High-Value Hiring

 What drives RPO in a recession? Scalability, flexibility, and quality of candidates.
 

By Katie Kuehner-Hebert
 
 
The use of recruitment process outsourcing (RPO) by many industry sectors such as healthcare, pharmaceuticals, and infrastructure equipment manufacturers has rebounded fairly well since the start of the recession. So say several RPO providers, who have the ability to respond to the fluctuating needs of their clients by quickly scaling up or down, or by transferring resources to other geographies. Even switching full-time employees to contingent—or vice versa—has been a successful approach in this ever-changing economy.
 
 
Josh Sorkin, senior vice president for RPO and talent management, Americas at Hudson RPO, a unit of Hudson Highland Group Inc., has seen an uptick in the RPO activities of most sectors (excluding finance), particularly “capital equipment” makers that aid in infrastructure development in emerging countries, as well as many large diversified industrial companies. He notes, “the Honeywells and GEs of the world are doing well.”
 

“I almost think that in some cases, the economy is pushing clients faster to look at RPO because we have scale and flexibility and we offer cost-advantage efficiencies,” he says. “Although the deal size may have gone down and companies may be hiring fewer people, it doesn’t mean the deal itself has gone away. The hiring volume has slowed, but not the interest level in RPO.”
 
 
The recession has also driven a strong refocus on the importance of quality of hire. Providers are being asked to more thoroughly assess the success of their recruitment efforts. Any business executive knows how much a bad hire costs, and how quality hires can truly lessen turnover rates and increase the bottom line.
 
 
Mark Melfi, a senior managing partner at endevis, says that he’s seen a real shift in clients’ RPO activities in the last 12 to 15 months because of the increased demand for quality candidates.
 

“However, HR department teams are so thin that they are unable to keep up with demand, and so we’ve seen a dramatic increase in the number of requests from client companies and new companies to help them fill high-level difficult to fill positions,” Melfi explains. “Gone is the passive candidate recruitment on the frontlines. Companies were having some success posting their jobs on job boards, but now they want a more active partner who has the ability to go out and proactively seek out and target recruit – ‘cherry-pick’ — from competitor organizations.”
 
 
As economic conditions slowed again this summer, clients that use RPO providers for help on very specific projects in high-growth areas scaled back, while enterprise RPO clients dramatically increased their activities, says Jeanne MacDonald, vice president and general manager, RPO and project recruitment solutions at Futurestep, the outsourcing arm of Korn/Ferry International.
 
 
“I think what happened was that a lot of companies quickly decided that they were not going to go back into recruiting,” MacDonald says. “For example, if our client was a consumer packaged goods business, they don’t want to be in the recruiting business, but in the candy-making business. So they will give the recruiting to us. They want to be really highly focused on their core business, and for everything not relevant to their core business, they’ll take a look at outsourcing again.”
 
 
Chris Hermannsen, chief executive officer of Ochre House Ltd. is seeing a differentiation between the hiring of business-as-usual positions and positions essential for growth or innovation.
 
 
“There’s a pretty hawkish view being taken around volumes of hiring on the non-strategic end or business-as-usual end—support, overhead, positions to ensure the normal basics of the organization continue to happen,” Hermannsen says. “Most organizations have a historical base business but are innovating rapidly to be competitive.
 
 
For example, a customer that is easily identifiable as a hardware company might be transitioning into a service company, and their hiring needs deal with ensuring the base business remains in place, with a much stronger emphasis on hiring positions that drive their future sales by transformation or innovation—positions in digital, technical, sales. Or, extremely difficult to find skills sets, such as project manager, solutions architecture—positions that drive growth opportunities and business future strategy.”
 
 
Do RPO providers and their clients fear a double-dip recession? There is a possibility, they say, as evidenced by the stockpiling of cash by many companies around the world. But perhaps the bigger realization is that full economic recovery will likely take much longer than those in years past, possibly even a decade, and clients have to adjust their RPO practices for the long term.
 
 
“There is a growing realization that the current challenges are not necessarily a short-term situation, but perhaps the ‘new normal,’” Hermannsen says. “If this is indeed the case, the only viable option [for clients] is to adapt and to combine a tough stance on the business-as-usual hiring, but continue investments in strategic positions that deliver on their strategy of innovation or transformation.”
 
 
Regardless of the downturn, some positions continue to be in high demand, such as those in engineering, information technology, and high-end consulting like actuarial services, says Kay Colson, independent consultant in Atlanta, and also a principle consultant to CDI Corp. in Philadelphia.
 
 
“This trend has been going on for five years and will just get worse as Baby Boomers continue retiring and moving out of the workforce,” Colson says. “The net result is skilled labor is leaving the workforce much faster than it is being replenished worldwide. With that issue in juxtaposition to the difficult economy, many companies are frustrated they cannot find the people they do need. Plus clients will always develop new products, so there will always be a need for new skills to drive those new products. So you have the problem of extreme hiring need on one hand and yet very little need in the unskilled arena.”
 
 
The economic conditions have prompted clients to demand more accountability from their RPO provider, says Ron Walters, another senior managing partner at endevis.
“Clients’ budgets are still tight and the result is that they really want to make sure we have defined results,” Walters says. “We have to show them that we can measure our results and from a communications perspective, have a real openness, to let the client know when we’re being successful and when we’re being less than successful. Then we can collaborate on alternative solutions. That’s not the way it used to be.”
 
