What is an RFP?
If your company is moving to a global payroll, looking to upgrade the global payroll model it already has, or just wants to replace its manual process with an automated platform, you are in the market for new payroll software that meets your unique needs.
One good way to procure the right technology is through a Request for Proposals (RFP).
An RFP is a formal invitation to vendors for proposals based on your specific criteria. A good RFP contains a clear description of the problem you are trying to solve, your objectives for the project, and as much specific detail about the technology as possible. It also sets out a clear application process and evaluation criteria, reasonable deadlines, and a set of specific questions to help identify the vendor who offers the best match for your needs.
An RFP could stand on its own if it provides a company enough information to make a procurement decision. More often, however, it serves as a “first round” of proposals for a company to review and then follow with a shortlist of vendors who will be invited to make more in-depth presentations.
Done properly, an RFP is a clear and concise document that pushes vendors to make their strongest case for winning the contract. It provides the issuing company with the largest amount of relevant information to make an important decision.
However, a poorly executed RFP – one that does not clarify the problem or provide sufficient details – could become a drain on your company’s time, both in producing the initial document and in evaluating proposals that are unlikely to work. Also, If the criteria are viewed as biased towards certain vendors over others, it could hurt long-terms relations with vendors who might be necessary in the future.
Creating an effective RFP requires strategic thinking, clarity of goals, and effective cooperation between people and departments. For the right needs, it provides an unparalleled number of solutions.
General Goals of an RFP
A company will launch an RFP for only one reason – to find the best solution to a need as quickly as possible.
A global payroll RFP is designed to launch a bidding process among qualified vendors to implement or upgrade a company’s payroll system.
The call for proposals encourages vendors to compete. They need to demonstrate that their technology, vision, and approach are a match for your company’s strategic goals and spending priorities. It brings out the vendor’s best offers and challenges them to demonstrate their unique value proposition.
Therefore, the goal of the RFP is to get the strongest set of proposals that will provide all the information you need to make an informed decision on procurement. In many cases, vendors will propose new solutions, expanding your company’s knowledge about the current state of payroll management.
Making it as competitive as possible is essential to drawing out the best offers at the lowest price. The RFP can go to every company working in the payroll space, or it can go to select vendors. It is an opportunity to reach out to vendors when no relationship exists, as long as each applicant has a fair chance to win the contract.
When the RFP goes out, it also serves a number of other advantages:
- It forces the procuring company to examine its needs deeply and carefully, with input from stakeholders in different divisions of the company, and results in better coordination and buy-in across the company.
- It provides a standard for evaluating solutions. Other procurement methods, such as contacting vendors individually and asking for a demonstration of their product, introduce subjective elements, (such as presentation quality) that make them difficult to compare. An RFP puts all bidders on the same level, answering the same questions, making it easier to compare features and price directly.
- It saves time in the long run. While it takes significant time and effort to formulate the initial RFP and more time to evaluate the proposals when they arrive, it is a more efficient process than trying to evaluate different solutions by looking at their sales materials. And it greatly reduces the chances that you’ll pick the wrong solution that will need to be replaced, which is the biggest drain of time possible.
The RFP is the most effective way to acquire all of the information necessary to decide which vendor to contract to provide its payroll solution. Remember, the goal is to solve a business problem, not just find a list of features that fits the criteria.
The RFP is part of a strategic approach to future planning. Every part of the RFP, therefore, should be focused on describing the company’s current and anticipated payroll pain points, its goals, and what it needs to know from the vendor to make a decision.
In the modern age, as technology is moving the world of work towards greater automation and increased globalization, common payroll pain points include:
- Manual system that’s too slow and error-prone for a complex global payroll
- Separate streams of information for each country making it impossible to calculate workforce spending
- Compliance in multiple countries hard to verify
- System does not integrate with existing workforce management tools
- Ineffective or no BI reports
- No employee self-service
- Payroll and payments go through different providers
- No human support for questions or guidance
The RFP lays out the company’s desired approach to global payroll and seeks solutions that are aligned with that approach. It allows the company to see if it’s moving in the same direction as the vendor.
The RFP also provides insight into how the vendor will handle the challenges inherent in the current state of work – where readiness for change is essential. Vendors that offer more agility may be more suited to navigate the challenges. At the same time, those same companies may sacrifice the ability to scale in favor of flexibility.
That’s why a company needs to be focused on its long-term goals in order to evaluate which option will help it grow in the right way.
Determining the Goal of the RFP
The art and craft of the RFP is to communicate the company’s needs so that the applicants can address them precisely. The questions should provide enough room for the vendors to show what is unique about their approach but in a way that makes it easy to compare the answers clearly.
The process actually starts before any questions are drafted. An earlier stage can be described as the “discovery” stage – the time when all of the people involved in implementing a global payroll meet to formulate the company’s goals for the desired payroll acquisition.
This may be the most important part of the RFP process because without clear alignment among all of the relevant people – payroll managers, IT leaders, finance heads, HR administrators, operations planners, and all those who supervise the global workforce – it will be difficult, if not impossible, to provide a detailed vision of what the right solution will be.
It’s important for all of the stakeholders to agree on what requirements are absolutely necessary. Those will play a prominent role in the RFP. Then form a clear vision of success. Finally, work out the details of the technology.
This is also the time to consider using other tools associated with the drafting of an RFP. In many cases, companies issue a Request for Information (RFI) before completing the RFP. The Request for Information is an industry-wide call for information the company needs in order to formulate the RFP. For example, a company may want to know the advantages and disadvantages of cloud-based payroll solutions or inquire into more technical aspects on the back end of the software. The information gained from the RFI would go directly towards formulating a more precise RFP.
