Recruitment Process Outsourcing

The seven fatal sins

Recruitment Process Outsourcing (RPO) continues to be a hot topic in the marketplace and according to HROA and Everest Group, it is growing at a 12% pace. Today, this industry segment is roughly $1.5 billion. So what is continuing to cause the stir? Certainly the economy turning around and the pickup in employment are contributing factors. Also, the shortage of recruiters and the shortage of candidate talent for select disciplines are major causes. Simply, there is a lot of competition for great talent today. This is quite a change from the 2008/2009 recession when little hiring was occurring and up to 60% of the recruiter workforce was furloughed.

WHAT IS RPO?

So what is RPO anyway? According to Wikipedia, ‘it is when a third party provider acts as the company’s internal recruitment function for a portion or all of its jobs. RPO providers manage the entire recruiting/hiring process from job profiling to new hire on-boarding, including staff, technology, methodology and reporting. A properly managed RPO will improve a company’s time to hire, increase the quality of the candidate pool, provide verifiable metrics, reduce cost, and improve governmental compliance.’ 

IS IT WORKING?

So is RPO working today? One point of measurement is RPOs performance in filling tough-to-fill assignments. For example: why are we still using third party recruitment firms to fill difficult-to-fill searches in hard-to-fill markets? Unfortunately, many of these RPO arrangements still require third party support. In some cases the use of third party firms range from 10% to 30% of the open positions. Why? Is it because RPO firms are bad at delivery? Is it the solution? Is it the price? Most of the RPO providers are experts at driving a re-engineered efficient recruitment process. This is great assuming the employer has adequate qualified candidate traffic flow. Unfortunately, in today’s world there is a shortage of qualified skills for select disciplines. These shortages require a unique direct candidate sourcing strategy. All of the RPOs do an effective job in ad development and placement. However, for some RPO providers, identifying and engaging passive candidates is simply outside of their wheelhouse. Targeted passive candidate sourcing is not their core competency. What they are good at is driving active candidate traffic flow and processing volumes of candidates. They have not built the candidate research engine required to drive passive candidate traffic let alone engage and court these targeted candidates once identified for these difficult-to-fill positions. Even if they have, in many instances their competitive pricing model has gotten in the way of implementing this unique direct candidate sourcing strategy. Simply said, the price per hire is too low to allow for a direct sourcing model of targeted passive candidates. Why do they price too low? The answer is simple…’to win the deal’. For the majority of hires that do not require a unique direct candidate sourcing strategy, the proposed price is probably okay. But, what about the difficult-to-fill jobs? Does this not potentially create issues down the road? Yes, but that is down the road. Now you are starting to understand why in many cases third party search firms are still in place after an RPO agreement. Aren’t third party recruitment fees substantially higher? Yes, they range from 20% to 30% of base compensation. Weren’t the reduction/elimination of third party search fees part of the RPO justification? Yes. Now you are starting to understand the problem.

Prior to the 2008/2009 recession the majority of RPO deals that went out for rebid, stayed with the incumbent. Everest Group at that time reported that 85% of the rebids stayed with the existing provider. Today that ratio has almost reversed itself. Does this mean buyers are getting smarter? They definitely understand when it is not working. However, I am not confident they understand the why. Often times, they leave the impression that this is a provider only issue. The thought is if you change providers, the problem goes away. However, in many instances they select a new provider delivering the same solution, but the problem remains the same. They do not appear to recognize price as part of the problem. In order to fix the solution, one must deal with the price points. They go hand-in-hand. Maybe that will get resolved when it goes out to bid the next time around. Avoid buying simply on price. Not all RPO providers are the same. Just because the RPO provider is large does not imply qualified. Often times there are hidden costs like the use of third party recruiting firms that are not well articulated or defined in the proposal.

So does it have to be like this? The answer is No! RPO can be a very effective/efficient recruitment solution when you select the right provider with the right delivery model. One size does not fit all. However, it needs to be configured to the specific client application. This partnered approach with shared ownership and shared responsibilities is a blend of high touch with high tech.

IS RPO A VIABLE OPTION?

