Traditionally a smaller market, companies are increasingly ‘testing the waters.’
By Audrey Roth
EMEA growth as a whole has increased in recent years, according to the Everest Group Recruitment Process Outsourcing (RPO) Annual Report 2014. The EMEA market for RPO services grew from $407 million to $442 million in the past year. The increase in adoption in the Benelux region is contributing to the overall European market’s gradual climb. Organisations are able to see the obvious advantages, and will continue increasing in implementation as more consider the beneficial possibilities.
For Randstad Sourceright, an operating company of Randstad, the second largest HR services provider in the world with global revenues of $22 billion, the Netherlands is proving to be a key constituent. The industry within the Netherlands had slowed down in the past few years, but times are changing as Jacques Van Den Broek, chief executive officer of Randstad Holding NV, recently shared on Bloomberg Television’s “On the Move.” “It was a bit sluggish for the last two-three years, but it’s picking up now. We see our own business, which is still a large part of our business, roughly 20 per cent of total sales, has a high single digit growth at the moment,” Van Den Broek shared. “It is one of our better markets in Europe actually.”
Managing Director of Global Client Solutions of Randstad Sourceright, Margriet Koldijk, says Randstad places more than 530,000 workers on any given day, with about 12 per cent of that being in the Netherlands, about another 8 per cent in Belgium, and 1 per cent or so in Luxembourg. Although these countries remain smaller in industry size, the region continues to grow as a successful player for the company. Koldijk took the time to speak with HRO Today Global about the state of the industry in the Benelux region.
What are some emerging trends within the region in the HR outsourcing industry?
It’s funny that we would talk about it right now because we have seen the uptake of RPO programmes really taken shape in the last year since 2014. Whereas RPO in the US and the UK had been there for a decade, or perhaps even longer already, we didn’t see that happening so much in the Benelux region. It was very much an in-house thing.
The only thing that’s had to do with recruitment and HR in general, the outsourcing trend, also in general, wasn’t very prevalent in this region. But the people have been becoming more accustomed to it, especially because they are part of a multinational company and they heard about it, perhaps from the US and from the UK, becoming more interested. At Randstad Sourceright, as well our competition, everybody has been talking to clients about it. And suddenly, from the beginning of 2014 everybody is willing to give it at least a try. So that’s really something that’s different, so it’s going fast now.
Within the region, there are differences. Netherlands and Belgium may be more or less look-alikes because both have European global headquarters. So there are European headquarters that are there to make international decisions for either their European or global RPOs. In Luxembourg, we see that much less. In Luxembourg, there’s an unbelievable shortage of talent.
So there if they talk about RPO at all, it’s always about how to recruit people from outside of Luxembourg into Luxembourg to put them to work over there, whereas in the Netherlands and in Belgium, it would be much more about, well the regular RPOs, i.e., ‘We need to have perm people and we need to have them from our own country.’
Another trend that we see is that it’s a lot of trials. We’re in the US and in the UK and often you see immediate complete end-to-end projects. People like the concept of outsourcing, they’re okay with it, and they immediately decide to do it for an entire business unit or for an entire company even. Here it’s about project recruitment. So, let’s try it for a year. Or, why don’t providers do the sourcing or the recruitment and we do the rest. Or why don’t they try it for this category of profiles, and if that goes well, then we’ll see. They’re okay to put their toe in the water, but not really to jump in yet. And also what we see is that they really turn to their already trusted HR partners. We have been doing business with these companies in all kinds of HR topics already for a very long time. So they turn to us now, when it comes to RPO, much rather than go to the pure play companies, which they may not know and have never tried out. In the UK it seems to be a little bit different. There they actually like the fact that a company is just about RPO, but here not so much.
Why do you think that outsourcing was not as prevalent prior to 2014? What changed and what was occurring before that it was not the case?
It’s probably just because of the globalisation. In the UK and the US it has been a trend now for such a long time. They go to those international conferences, and they read about it, so they think, perhaps that could be something for us. And I wish to say that would have to do with the fact that suddenly there is an economic upturn and there is an increase in need to hire more people, so they need that because they don’t have their own HR departments anymore. But, that is just a very tiny part of the story. So it is my belief that they anticipate an upturn, and they want to try it now so when the case is actually there, at least they have tried it and they know how to work with it. That would be a great foresight.
I’m not really sure if that does play a big role. It’s more like, okay, we’ve been talking about it now for such a long time; let’s just go ahead and try it. And then it goes a little bit viral. When they talk between themselves, then suddenly they hear about eight companies that they know, also in the Netherlands and Belgium, which have tried it, which have a good experience, so then the next one goes as well. And of course that goes hand in hand with companies like us, not having the experience, because nobody wants to be the first.
Earlier they turned to us and said, you know what, we may want to try this, but who can you bring us into contact with where you have done this for a couple of years? Well, somebody has to be the first. And then when a couple of them actually try, suddenly you have like 10 or 15 reference cases, who you can use to talk to other clients, and then they actually trust the whole development of outsourcing. So it is just a matter of time and a lot of small aspects coming together into this development, not just one big thing that fired it all.
In conjunction with that growth, how has Randstad’s presence developed in the region?
