PRP President, Don Steiner talks Expense Reduction Solutions and Consulting for Large Corporations
Interview conducted by:
Lynn Fosse, Senior Editor, CEOCFO Magazine, Published – July 18, 2016
CEOCFO: Mr. Steiner, the tagline on the Profit Recovery Partners site is “Innovative Expensive Reduction Solutions.” How so?
Mr. Steiner: Profit Recovery Partners is the largest professional services firm in the country that develops, implements, and verifies general and administrative expense reduction solutions. There are three factors that make PRP unique:
1) We have hired industry experts that know the cost of goods, the vendors’ pricing structure, and their distribution models. They have come from the “vendor side” and know how the sales reps are compensated and industry-specific “tricks of the trade.”
2) PRP currently manages over $2.7B of G&A spend on behalf of its clients. This creates enormous leverage for PRP with our clients’ vendors, and provides a solid basis for efficient negotiations that result in more savings, faster. This volume effectively makes our clients appear much larger to their vendors.
3) We provide full G&A savings verification by carefully examining line item invoice details for any deviations from contract terms and services. We deliver actionable metrics and a variety of customized tools including electronic dashboards that allow clients to manage their business more effectively.
CEOCFO: How does it work? When might a company turn to you? How will you help them?
Mr. Steiner: Most of our client companies bring in between five hundred million to twenty billion dollars in annual revenue. These are large, complex corporations that may have administrative or dedicated procurement staff, but they often lack the particular expertise, product knowledge, or purchasing prowess to achieve “best in class” pricing. Because administrative staff is often in charge of hundreds of expense areas with very little industry training and almost no time to verify pricing, the vendors, who only focus on one product or service, have all the advantages in the negotiations.
Companies hire us whenever they want to save money to help fund growth, save jobs, improve their competitive advantage, and increase profitability.
During our engagement PRP increases our clients’ industry knowledge, multiplies their purchasing power, validates that savings have been achieved, and proactively identifies new savings opportunities.
CEOCFO: What are some of the common services you can help with and maybe some things people do not normally think would either be negotiable or be of sufficient cost to review?
Mr. Steiner: PRP can work in more than fifty expense areas. Some of the major ones would be telecom, office equipment, office supplies, merchant services, temporary labor, and printing. One area that is normally not considered negotiable is research & information and subscription services. Most companies accept that this is just a “cost of doing business” and they believed it when they were told that the rates and services are non-negotiable.
CEOCFO: Would you walk us through a typical engagement?
Mr. Steiner: Our engagement starts with a Comprehensive Review. This is a no-fee assessment that quantifies the savings opportunities (same vendor-same service, consolidation, or even business process optimization). We also identify potentially costly contract language issues, evaluate their current invoice verification process, and quantify the amount of time and staffing necessary to achieve the savings. We construct the Comprehensive Review by reviewing a prospective client’s vendor spend and collecting and analyzing representative invoices, usage reports, and their current contracts.
After presenting the Comprehensive Review and discussing all the savings alternatives, the client makes a decision if they want hire PRP. Once the engagement starts, PRP collects a full twelve months of invoices, comprehensive usage data, and all relevant contracts the client has on hand for the scope of the project. PRP will meet with stakeholders for each expense area to better understand the client’s culture, the status of their expense management efforts, and their perceptions of vendor service levels.
Depending on the expense category, PRP will spend the next 30-90 days performing extensive data processing and proprietary analytics to precisely quantify potential savings opportunities. Then PRP meets with the client to discuss the strategy to achieve savings, quantify the expected results of each approach, and jointly agree the action items and timelines to achieve the savings and improved service levels.
PRP then negotiates new agreements with existing and potential new vendors to nail down the savings opportunities, improve SLAs, and develop “best in class” contract terms. PRP presents the savings opportunities, and after the client selects the best option for them, PRP provides extensive support with the implementation of the new savings program.
Once each savings program has been implemented, PRP provides a detailed, line-by-line, invoice-by-invoice verification of the implemented savings. During PRP’s ongoing verification process, PRP will continue to work to identify additional savings at no charge to client. We have been able increase client savings by employing our electronic dashboards to help identify and corral our clients’ employees’ maverick spend to maximize their savings.
CEOCFO: Do companies that are vastly overpaying in one or two services tend to be doing that across the board? Are there patterns that you know, without even looking, that tend to be typical thus helping you in your review?
Mr. Steiner: That is an interesting question. We find that most companies are good in certain areas and not very good in others. However, there is a common situation where we frequently see the highest savings: it’s the clients that are certain that there will be no savings opportunity. The ones that suspect that they are being overcharged and who believe that there is always room for improvement are the ones with the lower percentage savings. I think the psychology of always looking to improve is very important. The companies that are the most open to looking at their spend and their processes tend to be the most profitable; however, the companies that have repeated financial problems—even to the point of bankruptcy—and the ones who feel personally threatened, are the ones that do not get help.
CEOCFO: How do you decide what to recommend in a phone service, whether it is a different service or negotiating what they have now? How do you work to retrieve what has been an overcharge? What are some of the steps you take in any given situation?
Mr. Steiner: We first do a deep dive analysis to understand their contracted pricing versus what they are actually being charged (they are seldom the same), and what services they actually using and their volume of usage versus their contractual minimum commitment. This analysis allows PRP to find the most suitable program and the best pricing for our clients. Every client has different needs and service requirements.
Telecom is one the most frequently overcharged expense areas. Several years ago, Gartner reported that there was $13 billion in annual overcharges and billing errors within that vendor industry. They found that 80% of bills have outright overcharges or errors in favor of the telecom companies, and that only 2% of these are caught. In fact, all telecom contracts have a clause that says if the customer does not identify and request a credit within as little as fifteen days, the customer surrenders the ability to receive a credit and “gifts” the money to the telecom vendor.
