Author: Edward F Barry
"To err is human," wrote the 18th-century English poet Alexander Pope. True, and not much has changed since then. Pope also said that to forgive is divine. Yet HR managers may not find their chief human resources officer (CHRO) very forgiving if the error results in buying or renewing HR software that fails to meet the organization's needs.
Especially if you're a first-time buyer, assume you will make mistakes. Buying technology is complicated. Unless you're in the thick of it every day, it's nearly impossible to stay on top of market and industry changes. Most first-time buyers don't know what they don't know. With that in mind, do your homework to avoid these common mistakes and increase the likelihood of a happy partnership with your HR tech provider.
Gallagher's HR Technology Consulting practice identified the most common occasions for mistakes by HR managers: first-time purchase, deciding whether to change providers, and renewing a contract.
As you plan your HR technology purchases, use this guidance to ensure your team's "human" factor is about people — not errors.
Top three mistakes of first-time HR tech buyers
- Buying based on anything other than your requirements. Before you start shopping, know what you need to buy. Document and prioritize your requirements — you probably won't get everything you want. Don't become distracted by how much you like the salesperson, because you won't hear from them after the sale. Or related, don't be led astray by a cool feature the salesperson convinced you is a must-have. Was it on your list of requirements? Buy what you need. If that comes with extras, consider them a bonus.
- Buying on price versus functionality. Even experienced buyers make this mistake, especially if the budget is lean and the C-suite is watching. The adage, "you get what you pay for," applies here. If your needs are basic and straightforward, you may find a deal. However, buying on the cheap seldom pays off. You now must spend time and money to manually do the things your software doesn't do. Or, you must address issues stemming from software that doesn't perform as desired. Alternatively, don't overbuy. You can always add later based on genuine need.
- Failing to understand the implementation process. Don't assume implementation is part of the package, or if included, that your service provider will be the implementer. Many providers outsource implementation to a third party. Service providers increasingly refer to themselves as "technology providers" because they'd prefer to get out of the service business, which is a huge cost center. Outsourced implementation is okay if the service details are transparent. But, don't make the mistake of not asking about implementation and ongoing support. Such services may be available but at an additional cost.
Top 3 mistakes when deciding to stay with or change HR tech providers
- Taking an uninformed approach to price. If your three-year contract is up for renewal, expect a price increase, but don't assume you're getting the best deal. Review your contract for price increase terms to ensure the increase reflects your agreement. Even if you're happy with the provider, a market price check may provide leverage to negotiate, if appropriate.
- Resisting change. Change can be painful, and even a mediocre status quo can seem pretty good in comparison. Putting up with mediocrity may make sense in some circumstances, but give yourself adequate time to change providers if research shows that it's necessary. Be willing to weigh the pain of making a change versus staying in an unsatisfactory relationship.
- Failing to read the contract. Most contracts spell out the terms both for renewals and non-renewal. Too often, we hear from a client who missed the window to notify the provider of non-renewal because no one read the contract.
Top 3 mistakes of renewing HR tech buyers
- Failure to understand the contract (see previous mistake). Contract renewal terms tend to favor the provider. If your renewal period is 90 days, start at least 180 days before the end of the contract term by reading the contract carefully to understand your options and flag any points you want to renegotiate. Considerations include auto-renewals, price increase triggers and measures based on the applicable price index. The index that favors you may depend on factors out of your control such as inflation, so it's critical to understand and gauge the impact on your bottom line.
- Failure to do a market check. Don't assume the price is non-negotiable. If it's been at least two years since you signed the contract, check to see if the new pricing is competitive. It's easy for satisfied clients to accept price increases automatically. While you may find the price is firm, you may be able to negotiate additional features or services.
- Adding services without considering services to drop. Organizations routinely add new services — even if it costs more. Technology evolves quickly, and not everything is covered in a new release. Employers often make the mistake of paying for functions they bought initially but never used. Ask the provider to identify each disparate function you're paying for and then eliminate those you don't use.
Going it alone may be the biggest mistake
Ask for help from someone with knowledge and experience — internal or a third party — and ask lots of questions. Beyond questions about what the technology does and doesn't do, ask about service and support during implementation and after. What are your options to upgrade service, and at what cost?
A third-party expert can guide you through the purchasing and renewal process. You'll want to focus on current needs, pain points and organizational changes that impact HR technology functions, including size, business goals and people strategy. Also, consider any unknowns. For example, if your company is looking at a possible acquisition in the next 12 months, there are ways to structure a renewal that will serve all parties.
Enlist in-house counsel to review contacts. We sometimes see hesitancy by HR to do so for fear of delaying or derailing planned HR tech strategy. Ultimately, HR leaders must determine the greater risk: losing sole control of the purchase or signing a contract you don't understand. Thorough planning and research can minimize the risk of both.
Finally, be realistic about your needs. If you routinely require extra support, make exceptions, require last-minute changes or have other special needs, expect the renewal price to reflect this when service is included.
Gallagher's HR technology consultants help employers strategize, identify, purchase and optimize best-fit HR technology tools. Contact your Gallagher benefits advisor for more information on HR technology consulting support.