If the company knows the parameters it needs but isn’t sure how much the technology solution is going to cost, it may issue a Request for Quotes (RFQ) – a call for vendors to give their best price quotes according to the indicated criteria. The quotes provide valuable information for budgeting and planning.
Types of Sections and Questions
Every RFP is different, crafted especially for a specific purpose and therefore will have sections that help you drill down to the core of the solution offered.
However, as a starting point, the RFP should follow a structure so that applicants are clear on the process and provide all of the necessary information.
Here are some of the essential elements of an effective RFP:
- Company background – the first section of the RFP introduces the company that is looking for the solution, its basic history, and the scope of its activities.
- Goals of the proposal – what the company is seeking and how it plans to deploy the solution. This section should also include a detailed accounting of the work the winning submission would be required to perform if it is selected for the payroll contract.
- The requirements of the proposal – this would include the vendor’s background and experience, proposed budget, how the implementation will be handled, as well as supplementary materials such as financial records to demonstrate stability for the length of the contract, etc…
- Evaluation criteria – how the company will determine which proposals will qualify the vendors to enter the second round.
- Anticipated challenges and their solutions – identify what difficulties might be encountered in the course of implementation and how the solution will overcome them. This helps demonstrate
- Timeline for the project – Typically, the important dates are when the RFP is issued, the deadline for submissions, the date when companies will be chosen for more detailed presentations, and the date of final decision.
The categories lay out the general structure and cover all of the important parts, letting the applicants know what is expected of them, when they will get a response, and the context of the proposal. The requirements section – listed here as #3 – will include the bulk of the questions. There are several main categories of questions:
Company Questions – These are designed to allow the vendors to show that they are stable and sustainable. A company looking for a payroll solution will want to know that the vendor providing it will be there for the long run. It could include listing other clients.
Product Questions – These questions are designed to gain insight into how strong the payroll software is, how much flexibility it offers, how well it scales, and how compatible it is with your existing software.
Service Questions – These types of questions tend to focus on the big picture of what the solution offers, not just the quality of the software itself. Will it serve as an effective workforce management tool? Will it allow for all types of employees or only some? These questions get to the core of what is being offered in the widest possible measure.
Questions are the lifeblood of the RFP. They direct the flow of ideas to the points that are most important. That’s why it is essential to craft the questions so that they give you the most useful information. Make sure the questions drill down to the pain points directly.
That means posing questions with the answers already in mind. Then you know how to evaluate the quality of the answers, both on their own and in comparison to other applicants.
Use specific questions to collect basic information. These are the easiest to compare and often help identify the most qualified vendors.
For example, lets say you are looking for a global payroll solution that fits your plan for a wide overseas expansion in the next 2-3 years, but you are still researching which countries will be included in that expansion. You probably want a payroll service that includes an Employer of Record (EoR) option in a large number of countries, perhaps as many as 100 countries. You might include these related questions:
Do you offer an EoR option? How many countries are included?
You know that the answer you are looking for to the first question is YES, and the answer to the second one is 100+. Those who do not provide those answers may not be invited to the next round.
Detailed questions are specific questions but with an added level of complexity. While basic questions are useful for determining which companies are the basic threshold you need, more detailed questions provide insight into their level of expertise above the threshold.
A detailed question should not be answered with a yes or no, or with a single word or phrase. It should map out a set of steps that would illustrate the vendor’s knowledge and ability:
We use Expensify for expense tracking. Describe step-by-step how you would integrate it into your payroll solution?
When all of the steps are delineated explicitly, you will be able to see how well it fits with the workforce management tools you are already using.
There are different types of open-ended questions. For software acquisition, the most useful type is the use-case question. Use this type of question as often as possible to give vendors an opportunity to illustrate how their solution would be implemented and what their unique approach to the question. This is helpful when doing a direct comparison.
An example of a use-case question:
With employment laws constantly changing across the globe, how does your software ensure ongoing compliance?
Comparing different responses to a question of this nature provides insight into the system’s reliability and its sustainability over the coming years. Remember, you are buying expertise as well as a software solution. Give the vendor enough room to demonstrate their knowledge of the field and the extend it their experience.
Evaluating the RFP
Once the RFP is drafted and checked by all the relevant stake holders, it’s time to send it to all of the relevant suppliers working in the field. At that point, you have to be prepared to face the next challenge in the process – determining which proposals have earned their companies the right to enter the presentation stage of the process.
It’s a challenge because every vendor is going to make a compelling case for their own product and approach. It’s important to have an evaluation strategy in place. In fact, a good RFP has two evaluation strategies built into it.
The first is the official standard that you communicate clearly to the applicants. They need to know what elements are most important to you, how you will use them. They need to know the evaluation criteria so that they can tailor their proposal to your specific needs.
That standard is the acceptance standard. It lets the vendors know what you expect from them and the bar they need to cross to be considered in every category. It is essential to provide this information as accurately as possible in order to get the best proposals for your needs.
The second, private evaluation criteria is the elimination standard. This is the where you have personal preferences above the acceptance standard that will give one or two particular approaches an advantage. This is different from giving companies an advantage – something you always want to avoid in order to maintain a fair playing field.
Elimination questions could be about specific countries that you are leaning towards and the set up they have at those specific places. The process might be good, but if choosing a vendor means eliminating an option you are considering, that may hurt an application. You might not have a clear preference over whether the solution is a cloud-based SaaS platform or downloadable software, but one side may be more convincing in the proposal stage. That could tilt you towards one of them and eliminate the proposals from the other side.
The bottom line in the RFP process is to stay focused on the goal – to get the global payroll software that helps your company achieve its strategic goals. That means sharpening your vision, focusing on what you need, and describing it as clearly as possible. After that, it’s a matter of seeing which proposals match what you need better than all the rest.