Why a good RPO procurement negotiation isn’t always a win-win

Why a good RPO procurement negotiation isn’t always a win-win

There are horror stories out there when it comes to RPO procurement. Poor implementation where hundreds of contractors are out of contract on day one. Massive deals ripped up after the first year. These are often a result of a poor understanding of the negotiation process, overly aggressive negotiations and agreements, and service delivery issues usually caused by a lack of clarity on scope and obligations by both parties.

In conversation with Mike Lander, Procurement professional and CEO of Piscari, and Olly Harris, the Global Managing Director of Page Resourcing, we discuss how to avoid the pitfalls and end up with a commercially balanced and sensible outcome. One in which both parties get what they need during a recruitment process outsourcing negotiation.

There are many obstacles to negotiating a balanced RPO agreement, one of which is payment terms. In the safe space of this chat, Mike Lander presents a standard payment term of 90 days on month-end. Harris has issues. "As an RPO, we've had a lot of success pushing back on long payment terms." He presents the following solution, "If the 90 days are non-negotiable, here is your price. If you can do 30 days, here is your price; if you can do 60 days, here is your price. We normally win that battle." Why does Harris know this usually goes his way? Clients see the cost savings, and Harris will point-blank explain to them, "we're not your bank here; we're not funding your business growth via our balance sheet." 

The conversation now leads to a broader discussion. "I always start my preparation away from the negotiating table with a list of my key negotiation variables," says Lander," very rarely does Procurement or an RPO say take it or leave it straight out of the gate. The negotiation process is about understanding the interests of both parties. It’s not about stating your demands and being belligerent." Harris agrees, "the best solution is, you meet in the middle, which is where Mike and I are ending up now because usually, we have bright, smart people who find a workable solution."

Lander stresses that these negations should not be sequential; instead, you should work through them like an audio engineer mixing a track. "When I turn one dial-up, you turn another dial down." A sequential negotiation can be very adversarial, locking people into positions and forcing people away from the table. 

In the end, it's rarely all handshakes and celebrations; these conversations are tough yet essential. "There are very few win-win deals. If I can make the pie bigger for Olly, give him more access to the MSP and the RPO and other areas across regions, and get a better unit cost, you'd argue it is a win-win. But if we are haggling over one market, RPO only, and 500 hires, then it's very hard to create more value in the deal for both parties; it’s more about claiming value from a fixed pie," argues Lander. 

Harris knows he doesn't always come out on top in these negotiations, but he respects the agreement. "You know, no one is forcing us to sign," he tells Lander, “But yet we'll still sign deals, and then we walk away going 'how did they get us to that?' But we've done it for these reasons, and it's on our shoulders whether we sign." The frustration sets in when it all changes. "We go live, and guess what, it looks very different from the negotiations we had with procurement," says Harris. 

Lander advises bringing in Procurement from the beginning of the outsourcing process. Have Procurement help shape the RFP and scope and involve them in the sales process, not just the back-end negotiations. "If we’re engaged early, you're far more likely to get an integrated negotiation, which is deliverable against the business needs and exceeds internal stakeholders’ expectations. When it's thrown over the wall at me at the last minute, it's usually a disaster." 

Harris concludes with his main advice: "The best relationship is when you have good open, collaborative communication, where procurement is involved early in the process, and both sides have been clear about their sensitive areas." 
 

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