When is RPO an option? When the employer has fluctuating hiring needs throughout the year and lacks predictability. Where the employer needs to reduce fixed recruiting expense and have greater scalability. When recruitment needs exceeds the capacity of the internal recruitment team (demand exceeds capacity). When the employer lacks the mix of recruitment skills and/or technology to perform the work? When there is a significant mix of difficult-to-fill jobs and/or in hard-to-fill markets? When there is a high usage of expensive third party search firms? When cost of recruitment delivery is too high? Where an employer has broken recruitment processes? Where there are legal compliance and reporting issues? It could be some of these things or all of the above. Now, how does that apply to you?

Is there only one type of RPO solution? No. Do I have to outsource all of recruitment? No. Can I outsource only specific processes like candidate sourcing or new hire onboarding? Yes. May I outsource recruitment for only specific skill sets (e.g. sales, call center, IT, therapist)? Yes. Can I use it to augment my internal resources when demand exceeds our capacity? Yes. This is called Scalable RPO where resources can be turned on and off or scaled up and down based on real hiring needs? Are there hiring minimums? Generally No. Are there fixed expenses? There doesn’t have to be and generally not. Scalable RPO became increasingly popular after the 2008/2009 recession. As business improved, corporations looked at Scalable RPO as an effective/efficient alternative rather than build a large internal recruitment organization along with fixed expenses again. Firms quickly realized that employment is never a constant.

THE SEVEN FATAL SINS:

Once an employer goes the RPO route, what are the Seven Fatal Sins to avoid?

Sin #1…The Wrong Solution: Selecting a solution that is not configured to meet the client expectations. For example: one that re-engineers the recruitment process, but does not address candidate sourcing especially for those difficult-to-fill positions. Buying on price or assuming all providers and all RPO solutions are the same.

Sin #2…Lack of Employer Commitment: This is a change management initiative. To be effective, it needs to be a top down driven approach. It requires senior executive level sponsorship.

Sin #3…Poor Communication: The reason for change needs to be properly communicated to the client stakeholders in order to secure buy in and trust. In the absence of communication, the constituents will make up their own and it is generally wrong and bad.

Sin #4…Competitive Landscape: This is not a competition, but rather a partnership. This is not risk shifting. The RPO provider and the employer have shared ownership and shared responsibilities working together as one team in getting the job openings filled.

Sin #5…Accountability: Hiring great talent requires an efficient process that helps to court the candidates. When process bottlenecks and GAPS occur, both parties have to be held accountable for making the necessary, appropriate changes.

Sin #6…Lack of Employer Brand: You must articulate the ‘day in the life’ of your organization in order to properly level set candidate expectations while selling the opportunity. It is different than an advertisement. Your brand will help both in candidate attraction and new hire retention. 

Sin #7…No Baseline Data: It is difficult to improve what one does not measure. Most organizations lack meaningful baseline recruitment data in order to calculate an RPO ROI effectively. A big RPO benefit moving forward is accurate, measurable data.

RECOMMENDATIONS:

How does an employer who purchases RPO services eliminate these Seven Fatal Sins?

Partnership Approach: It is one team where we combine the client’s business expertise with the RPO’s talent acquisition thought leadership.      

1 + 1 = 3

Select the Right Solution: One that is configured to the specific client application and that meets stakeholders’ expectations.

Making Recruitment a Priority: Measurable data along with accountability is a winning formula. Everyone in the organization must recognize the importance of hiring great talent. It is a top down driven approach requiring senior executive level sponsorship.

Over Communicate: When in doubt-communicate. Make sure there are no surprises. That constituents understand the importance of change.

Well Defined Employer Brand: Messaging that is configured by employee skill set and geographic market. A message that accurately depicts the ‘day in the life’ of your organization.

Pre-define RPO Success: How does one measure success? What are the desired outcomes? What are the client expectations?

Change Traditional Thinking: Recruitment is both an art and a science. Recruiters and hiring managers, first need to build a relationship with the candidate based on trust. Then they sell the job, the firm, the opportunity and the location. Finally, they screen candidates for fit and interest. It is never the other way around. Great candidates need to be courted first prior to putting a marriage together.

CONCLUSION:

RPO can be a viable option when done correctly with appropriate employer support. When done well, there is a measurable ROI. A firm should only consider RPO if committed to change and they have realistic expectations. This is not risk shifting. Again, no one size fits all. Do not just buy on price. Look for the hidden costs. Not all RPO providers are the same.