Hot-Button RPO

M&A. Talent pipelining. New client demands. Need we say more?
 

By Debbie Bolla
 
 
What’s hot in RPO? A lot—so we’ve done a little digging to see what trends will continue in recruitment into 2013.
 
 
Consolidation came to town in 2011 with Randstad’s acquisition of SourceRight and ADP buying The RightThing. It continued in 2012 with IBM’s billion-dollar purchase of Kenexa. So what about 2013? The majority of industry experts are siding with more merger and acquisition (M&A) activity—although a few question its position to continue at its fast pace.
On team yes is Paul Harty, president of Seven Step RPO. “In any successful emerging industry, M&A will be active. Two large RPO players have now joined the HRO category,” he says. “For many pure-play RPO providers, that’s good news because it provides an opportunity to gain market share. We expect M&A activity in the RPO space to continue at a steady pace into 2013 and even 2014.”
 
 
John Wilson, CEO of WilsonHCG, agrees, with RPO showing strength as a desirable strategic business function. “The one thing that drove the M&A activity is RPO rarely can be built as a secondary business,” he explains. “Consequently, companies that want an RPO arm/firm will need to acquire.”
 
 
On team maybe is Tom Marsden, head of professional service of Alexander Mann Solutions. “The trend of consolidation to a smaller number of reputable firms operating in RPO will continue, however, there a limited amount of independent RPO firms in the market. Therefore the volume of activity may slow down from levels seen over the past 12 to 18 months,” he explains. “In the future companies will also be looking at opportunities to diversify into new services and geographic markets.”
 
 
Sue Marks, CEO of Pinstripe, also forecasts pushing the breaks on consolidation. “M&A activity is only possible when there are companies interested in and available for,” she says. “I think there are fewer and fewer target organizations around, so once the final few that are showing interest are acquired, there will be a hiatus on M&A activity, and a flurry of new startups.”
 
 
Talent is a word that is being tossed around more and more at organizations—a war for talent, a talent shortage, a talent supply chain. But in the RPO space, it’s all about talent pipelining, right?
 
 
“The need for speed to fill an open requisition is precious, especially in today’s economy,” says Phil Stewart, president of recruitment solutions for Kenexa. “When a company opens a requisition, which typically means there is a pent up demand for the person with the right skill set and talent to fill it, the ability to find that person quickly is more important than ever. The best people are not out in the market actively looking for a new job—they’re working for another company—so it’s important to have a process in place where the best people are at least in your system. So when a requisition is opened, you have already identified the top talent.”
 
 
The ways organizations source talent has evolved with today’s emphasis on social media and networking. “Fundamentally, everything has changed. The “post and pray” method of finding hires is officially dead,” notes Harty. “Hiring managers are becoming more aware of their need to network and work with talent acquisition to provide leads. Cultivation of those leads, and how you treat people in the process, is a driving force for hiring now and in the future. The demand to be accountable for spend is also driving this emphasis on talent pipelining. If you can build, engage, and measure a talent community, you’ll have candidates for today and the future.”
 
 
Marsden says talent pipelining is the foundation of an organization’s business plans for development and growth. “Companies need to always retain a focus on talent pipelining—the war for talent never stops,” he explains. “In high-growth markets, there is acute talent shortage. At the same time, the ‘talent paradox’ is that, even in the mature economies where there is relatively high unemployment there remains a scarcity of certain kinds of talent. The context is different but the solution is the same—ruthless prioritization of your needs and having open engaging conversations with candidates.”
 
 
And it’s not something that should be taken lightly. “It is important to note that organizations and, frankly, individuals within organizations, are defining talent pipelining very differently,” notes Marks. “ So the first step is to ensure your organization is on the same page internally and with any recruitment partner. The next step that we are seeing as critical is having talent pipelining strategy, but more importantly, the clear and articulated ability to execute on that strategy. Then, you need to convert those within your pipeline to hires, and finally, have processes in place to maintain the funnel into your pipeline. So, yes, there is an emphasis on talent pipelining, but the actual ability to turn that into results is where organizations are having trouble.”
 