To maximize and maintain savings in this area, clients need to do a deep verification analysis on a monthly basis. PRP has spent millions of dollars on software and thousands of hours developing processes to be able help our clients to identify and avoid these overcharges.
CEOCFO: That is a mighty tall order when you are looking at, as you said, fifty plus different arenas. How are you able to be on top of all the different services?
Mr. Steiner: By hiring industry experts, understanding the vendors’ compensation programs and their cost structures, and by having equal or better information on our clients ordering patterns than the vendors themselves, allows PRP to be successful in all the different expense areas. PRP also employs what we call the Gold Standard Strategy Program. This approach allows the best minds from PRP to pre-strategize on each account and allows us always to be on the top of our field and break though into new territories of negotiation.
CEOCFO: Do your clients want a deep analysis?
Mr. Steiner: I think that the problem with most companies is that they are at the thirty thousand-foot level and until you understand how every program works you have a hard time understanding how to improve it. Our clients know that PRP takes very complicated products and processes and put them in a nice box with a ribbon on it. PRP makes it easy for them to understand what happens behind the vendor curtain. Our client reports start as very high-level and then drill down to a mid-level analysis and then to literally five-inch-thick binders that report every item they order, the old price, the new price, the unit of measure, the quantity, and resultant savings.
CEOCFO: Is there any difficulty getting companies to cooperate with you as far as rates and data?
Mr. Steiner: Nothing is easy. Our objective is not to make any vendor look bad—just to make sure the client has verifiable “best in class” pricing and service. When we start the savings program, our clients typically do not have the requisite data from their vendors. PRP educates our clients on what data is needed and how to properly receive it from their vendors.
CEOCFO: You have had record growth over the past year. How and why?
Mr. Steiner: PRP is growing in four ways. One, we are engaging with larger clients. Two, we are adding new expense areas each year. Three, we are improving our craft and therefore finding bigger savings, and four, we are increasing the scope of services to our current clients. Due to the national economy’s slow growth clients are still trying to do more with less, particularly with regards to staffing, which makes PRP’s services a more popular solution.
CEOCFO: Are there many companies in competition with the depth of PRP?
Mr. Steiner: The word “consulting” covers a large range of services. At the Accenture and McKinsey level the focus is more on strategic planning and solutions, not implementation and verification. In administrative cost reduction consulting, there are many small regional companies that focus on a few areas with two to twenty employees, or franchise models. For companies that are looking for a consulting company that has the size to address most or all of the client’s administrative cost reduction needs, and which has in-depth industry knowledge, purchasing power, and the means for detailed line item verification, PRP is unique. Therefore, we seldom see direct competition. When meeting with new potential clients, perhaps one in a hundred have met with another full-line consultant.
CEOCFO: Do potential clients know where to turn? How would they find you? What search terms are best?
Mr. Steiner: That is a great question. Sixty percent of our business is still referrals or C-suite executives that have taken on new jobs. We also do many presentations at seminars, conferences and events. We are fairly well known across North America as a leader in administrative cost reduction, and we are always looking for ways to increase cost reduction education to our clients and prospects.
CEOCFO: What do you look for in your people? What are the intangibles?
Mr. Steiner: The intangible is the “can-do” spirit. PRP is a roughly one hundred-person company that is helping $300 million to twenty billion annual revenue companies—something these firms thought was impossible. We look for employees that are passionate, hardworking, and always believe there is way to solve any problem.
CEOCFO: Would you tell us about Casual for a Cause?
Mr. Steiner: Casual for a Cause was started by our employees and supported by PRP. The program focuses on giving back to our community. Even though I am not a fan of “Casual Fridays,” it was a compelling proposal that showed how employees’ desire for Casual Fridays could make a difference to our local charities. PRP is providing a 100% dollar-for-dollar match to employee-directed donations, and the program will generate three or four hundred thousand dollars and a great deal more in in-kind donations within the next couple of years to local charities.
CEOCFO: Why is giving back important for you and for the company?
Mr. Steiner: It is important for us to give back across the board. Our employees are committed to this concept. PRP was already providing support to other programs including the Emeril Lagasse Foundation and Loyola Marymount Scholarship Program, but our employees wanted to do more, and used the incentive of Casual Friday to drive individual donations of time and money. Our goal is to improve people’s lives that have difficulties and to help people who are struggling. It is all about improving people’s lives. If we can make the world a little better place before we leave it, then we have done our job.
CEOCFO: PRP is almost twenty years old. What have you learned along the way? What do you know today that makes you a better leader and the business a better offering?
Mr. Steiner: To be humble is the number one lesson learned. We have realized from our interactions with our clients and employees that when we stop learning we stop growing. Lessons are learned from everybody we meet. It does not matter if it is a brand new twenty-one year old employee or an eighty-year old client—we must take the time to listen and learn. I have been challenged by my employees to improve my skills as much as I have challenged them. I think that this idea applies to businesses across all avenues. We have to be humble enough to be able to listen, to learn, and to then apply what have learned.
Number two is “finding a way”. Challenges come every day and we try to creatively come up with ten different solutions to solve a particular problem. I truly believe there is always a solution to any problem.
CEOCFO: Why use Profit Recovery Partners?
Mr. Steiner: Every company works very hard to earn their revenue and to have their hard earned profits quietly slip out the back door is very disheartening. PRP is a paid-for-performance consulting company that brings industry expertise, massive purchasing power and line item detail verification so that our clients can maximize profits, save jobs, and use the savings to help grow companies.