech bells and whistles; stick with your prioritized requirements list to identify providers that meet your needs.
4. Play in the ‘sandbox’
Don’t rely on canned online demos—ask vendor finalists for a “sandbox” environment where you and your vendor selection team of end-users can play with the solution. This is the best way to evaluate a tool’s real-life usability and compatibility with your needs.
5. Check references
Ask for references at different stages of the vendor/customer life cycle: one in the middle of implementation, another one year out and a third who has left the vendor. Do your own research to identify clients using the solution and ask for their feedback.
6. Negotiate your best deal
Don’t let a vendor know it is your first choice until after you’ve negotiated terms. Remember, everything is negotiable—even if the vendor makes it appear that terms are fixed. And don’t be afraid to bring in an expert in contract negotiation to help close the deal.
Closing the Deal
Once you’ve completed these steps, the choice should be fairly obvious. But don’t show your cards yet; experts recommend negotiating price and terms with the vendor before letting them in on your decision.
“We don’t tell the company we’ve made our selection until we negotiate the price,” Thatcher says. “Companies will make it sound like you have to agree to their terms, but it’s all negotiable.” Be sure to consider the complete cost of implementation, including setup and licensing fees as well as add-ons for additional users or increased volume, especially if your workforce is growing.
Evaluate the time frame of the agreement. “You don’t know what your needs are going to be in a few years,” Thatcher says. “If your company expands much more quickly than you anticipated, you want to be nimble.” He advises contracting for as few years as possible to make it easier to move on or renegotiate terms if circumstances change. And in licensing situations, avoid automatic contract renewal language in your agreement so that you don’t get locked into an outdated agreement down the road if you miss a termination notice date.
Be assertive when negotiating service contracts with HR technology cloud vendors.
“Data extraction from cloud systems isn’t always cut and dried,” says Jeremy Ames, president of Hive Tech HR
, a technology consulting group in Boston. “Vendors will sometimes give your data back in unfriendly file formats, with long delays or even extra fees if the terms on data retrieval aren’t clearly spelled out,” he says.
Contract negotiation can be an intimidating prospect. If this step takes you out of your comfort zone, don’t be afraid to ask an experienced colleague from another department to take the lead or consult with an attorney. Doing so increases the odds of a positive outcome, and you can learn a lot by watching a master negotiator at work.
Experts say a well-planned vendor selection process can be completed in a few months. It may be tempting to skip some of these steps in the interest of time, but shortcuts often end up costing you more time and money in the end. “Choose wisely, take the time to check references, play around with the tool yourself,” Thatcher says. “I’ve seen too many companies make a decision based on what an online demo looks like and then cost themselves six months to a year of pain because they didn’t do their due diligence.”
Jennifer Arnold is a freelance writer based in Jacksonville Beach, Fla.
Was this article useful? SHRM offers thousands of tools, templates and other exclusive member benefits, including compliance updates, sample policies, HR expert advice, education discounts, a growing online member community and much more. Join/Renew Now and let SHRM help you work smarter.