Are you a CFO with a massive procurement department that tells you which vendors you are going to use, eliminating both the burden and the privilege of choosing your own trusted advisors? If so, this article isn’t for you.
This article is for those CFOs who want to choose their own trusted advisors. After all, procurement won’t be responsible for having taken the advisor’s advice if things go wrong, it’s you.
In this article, I’ll explain how to make the RFP process more efficient so you can get back to the business of your business as quickly as possible.
Simplify Your RFP
A typical RFP for service professionals often asks many questions that have little to do with whether you are going to be working with a creative, seasoned pro or the low-cost leader uninterested in going that extra mile for you.
The result? You wind up with 100s of RFP pages without being any closer to discerning who the right trusted advisor is for you.
Here are some steps to try instead.
Make A Short List
Using an insurance brokerage service provider as an example, a short list means your incumbent insurance brokerage plus one to two others. (This can be applied to any service provider in an RFP process.)
Limit yourself to the names that keep coming up when you get input from other CFOs you respect.
It’s also a good idea to also get input from your general counsel and your outside law firm.
Ask your network if their service providers are good at certain elements that are important to you.
For insurance, you might think about the type of service you want from your broker, including:
· Specialized expertise and experience
· Partners who can present to your board of directors
· Value-added services like continuing education and market updates.
Metrics Don’t Necessarily Equal Value
Procurement classically attempts to reduce all elements of any proposal exercise to a spreadsheet. Some CFOs may find themselves doing the same.
But you aren’t hiring widget manufacturers. You are hiring experts who will bring their experience to bear on your behalf when the rubber hits the road.
So, Consider More Than Cost
Everyone wants more for less. That’s a given.
For example, you can work with a half-priced insurance broker who will get you half-priced insurance. But if your insurance doesn’t pay when you have a claim and your broker can’t be an effective advocate on your behalf, those cost savings haven’t helped.
Instead, ask questions about the trade-offs that come with lower costs. Why is one service provider charging so much less than others?
Ditch The Documents, Go Straight To The Presentations
This may seem like a radical approach, but it can be much more effective in identifying the right brokerage for the job.
After creating your short list of brokerages, skip the lengthy stage of the written RFP. Instead, go straight to the interview process and invite your candidates to come in and give a presentation on their capabilities.
Putting the request this way means that you will see what each vendor thinks is essential for you to know about their firm and their approach to their services.
The best service providers will use their presentation time to tell you about themselves and to ask you questions about your company and goals. This is also how you determine chemistry, something that is important in any advisory relationship.
Ask The Right Questions
Instead of asking candidates 50 generic questions, limit yourself to five key questions—and ask everyone the same five questions.
1. What Can You Tell Me About Your Company Culture? Answers to this query help you understand team dynamics, cohesion, and how well team members cooperate, especially under stress. The goal is to discern whether the firm aligns with your company’s values and working style.
2. What Risks Do We Face? You know your risks, but how well does the service provider you are interviewing know your risks? Service providers have to understand your threat landscape properly if they are to advise you well.
3. What Does The Process of Working With You Look Like? If you are doing something with a transactional element, what is the recommended timeline? Is recommending a course of action a question of experience or are there analytics that will be brought to bear?
4. What Else Can You Do for Me? You are running an RFP because you have a specific need. Most service firms, however, can do more than one thing. In an insurance brokerage RFP, you might find out about any additional services, such as claims advocacy and access to specialized resources, and whether these are included in the service fee or charged separately.
5. What Will This All Cost? This final question is about cost, but it is really about transparency. What is included and what is not included in your service provider’s proposal? Are there alternative fee structures (hourly, flat fee, commission, capped commission) that might better align you with your service provider?
In the end, these questions are designed to help you get to know the vendor, the vendor’s approach to providing you with advice, what it might be like to work with them, and the price you’ll pay.
This modern approach to running the RFP process will help you quickly make an informed decision for a services RFP.