 
While everybody is cost conscious and has pricing constraints, there’s now a real shift in RPOs demanding a model from providers that is much more focused on performance, Melfi says.
 
 
“Clients used to be willing to pay monthly management fees and additional fees prior to generating a hire, but nowadays almost 100 percent is pay-for-performance, which goes toward accountability—having skin in the game,” he says. “If costs per hire go down by 25 percent but turnover costs in turn increase by 40 percent, then costs in essence have gone up. Quality of hire impacts the bottom line.”
 
 
Kimberley Hubble, global RPO leader, Hudson RPO, agrees, adding that RPO providers and their clients are now seeing the effects of an enhancement in the “science of recruiting.”
 
 
“Putting more rigor, objectivity, and science into how you get that match between a person, a role and organizational culture,” she says. “People are moving away from strictly looking at candidates with the right skills and knowledge, and cultural fit is becoming more important every year. It requires the RPO to think differently, to go beyond technical knowledge and experience, to think about the more intangible factors that ultimately create a great hire.”
 
 
RPO providers are also continuing to enhance the tools they use to find quality candidates, including finding innovative ways to use social media to reach target candidates, Hubble says.
 
 
TalentReef is offering a cost-effective way to better utilize social media for recruiting, Colson says. Monster and Career Builder have designed new ways to use their databases, and Wanted Technologies has done a great job aggregating their data in one place for a better feel of what types of skills are being hired, where they reside, and how much is being paid, Colson says.
 
 
“In the U.S., there are a lot of new and changing tools, but outside the U.S., there aren’t as many tools available,” she says. “It’s easier in the U.S. because the states operate similarly. But in Europe, Asia Pacific, Africa or South America, you lose that commonality and you have language differences to deal with. So it becomes very difficult to build and sell new tools cost effectively. What I’m finding as an RPO provider is that everyone is scrambling to find good tools, and there is a ton of pressure to find tools and do a better job outside the U.S., which poses challenges.”
 
 
How are RPO providers responding to the challenge?
 
 
“We just have to work harder,” Colson says. “With more clients looking for solutions that are global, we spend a lot of time and energy putting together marketing intelligence from state to state and country to country. We have to get better at aggregating our own internal information, sharing information across our own organizations. Plus we keep looking for new tools or push U.S. providers of these tools to go global. But it takes time.”
Clients are beginning to demand forecasting tools to help them better gauge their future hiring needs, Melfi says.
 
 
“For example, say they think they need to hire 2,000 people over the next two years, but when we drill down and start to ask the right questions—what are the variables, current staff, succession planning, new product launches—we may find out that they really only need 1,000, or they might need 4,000,” he says. “We’re really seeing a demand for effective talent forecasting and planning. That’s one of the things we have built on the front end of our RPO solution. This helps them better forecast so we can help them build a delivery model in partnership with their internal team, to deliver the right solution.”
 
 
More clients, including some midsized companies that have a multinational footprint, are seeking out RPO providers for either multiple regions or for a global deal, as opposed to just in-country solutions, Hubble says. Moreover, an increasing number of clients are asking for “blended” models in which one RPO provider handles recruitment for both permanent and temporary workers.
 
 
“Having an overview of a client’s permanent and temporary recruitment needs means we can take a more strategic view with the customer for their entire workforce needs,” she says. “So if the client wants to scale up in one category or pull back in this other area, then we can easily help them with that need. We can better resource plan when we have visibility of both segments. Clients should also expect greater cost savings from a blended model as there are greater economies of scale as well.”
 
 
In fact, clients are increasingly asking for a single point of contact for all of their RPO needs, including temporary, global, executive recruiting and high-volume recruiting, MacDonald says.
 
 
“They may have less resources internally to support multiple providers, so they just want to use one provider,” she says.
 
 
As such, there is increasing demand for RPO providers to act as vendor managers, overseeing a wide range of RPO services, Walters says.
 
 
As clients shift their RPO strategies to better adapt to the “new norm” in current economic conditions, more of them are exploring broader transformations of their talent acquisition and talent management strategies, Hermannsen says.
 
 
How are RPO providers reacting?
 
 
“It is critical for us to flex to scale, and to transition to a strategic partner model which integrates resourcing with the broader talent management agenda,” he says. “The importance of having a flexible capacity is beginning to become very important to our customers, and that gives rise to challenges in our world. We need to be more agile for our customers, to deliver in the changing landscape.”
 
 
Many clients are now into their second and even third generation of RPO activities, and as such, have become much more sophisticated in their requirements for providers. Colson says just three years ago most clients were looking for providers with general recruiting skills, but nowadays many second- and third-generation clients are only interested in providers that can show expertise in recruiting in their specific industry sector.
 
 
Second- and third-generation clients are also seeking more innovation from their RPO providers, particularly in consultation services in which providers can help them devise strategies at the highest levels to find the best talent with fewer resources, Futurestep’s MacDonald says.
 
 
“Companies are seeing value to RPOs as opposed to just a cost-savings solution,” she explains. “The Baby Boomers are starting to retire and that war for talent is taking place, especially in the C-suite. Chief human resource officers are taking a place in the C-suite and so the work we do is applicable. They want their provider to be comfortable with less and less talent.”

Posted January 3, 2012 in Talent Acquisition

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