As a company what we did do earlier, let’s say five years ago when we really started to focus on this, is try to do it country by country. We had a presence in Luxembourg with its own team, with Belgium with its own team, and the Netherlands with its own team, also with local recruiters, because it felt most familiar to the companies who wanted to deal with us.
Now we have a European organisation [that works] completely [across] borders that is focusing on staffing and on contingent labour, with a shared service centre that operates from Budapest, Hungary, very much like the model that you would see in the US or even in the UK. That’s entirely in Europe. It has moved to 530 people including the shared service centre, all working across borders, depending a little bit on the language. But in Belgium they speak three different languages, in Luxembourg they speak two different languages, so what you can’t have anymore is just a local team.
So we have all international teams of experts, rather than people who are just sort of acquainted with our clients, and who next to contingent staffing, would also do the perm, and from there on take it to an RPO. Now it’s an international team of experts, who together, because of the relationships that these companies have with the staffing part of Randstad, go to the clients to talk about how an RPO would fit in their holistic HR strategy. We have grown tremendously and we anticipate growing even more.
What has been working for providers within the region?
If there were companies that have been on the ground for a very long time, had a proactive strategy, and the time and the energy to have a long engagement cycle with the clients, they are the ones who are the most successful now. You can’t just come in and take it top down, talk to the top management of a company and say, ‘You know what, we will take over your recruitment endto-end,” and think that will fly. You need to talk to a lot of stakeholders, you need to convince them, they need to trust you, they need to understand how it works, and then little by little you actually get to be a trusted partner, and then they will give you the assignment. So that has really worked. And that’s not only true for us, that is true for others who have been on the ground for a longer time as well. But for companies from the US and from the UK that thought, ‘Well, we are really successful in those regions. We’ll just send a couple of sales people from overseas to this region and knock on the door and say how successful we are in the US and the UK [and ask] why don’t you allow us to become your partner here as well?” And that doesn’t work.
What else has not been working for providers within the region?
There’s a very big thing culturally that you do not bypass the HR department themselves. So you have to go to the HR department, and the people whose jobs would be affected, if in fact they would decide on outsourcing these kinds of activities, to demonstrate the value. How will it become more effective for them? How will their job be more interesting than it is right now? Well, but then [if you were to] try to go top down and propose something to and say, “You know what, we can actually improve your employer branding, or we can speed up your time to market, time to hire, or we can do it much cheaper.” In this region if you do that top down, then very likely there will be a middle management layer who will make your life impossible, and you won’t really get a foot on the ground.
With that, what is the biggest challenge in the region?
There is a talent shortage in Luxembourg, so to be successful you really have to attract the people to come over there. But, in general, and it’s true for all three of the countries, is that the projects are very small. If you win an RPO project in the US or in the UK, which is end-to-end, it’s a large project, and you can staff your programme accordingly.
Here if it’s a trial for a year, and it’s really small, then it’s very difficult to end with it cost effective, which the clients always demand, and demonstrate the value at the same time, which requires you to put your best people on it, and add strategic value, and do a lot of market research for it. Your sales cycle, your implementation, and your expertise costs are more or less the same because they’re not too dependent on the scale of the project, whereas your return on investments are very low because of the size. So, to actually make these kinds of things profitable, and thus sustainable, and thus for a longer time interesting for the clients, it is challenging.
I think I already know the answer to the next question. Do you think HR outsourcing will continue to grow in upcoming years or decline?
Yes, absolutely. Now companies like it. I guess we’ve all seen the same kind of growth, and we actually have seen it in our own numbers. So, in the US and in the UK, we grow with the rate of the market, and here it goes much, much faster.
What do providers need to do to stay competitive in upcoming years?
If the development will be in this region a bit like it was in the US and in the UK, then the challenge here is going to be how to stay relevant in a strategic way. These clients outsource because we know better than they do themselves. And we know better not because we know their company better, but because the way we recruit is so innovative that they could never do it themselves. Because the data analytics that we have allow us to benchmark between this company and other companies in the market, in their industry, etc. So, you need to add value, which they could never bring to the programme themselves.
Otherwise, we will see the same development as we see somewhere else, that if it’s not strategic enough then they might just as well take it in-house. They think, “Well, what have you brought to me lately?” And if that does not add enough value then they will do it themselves. And it’s very easy to just take the best recruiters from us, or from any supplier that has been their provider, because then the ATS has been implemented, all of the job descriptions have been made nice, the employer brand has been established. And then you take the best recruiters, offer them a little bit more salary and take the program back in-house. So, in order to make this development sustainable and relevant, we will have to keep continuing to add value and constantly innovate.
Is there any change that could take place in the future to make the Benelux HR outsourcing industry more favorable?
Yes, but it could refer to legal issues or any restriction that there would be today. But in terms of legal there’s not really any restriction to outsource. What would really, really help to speed up this industry is if there were an economic upturn, because all of these clients have really downsized their own recruitment department, their own HR department, and they have now tried this RPO concept, and they like it, they see the value. So if they suddenly would need loads and loads of new people, no doubt they would immediately turn to their RPO provider to help them with that.