How to...Manage HR Vendors without any HEADACHE

by Lisa Cheong

In a time when productivity and cost-efficiency are corporate buzzwords, companies are becoming increasingly reliant on third-party vendors to boost their HR capabilities. HR vendors span across various services that range from recruitment, talent succession, payroll services, employee benefits, expat management and more.

Outsourcing HR services has its benefits. Not only does it help companies reduce and control their operating costs, but HR practitioners can also tap onto vendors for their expertise and gain resources which may not be available within the organization itself. Outsourcing also frees up HR practitioners’ time, giving them the ability to focus on their core functions and skills. Regardless of your company’s industry, vendors can help enable HR practitioners to succeed in their work. So what are some best practices for searching and managing your HR vendors?

1) Analyse it well

Good vendor management starts with selecting the right vendor for the right reasons. For companies who have not fully examined their reasons for outsourcing, the selection process may come across as lengthy, complicated and painful as the opinions of several company stakeholders will have to be sought out. This is why it is important HR practitioners fully analyse their HR requirements and current weaknesses before searching for prospective vendors and heading the procurement process.

2) The price of value

While price is one of the biggest considerations when choosing a vendor, it should not be the driving reason. One mistake companies fall into is selecting the vendor with the lowest bid. HR practitioners should think long-term and seek to develop a mutually beneficial relationship between both parties. Focus on the quality and value of work provided by the vendors instead.

The focus on value should also be a reason against constantly changing vendors just for the sake of saving a few dollars, as turnovers will cost more money in the long haul. In addition, the quality of services may be diminished as it will take time for vendors to understand your business.

3) Open and transparent

For vendors to understand and provide solutions to your problems, it is important that organizations share their business priorities and information with vendors. That does not necessarily mean giving them free range in your accounting books or financial statements. Instead, sharing the appropriate information includes business forecasts, a pipeline of future projects and management and business goals, or any other changes in management.

It may also be beneficial to include vendors in certain strategic company meetings that relate to their service so as to enable them to better understand the positions of the company and better plan out their solutions for your HR issues.

4) Monitor vendors’ performance

While not all the benefits that vendors provide can be calculated in a tangible value, HR vendors should create some form of measurable value for HR practitioners and companies. Whether it is a reduced time to hire, greater technical competency or higher employee engagement, HR practitioners should be able to justify the use of vendors to other company stakeholders. HR practitioners should also not assume that everything will go according to the stated contract.

While initial hiccups are almost inevitable, HR practitioners should monitor the performance of HR vendors against what they promised, which includes turnover time, quality of service performed or call answer time.


At the end of the day, good vendor management is built on a strong line of communication from both parties. While HR practitioners cannot assume vendors to understand the company’s processes and needs if the companies does not provide the information, vendors also need to ask and raise questions when there are issues that may affect their delivery. With a strong line of communication, this enables both parties to proactively address issues and challenges before they become bigger problems.

To select the right vendor, some of the questions HR practitioners should ask include:

-Is the proposed material or service within the vendor’s area of expertise?

-What is the cost pricing based on?

- (For services such as HRM software) Is the software compatible with the company’s current software? What sort of customization is there?

-Will there be upgrades?

-What is the level of service provided?

-How long will the implementation take? Will there be training for relevant employees?

-What happens if the company wants to switch to another vendor? What are the exit processes in place?

-Will outsourcing improve performance?

-What tools and processes does the vendor use?

-What is the vendors’ work process ?

-Who will the company work with?

-How will the vendors manage the project and

Potential pitfalls:

While outsourcing may have its benefits, but as with any business dealing, it brings about a certain amount of risk as well. What are some common pitfalls HR practitioners should be aware of?

Strategic risk: If HR practitioners do not perform their due diligence, they may mistakenly outsource their core functions out. If the core function contributes as a strategic advantage over your industry competitors, outsourcing these functions may cause the company to lose this advantage in the long run.

Operational risk: One common risk all companies share is a sub-par or declining level standard of service or unexpected costs.

Cultural risk: As vendors, such as recruitment agencies, can be seen as ambassador of your company, this creates a possible branding or cultural risk. For instance, vendors who do not fully grasp your company’s employer brand position may send out different messages to candidates.

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