 
Problems and Solutions
RPO has revelled in its maturity over the last few years, with client expectations and demands becoming greater. Savvy providers have made adjustments to accommodate the new business needs of HR buyers. But RPO has always been touted for its flexibility and that comes in handy when developing a solution.
 
 
“There’s not a one-size-fits-all model for recruiting, and providers that offer that are really missing the mark,” says Stewart. “Successful providers are able to find a solution that finds talent based on the customers’ needs. RPO is a big expenditure, and it’s common for organizations to try one solution from an outsourcing provider—whether it’s a recruitment solution or onboarding or an assessment. This allows a company to test drive an RPO provider before they implement the entire suite of solutions. Customers are then able to establish and grow a relationship with the provider, to see its capabilities and to experience how the provider works.”
 
 
This type of al la Carte buying can be quite attractive to buyers as it delivers a bevy of options to managing their talent. “Customers are keen to have a set of options from which to choose that fit the operating environment they face. The ability to define these service options and either integrate them or ‘unbundle’ them will set the best providers apart,” says Alexander Mann’s Marsden.
 
 
And it extends way beyond filling a requisition. “There is an increase in demand for market research, employment branding, and other one-off human capital needs that are becoming more popular and relevant as companies are investing in their talent acquisition strategy,” explains Wilson.
 

Seven Step RPO’s Harty is seeing a new trend in the service delivery space emerge: rolling transition. “While we are seeing more firms willing to outsource all of their recruiting, many are looking to transition those jobs gradually over time. This rolling transition can have our team taking ownership of around 40 percent of jobs in the first few months, and then gradually building toward 100 percent,” he explains. “This model is attractive to customers who are committed to outsourcing and want to ensure a level of execution and professionalism during pass-offs that ‘partial delivery’ models simply can’t deliver. ‘Piloting’ models present additional challenges for RPO providers, as they don’t have the full investment of the client that’s needed to make them work at all levels. We still discuss these models with our customers, but they tend to fade away in favor of more effective models like a rolling transition and full life cycle RPO.”
 
 
A few areas continue to plague the talent acquisition and management process, and only time will tell if improvements will be made in 2013.
 
 
• Technology. “How to get the most out of technology continues to be a challenge for many clients,” says Marsden. “There are some exciting developments through innovations in social media and consolidation in the technology landscape but they have not yet resulted in what matters to those managing the people strategy. There remains a need and desire for good data on which to make strategic decisions about people and simple, inspiring tools to manage people processes.”
 
 
• Succession planning. “Companies are trying to figure out the best way to handle internal mobility, and their biggest challenge is to get their people in the right spot. That’s another opportunity for an RPO provider because the technology, their expertise and their program can be designed to solve that challenge for the customer,” says Stewart. “More and more customers are defining what a quality hire is, and they’re not only looking at talent, but growth potential and culture fit because only when all three are aligned is the result a quality hire.”
 
 
• Accountability. “We’ve noticed an extreme demand for accountability and visibility in the recruitment process that has resulted in increased scrutiny of HR leaders’ performance by the C-Suite,” notes Hardy. “As success stories fueled by companies’ decisions to go RPO in 2012 continue reach a broadening audience, the choice to outsource recruiting is being seen as more of a strategic business decision than an admission of failure by a company’s in-house team. The industry is gaining credibility as an innovative solution to some of HR leaders’ biggest challenges and RPO’s new focus on measurement and analytics are providing these leaders with the ammo they need to secure the C-Suite’s buy in and the data they need to drive intelligent business decisions.”
 
 
• Training. “Pulling hiring managers into compliance and building
consultative skills in recruiters is a real challenge. If “post and pray” is dead, so is the idea that recruiting is just a series of transactional movements. Without good recruiters, you lose talent to your competitors and erode your corporate and recruitment brand,” explains Harty. “Good recruiters are sales-oriented consultants who engage, advise, and compel candidates and hiring managers. Demand for good recruiters in RPO and corporate environments is skyrocketing and supply is low. Good, replicable recruitment training is really at a premium.”
 

Posted January 4, 2013 in Talent Acquisition

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