Does your HR tech provider relationship need governance? Consider these 10 tips to help you save time and money as you drive the working relationship and outcomes you want.
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Author: Edward F Barry


Purchasing technology and outsourcing services from a third-party provider offers many advantages. Primarily, the relationship affords you the ability to focus on your core business and leave HR technology automation, compliance, reporting, and engagement to those with the expertise.

While a good HR technology provider can minimize risk in their area of expertise, any shift of responsibility to a third-party service provider requires accepting the risk that some aspects of the relationship may not meet expectations. To ensure the best possible outcomes, Gallagher's HR technology team helps employers govern the relationships with their technology providers — if it makes sense to do so.

With that in mind, consider the following ten tips.

1. Determine whether the relationship needs to be governed

Ask yourself how important the technology/service is to your daily operation. More simply, what would the damage look like if the technology failed? Along this line, what's your definition of success for the technology/service?

As an example, think about payroll. Success means that employees receive the correct amount of pay on time. Now, consider the pain associated when that's not happening.

Compare that to the other end of the potential pain spectrum: if your internal chat platform goes down for a few days, employees have other ways to communicate.

Not governing a relationship may result in an inconvenience; but like most technology-related decisions, the degree of governance involves a tradeoff. You must decide where you'll get the most return on your investment, especially if a quick phone call will suffice. That said, most employers use at least one HR technology platform or tool that warrants putting time and effort into governing the service-provider relationship.

2. Define your risk

While defining success, also define the associated risk if the technology doesn't work. What is the risk to my job if I'm in charge of benefits and the CEO's husband can't fill his prescription at the drugstore? Or what's the risk if a recently added dependent doesn't show in the system during a 3 a.m. visit to the emergency room? The value of governing a relationship will vary depending on the associated risk of problems and the amount of effort you want to commit. Some relationships warrant more effort than others.

3. Define upfront and in writing what success looks like (see No. 1) and reference as needed

Sometimes people forget why they bought a specific tool. They become unhappy because their expectation for performance changed since the initial purchase, but the software didn't.

An example from my team: Two years ago, we bought a time-keeping system to keep time, which it does just fine. Now, we want the system to support project management, which it doesn't do well. We're unhappy with the product but remind ourselves the software is doing exactly what it's supposed to do. The onus is on us to find a different product.

Has your definition of success changed? Share your definition with the provider to make sure the company can deliver.

4. Meet formally at least twice a year

At both meetings, two things should happen:

  • Conduct a good, old-fashioned, eye-to-eye discussion on how things are going. There's a lot of value to simply sharing the experience of working on both sides.
  • Discuss what's changed on both sides.
    • Perhaps you have seen a material change such as growth. Is your payroll system now managing 500 employees versus the 250 when you bought the system?
    • Perhaps your needs have changed — you want to offer decision support for open enrollment.
    • Perhaps your expectations have changed: I need a faster customer service response time.

Providers should use these meetings to discuss product innovations, new offerings and evolutions. Neglecting to discuss software upgrades means missed opportunities to optimize use of the software.

5. Set clear expectations for response times

Determine response times mutually with your provider based on the severity of the problem. For example, the provider should address a "severity 1" problem within two hours, while a 24-hour response may be appropriate for "severity 2." Perhaps general industry guidance is available — ask your provider or your HR technology consultant.

Further, agree on what should trigger service escalation. Most important, look for culture fit concerning response expectations. If the providers' culture is "we'll get to it when we do," and yours is "get it done yesterday," then your relationship will require more governance, or the provider may be a poor fit.

6. Insist on a formal structure

Who will interface with whom for each side? When the interface doesn't work, what's the escalation process? Is it in the contract? Outline clearly the answers to both questions and reconfirm at each formal meeting.

7. Know your part when there are issues

Recognize that sometimes YOU will be the problem. Someone on your team didn't participate in training, follow instructions or adhere to an agreed-upon process. Acknowledge your role in any given situation and ask the provider to do the same.

8. Insist on root cause analysis

For almost any issue there's a fix, but if no one is looking at why the issue arose, then the problem likely will resurface. When issues arise, insist on identifying the cause. Was the issue technical or non-technical? While it's tempting to accept a quick fix and move on, take the time to resolve the issue at the source to avoid recurrence and frustration. This analysis should be part of the service provider's job.

9. Recognize the complexity of what you're trying to do

Likely you're working with multiple providers whose products must work together. You have a contract with each one, but there's no contractual relationship between the various providers — you're the central control. Don't assume the providers will engage and communicate with each other to address issues and efficiencies; being the communication hub is part of your governance responsibility.

10. Try "marriage counseling" before getting "divorced"

In our experience, employers are too quick to change providers when things don't go as desired. Keep in mind the pain and cost associated with changing platforms/providers. Enlist a third party to facilitate communication and resolution before you change providers. Don't wait until you have irreconcilable differences. Good governance will help avoid getting to this point.

The governance of HR technology and service outsourcing relationships involves creating a mutually defined set of goals that, when achieved, offers a big win-win. However, don't confuse governance with management:

  • Governance concerns how decisions are made, who makes them and who is accountable for the outcomes. Consider these decisions in advance of entering into a long-term alliance and refine as needed over time.
  • Management delivers to meet the expectations outlined by the governance process. Management addresses the ongoing activity associated with sourcing, which doesn't kick in until after the employer selects a provider.

Both governance and management combine to deliver successful outcomes. Investing in good governance on the front end will make day-to-day management much easier and pay you back in time and productivity.

If you feel frustrated with your current service provider relationship, contact your Gallagher benefit advisor. Ask how a Gallagher HR technology specialist can help you enhance organizational wellbeing through improved business relationships with your HR technology service providers.

Author Information


Consulting and insurance brokerage services to be provided by Gallagher Benefit Services, Inc. and/or its affiliate Gallagher Benefit Services (Canada) Group Inc. Gallagher Benefit Services, Inc. is a licensed insurance agency that does business in California as "Gallagher Benefit Services of California Insurance Services" and in Massachusetts as "Gallagher Benefit Insurance Services." Neither Arthur J. Gallagher & Co., nor its affiliates provide accounting, legal or tax advice.