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From RFP to ROI: Managing Strategic Partners

Rick Storms, CEBS Field ManagementMedicaMinneapolis, Minnesota

5C-1

Agenda

Determining When and How to Utilize Strategic Partners Managing External Vendors, Internal Stakeholders

and Your Day Job A Sample RFP Process and Vendor Management

Approach Trite Truths Contracting Process Questions

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Determining When and How to Utilize Strategic Partners

Evaluating potential partners Implementation

Analyzing complex opportunities and challenges

5C-3

Determining When and How to Utilize Strategic Partners

What HR Processes are Outsourced:

Function Frequency

Payroll 95%

Benefits 73

Recruiting and selection 32

Compensation 27

Training and development 20

Performance management 15Source: HRO Annual report 2011: The Revival of Multi-process HRO Market. Everest Group

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Business Relationship Cycle

Internal Preparation and Assessment

Financial Analysis

Strategic Partner(s) Analysis

Implementation and Contracting

On-going Management

Monitor and Review

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Potential Opportunity Assessment

Why is your organization considering this project and why are they considering it in-house/outsourced?

1. The boss’ boss says to do it.2. It’s the only realistic way to do it.3. It fits our company’s mission and financial goals.4. The ROI works best this way.

5C-6

Potential Opportunity AssessmentOne Approach

Rating of Importance

Weighting Success Criteria High (H) Medium (M) Low (L) No Correlation

1 10 New initiative aligns with Corporate Mission.

High correlation to mission

Medium correlation to mission

Low correlation to mission

No correlation to mission

2 8 New initiative enhances an existing successful program.

Enhances 5 or more programs

Enhances 2 to 4 existing programs

Enhances 1 program

Does not enhance an existing program

3 6 New initiative generates net revenue ( This is calculated by gross revenue generation minus operating and startup expense = net revenue)

500+k /year 250+k /year 100k / mo N/A

4 4 New initiative is a feasible program. (Feasibility in this case refers to program logistics and infrastructure required for program startup.)

High probability of success (Previously demonstrated skill set - low risk)

Medium probability of success (may be close to another similarly performed skill - med risk)

Low probability of success (have not demonstrated this skill previously - high risk)

N/A

5 4 New initiative creates new innovative program.

New, Unique, Innovative -value add programs

Medium Low Uniqueness, Innovation, value add programs

Not innovative

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Potential Opportunity Assessment

Return on Investment Consideration in Words

1. Will we get our money back? If so, how soon?2. What’s the impact on Income and Expenses?3. Are there Non-Financial considerations?

Return on Investment Consideration in Numbers

See Appendix

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Potential Opportunity Assessment

Return On Investment

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Potential Opportunity Assessment

Return On Investment:

With some CFOs, simple is OK:

Value = Benefits – Cost

Point is to have a documented and thoughtful process

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Managing External Vendors, Internal Stakeholders and Your Day Job

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Managing External Vendors, Internal Stakeholders and Your Day Job

Systematically reach out to Internal business partners including Procurement,

Finance, Legal, Compliance, IT and other potential areas such as payroll, internal communications, marketing, etc. External business partners including consultants,

brokers, incumbent vendors (if applicable), potential vendors, etc. Self-service system oriented solutions Other networking resources (CEBS!)

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Managing External Vendors, Internal Stakeholders and Your Day Job

Calendar the evaluation, selection, implementation, contracting and other execution steps Define Role(s) of each potential Strategic Partner Establish selection criteria

- Initial Cut- Finalists

White Board the process, criteria and vendor questions Write RFP

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Trite Truths

Begin with the End in Mind- Ultimate Customer(s)- How will it look to you and each strategic partner- Know your exit strategy

Honesty is the Best Policy- Service Expectations/Guarantees?- Will it regularly go out to bid?- Could you eventually take the service in-house?

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Sample RFP Process

Identify—Goals/Criteria/Providers Develop RFP goals and determine most important

criteria in the selection process Develop the RFP document and pool of prospective

providers based on the goals and criteria If necessary, perform a Request for Information (RFI)

to determine provider networks that meet the criteria and the network savings projections

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Sample RFP Process

Identify Unique Circumstances

Are you a hospital or other medical provider? Are you a financial services firm? Are you a large employer in a relatively small city? Are you a public employer? Do you have certain bid

requirements? Any particular show stoppers or deal makers? Consider special opportunities or concessions.

Under what conditions will these make sense?

5C-16

Sample RFP Process

Document—Questions/Answers/Decisions

RFP distribution to prospective vendors/partners Manage questions (and answers) the bidders may

have regarding the proposal (all documented through email or written correspondence) Receive and consolidate RFP responses

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Sample RFP Process

Analyze—Responses/Finalists/Value-added Analyze all costs associated with proposals, including all

administrative fees, discounts, premiums, investment fees, printing charges, communications fees, etc. Perform objective calculation of the proposals based on the

requirements as outlined in the RFP Meet to discuss the proposals and narrow field of providers for

finalist presentations Distribute finalist questionnaire at this stage (?) See Appendix Notify finalists (and eliminated providers?) of status in writing Host finalist presentations (usually 2-3 providers) Perform site visit (if necessary)

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Sample RFP Process

Review & Negotiate—Goals/Criteria/Providers Fees/ Services/Concessions

Perform Provider Selection criteria and relative ranking of providers Committee ranks criteria in order of importance Rank providers relative to one another with respect

to each criteria Distribute finalist questionnaire and summary Negotiate fee concessions, contractual terms and

service enhancements from finalists

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Sample RFP Process

Contractual Terms—Identify and Resolve All Terms

Legal roles, subcontractors and obligations Clarify who owns what information If you do not know the meaning of a term; ask Understand the fine print Contingency language for new regulations, mergers

and acquisitions, etc. Provisions for termination of the contract

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Sample RFP Process

Take Action Make recommendation based on established criteria

and ability to meet the identified goals and objectives as outlined in the RFP Committee selects provider Performance and service guarantees finalized with

selected provider Finalize and sign-off on all contractual terms Identify Implementation Team Implement new program

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Trite Truths

Build to Win-Win

Trust the Process

Don’t Name Your Cows

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Implementation and Contract Management

Calendar all implementation details, communication processes and other logistics contracting and other execution steps Define Role(s) of each potential Strategic Partner Establish Implementation Team communication

expectations Establish success criteria Establish Contingency Plan(s) Sign-off on agreements (before effective date)

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On-going Management

Define expectations for on-going communications Define Role(s) of each potential Strategic Partner Establish success criteria (scorecard) Define renewal expectations Establish boundaries for escalated issues

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Monitor and review

Measure objective standards against established scorecard Evaluate subjective standards/expectations Seek input from appropriate internal stakeholders Share results with internal stakeholders On-going review of other market options and

approaches Re-bid as previously established or as appropriate

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Business Relationship Cycle

Internal Preparation and Assessment

Financial Analysis

Strategic Partner(s) Analysis

Implementation and Contracting

On-going Management

Monitor and Review

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From RFP to ROI: Managing Strategic Partners

Benefits of Managing Strategic Partners Reduced time and expenses Prudent justification of in-house vs. outsource

options Objective evaluation of all potential strategic

partners Documentation that you and your committee have

followed a prudent selection process Ability to choose partner that best fits the goals,

needs and culture of your organization

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Managing External Vendors, Internal Stakeholders and Your Day Job

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Questions?

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