“Benefits RFPs are universally awful and HR should abandon them…… RFPs are suited for buying a commodity, but not selecting a consultant……”
By Nelson Griswold
8 August 2015
“How do we win the RFPs for brokerage services or benefits consulting?” was one benefit adviser’s question to the other agency owners at a discussion during our most recent Agency Growth Mastermind Summit for our top agency clients. It was, however, the wrong question. A much better question: “Why reply at all to benefits RFPs?”
Have you ever seen a good RFP for benefits? One that would ensure that the employer selects the right benefit adviser for this increasingly complicated Affordable Care Act era? One that would allow a progressive, consultative benefit advisory firm to differentiate itself from all the transactional brokers? From every single adviser I’ve asked, the answer is, “No.”
Benefits RFPs are universally awful and HR should abandon them. Even well-written RFPs are a 20th century tool unsuited to the challenge of identifying the right 21st century benefits firm. RFPs are suited for buying a commodity, but not selecting a consultant. You need to educate your clients and prospects on why RFPs are a relic of the past and a very poor tool for choosing their benefit adviser. There are two key reasons you should have a problem with the use of an RFP.
Expertise and control
Who knows more — you or the client — about employee benefits, plan design, alternative financing arrangements, compliance, cost-mitigation strategies, benefits technology, population health management, benefits communication, etc.? Obviously, as the benefits professional you have the expertise; that’s why the client needs you. Then why does HR continue to use these ineffective RFPs, likely scraped from the Internet, written by someone in HR who knows little about benefits, and likely created when employee benefits were a commodity? In today’s world, it’s a classic case of the blind leading the blind.
The answer to this problem, however, is not for you to write the RFP. An RFP itself is too blunt an instrument, given the increasingly sophisticated toolset and strategic capabilities of today’s best benefits firms. How can an RFP possibly be effective when choosing a benefit adviser is no longer about the agency’s process and people but about strategy and solutions? Using an RFP for the critical task of selecting a benefit adviser is like using a meat cleaver in the operating room. Both constitute gross malpractice.
Whoever is asking the questions is in control of the conversation. This is as true in the selection process for a benefit adviser as it is in the sales process. Play the RFP game and you give up control; the client has all the control. In the new post-reform environment, this is a particularly bad idea, because, without the requisite expertise (see above), your client isn’t equipped to control the conversation. Not if the client wants to identify and select the best choice of a benefit adviser.
How can I be so sure that the RFP is such an ineffectual tool? If it worked so well, why do so many companies issue an RFP annually? Clearly, the RFP fails repeatedly to identify the right adviser, so it’s back to the drawing board every year.
At our recent Mastermind Summit, our agency clients requested that we create a whitepaper to educate their employer clients and prospects on why the RFP is outdated and to prescribe a truly effective process for HR to select the right benefits adviser. I urge you to do the same and just say “no” to RFPs.
Griswold is an agency growth consultant and author of DO or DIE: Reinventing Your Benefits Agency for Post-Reform Success. His Agency Growth Mastermind Network helps agency leaders reform-proof their firm. Reach him at (615) 656-5974, nelson@InsuranceBottomLine.com, or through 21stCenturyAgency.com.
Couldn’t agree more Nelson. Great piece. Well put and wise advisers will say “no” to RFPs the way that I adopted years ago. They’re, in a nutshell, an awful and unproductive waste of time. I’d just assume have my agency start making cold-calls again then to fight over a “juicy” sounding account that will lead you on forever with their never-ending RFPs.
Posted by Eric S | Thursday, August 20 2015 at 3:27PM ET
While I certainly appreciate the gist of the argument you will never get any consulting business with a government agency (university in my case) without responding to our carefully crafted RFP. It’s a mandated requirement for business at our entity.
Posted by Jerry Z | Friday, August 21 2015 at 11:18AM ET
I, too, empathize, but disagree, with the author. It’s not just governmental entities, but many nonprofits and other tax exempt organizations that require RFPs. The staffs of these organizations need objective support for many business decisions to justify those decisions to their governing bodies. We’ve found that, yes, the first RFP is a royal pain to complete, but that they become less and less onerous with each subsequent effort. Unwillingness of others to participate in RFP processes, is great news for us!
Posted by James W | Friday, August 21 2015 at 11:35AM ET
I haven’t seen the word “ERISA” anywhere. Unless I’m mistaken, you have been referring to Welfare Benefit Plans which are ERISA plans and subject to oversight by the Internal Revenue Service and the Department of Labor. As such, the Plan Sponsor or Plan Administrator as the case may be has a fiduciary responsibility for the selection and monitoring of service providers. No different than for retirement plans which mandates that a prudent process be used. That’s what RFPs are used for – not for the benefit of the service provider. In a recent meeting with the Department of Labor with an ERISA group in which I am a member, the DOL told us that approximately 50% of their investigations now involve Welfare Benefit Plans. One of the first questions they ask of the plan sponsor is how service providers are selected and monitored. Compliance aspects aside, an RFP is an opportunity to decommoditize yourself by having the opportunity to tell your story.
Posted by Jerry K | Friday, August 21 2015 at 12:23PM ET