The process of decision-making tends to be difficult for people in any facet of our lives, be it which ice cream to choose, what type of car to buy, or even what to make for dinner. And when it comes to a professional context, it can be even more tricky, specifically when one is tasked with making decisions on behalf of an enterprise.
In order to remedy this, we have come up with complex decision support processes: The request for proposal, or RFP. Depending upon your organizational structure, the RFP can be incredibly complex. Most RFPs are preceded by a request-for-information process, where the criteria are identified and suppliers are pre-screened for inclusion in the eventual RFP process.
After conducting an RFP, most companies evaluate supplier responses by committee. It’s not uncommon for these documents to be quite long — sometimes more than 500 pages. Responding to RFPs is a big commitment for suppliers, as putting together responses can cost them as much as $50,000 to $100,000.
For as long as I can remember, companies have been using the RFP process to drive their supplier management strategy. On its face, that seems to make sense. The problem, though, is most RFPs are inherently and inextricably flawed and most often yield a less-than-optimal outcome. Put simply, most RFPs are awful. There are many reasons why I’m not a fan of the traditional RFP process, but here I will identify two key issues.
Poor RFP design. The first issue starts with the RFP document itself. Many category managers approach creating an RFP by asking for copies from colleagues and advisory organizations like SIA (Full disclosure: through our CWS Council, we do a tremendous amount of RFP support for existing members). While there’s nothing inherently wrong with taking the best ideas from many sources as possible, where many go wrong is pulling what you consider good questions without understanding how each individual question may further your decision. And this is an almost existential challenge for most buyers. It’s dangerous to build your RFP with an eye toward quantity over quality. While having a stack of binders on your desk may go a long way in impressing your manager, it often does very little in helping you make a better decision.
Let’s be honest. The first page RFP reviewers tend to go straight to is the pricing on the back page, bypassing all the charts, long words and graphics that your providers so diligently put into your requested format. While I have nothing against long RFPs when the situation requires, the documents should be no longer than absolutely necessary and every single question should further your decision in some way. Each question should apply to the decision criteria. I cannot even begin to say how many times I’ve heard a category manager say: “I like that question I’ll add it to my document,” without knowing how it affects the decision.
Executive sponsorship. The other area where most of these projects fail is in the area of executive sponsorship. One of the greatest complaints I hear from suppliers is about the length of time it takes for an RFP process to arrive at a decision and once decided, to go live. It’s not uncommon for some RFP processes to take more than a year — or even two — to reach conclusion. Notice I said conclusion as opposed to awarded, because often all the investment in time and effort goes for nothing. This is because most people confuse executive signoff with executive support. The former is your senior leadership simply agreeing in concept to the project goals and then giving the green light to go forward. The latter is when your senior leadership has bought in to the goals of the project fully, maybe even participating in the decision process. Lacking executive support can significantly slow the implementation process.
Executive sponsorship means your senior IT executives are prepared to make the “Difficult Call” — when one of your business stakeholders says they need an exception resources who are “critical,” and they simply refuse to participate in your program. But in reality, exceptions should seldom, if ever, occur. If your executive sponsor folds under this pressure and is willing to consider an exception right off the bat, then you might as well start packing your bags and heading for the exit, because the program’s goals are already dead. True executive sponsorship means they understand the importance of program integrity and while the sponsors may still allow exceptions from time to time, they are exceedingly difficult to get.
Other options. Many forward-looking companies are questioning the traditional RFP process and are considering more streamlined approaches, like rapid RFPs, which are truncated proposal processes or scenario-based RFPs that get the question in a format in favor of presenting a business problem to suppliers and asking them to come up with solutions. Other companies are leveraging technology in artificial intelligence to recognize the decision process and support decision-making based on hard-core facts as opposed to appearance and intuition.
The unfortunate truth is RFPs are not going away anytime soon. And while they are a blunt and, most often, imprecise instrument, for most companies they often still represent the best way forward to changing business cultures and processes.