Procurement Fighting the Good Fight: Benefits Sourcing and HR Complacency (Part 1)

I remember many years ago, sometime shortly after the fall of Arthur Andersen, when I found myself in the early offices of the Claro Group, a consultancy formed from when a number of partners and senior managers left the unfortunately troubled firm. At the time, I was talking to some members of the Claro team about the ecosystem surrounding sourcing categories in which HR previously maintained full control (and in which the benefits consulting arms of brokers would often find themselves in potential conflict given the high margin policies they would sell to clients).

The entire opportunity to source and better manage benefits and related categories appeared quite real to me. And Claro was one of the firms at the time -- they still are, mind you -- that had figured out a way to engage a combination of business leadership, HR and procurement without causing a toe-stepping dance. Yet human resources and procurement turf wars remain to this day, despite the internal conflicts that HR-types (focused more on nebulous definitions of value) and true conflicts of interest that certain benefits consulting firms can find themselves in. You would just think procurement would parachute in and commandeer these areas.

But it's not so easy. In a recent Spend Matters Perspective, Human Resources & Sourcing Turf Wars -- HR Departments Lose their Prescription for Sourcing Immunity, we begin to investigate the benefits buying battle firsthand. Author Thomas Finn, the Executive Editor of Healthcare Matters (along with contributors Allianza Partners), suggests that despite the significant price compression in services categories such as legal and accounting, "HR departments have remained conspicuously successful at keeping strategic sourcing professionals out. Why? Well, like most good conflicts, the war between HR and sourcing takes place on multiple fronts."

One of the challenges, Tom believes, is that "you've got HR professionals fortifying their resistance by combining their demand with others in ad hoc partnerships. Some just cash in their chips and join coalitions. For example, the National Business Coalition on Health (NBCH) is the trade association for many of these coalitions that continue to form (see member listing on this page)." Moreover, "the traditional consultancies (e.g. Towers-Watson, Mercer, Aon, Gallagher and Havens & Company) have created their own branded consortia and they market membership to their clients. A number of conflicts of interest in these arrangements are startling -- yet prevalent."

Yet there is hope in the turf war battles for the good guys to prevail, driving savings and value (rather than entrenched special interests). Stay tuned for Part 2 of this post as we investigate! Or download: Human Resources & Sourcing Turf Wars -- HR Departments Lose their Prescription for Sourcing Immunity if you want the full story and don't want to wait (available free to practitioners in the Spend Matters Research Library).

- Jason Busch

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