Has RPO Evolved in 18 Months?

Maturation of the industry has led to better cost and service aspects when outsourcing recruitment.
 
By Mark Hodges
 
Talent management is viewed as a key area in which HR groups can play a greater role in adding strategic value. Organizations of all sizes and across all geographies and industries are struggling with talent-related issues. These include finding and hiring needed talent, maximizing and retaining existing talent pools, and ensuring an adequate supply of new talent for the future. Alternative service delivery models like outsourcing can play a role in supporting efforts to improve talent management capabilities.
 
Recruitment process outsourcing (RPO) is positioned to help with talent challenges and has become a “hot” segment of the HRO market. But how real is the RPO market today compared with 18 months ago? How much has it evolved? And can RPO now better help customers to address their talent challenges?
 
A year and a half ago, EquaTerra conducted interviews with 450 HR decision makers. Of these, 29 percent were senior vice presidents or vice presidents of HR, and 71 percent were HR directors in either executive or HR operational roles. Respondents were asked to assess the importance of RPO in addressing their talent challenges. Surprisingly, RPO was not deemed a critical tool. On a scale of 1 to 5, where 5 was very important, RPO only scored a 2.32. Why?
 
At that point in the market’s evolution, the low perceived importance of RPO was not very surprising because most vendors only addressed certain segments of the talent management supply chain and were primarily administrative activities. While RPO had potential to support broader dimensions of talent acquisition, its focus then was more limited. Only 19 percent of respondent organizations in January 2008 had undertaken or were in the process of undertaking RPO.
 
Since then, RPO has become a key growth area in the overall HRO market, and buyer adoption has increased. Then, as now, RPO was defined to include the outsourcing of most or all of the work associated with the following processes: employee sourcing, employee hiring, executive recruiting, staffing, contingent workforce and temporary employee administration, drug testing/background checks, pre-employment testing, and RPO IT applications/systems.
 
The reality of the RPO market today is that many RPO providers have increased the scope of their offerings significantly since January 2008. This has occurred through mergers, acquisitions, and organic service development. Today, RPO has evolved into an end-to-end solution.
 
A variety of factors have driven the adoption of RPO during the past 18 months. The most frequently cited benefit by RPO clients is the acceleration of the recruiting and hiring process. In second place is allowing HR organizations to focus on strategic aspects of recruiting by offloading transactional activities.
 
The top reason cited for not undertaking RPO is that it is “not needed.” In my experience, this rationale is used by the same individuals who suffer from “not invented here” syndrome and lack the requisite process knowledge and market understanding to make a true comparison.
 
Other organizations decide that RPO is “too expensive.” Given the strategic importance of the recruiting process, not undertaking RPO could prove shortsighted. While RPO may be more costly than an in-house solution, its return on the investment should be used to determine whether it’s worthwhile. RPO can often deliver more robust supporting IT applications and tools, a better candidate match, a reduction in turnover, higher satisfaction rates, and improved compliance and documentation. EquaTerra often finds that the perceived costs associated with outsourcing are frequently much higher than the actual. Potential buyers should ensure they adequately assess all relevant direct and indirect costs and funding options before dismissing the RPO option as too expensive.
 
Given the advances in the market, buyers should review and reassess RPO services. While not a panacea to address all talent management challenges, RPO is an increasingly viable tool to help with talent acquisition. Most buyers today are taking a pragmatic approach to RPO, recognizing its applicability to primarily address improvements to operational aspects of recruiting. This is only the first step in elevating overall recruiting capabilities.
 
One of the benefits RPO can bring to talent management improvement efforts is to free up HR staff from operational tasks to focus on the more strategic aspects of talent. Many HR groups can no longer stay competitive with the unique and demanding avenues for sourcing great talent. If sourcing is no longer a core competency and differentiator for HR groups, then assessment and development of talent must become even more of one.
 
Mark Hodges is chairman and co-founder of EquaTerra. He can be reached at Mark.Hodges@EquaTerra.com.