Outsourcing gets caught in bureaucratic red tape.
A recurring theme of this column has been that the rationales for HRO go well beyond cost savings and grow deeper year by year. This summer, the City of Chicago provided yet another reason why recruitment process outsourcing is a good idea–because it helps avoid all criticisms about patronage-based hiring.
Since 1973, the City of Chicago has operated under a legal requirement–known as the Shakman Decree–that it cannot make politics a factor in the hiring, firing, promotion, or transfer for the vast majority of city employees. Think for a minute about the vagueness of the word politics when you consider how difficult it is to operate under this decree. Must it be election politics or can office politics apply? And since when is it possible to completely divorce government from politics?
Imagine inheriting a traditional political machine and now having to take all politics out of the equation. The city was an old fashioned one-stop shop for its own services. It employed its own janitorial services. It maintained tow trucks and owned dozens of parking lots. Need something shipped from one city office location to another? You would have to use a city-owned truck and a city-employed trucker. Now take these tens of thousands of employees and demand that none of the hiring and firing decisions may be touched by “politics.”
When Mayor Richard M. Daley was first elected in 1989, he saw this vast edifice of bureaucracy and legal straitjackets and decided it was time that the city got back to core competencies. The mayor began a process-by-process overhaul of city government, outsourcing dozens of functions that were costing taxpayers money and making the day-to-day operations of Chicago unwieldy.
But in politics, there is always a backlash, and this one took on a new name: pinstripe patronage. The argument was that Mayor Daley was circumventing the Shakman Decree by taking government hiring out of city hands and using the power of government contracting to advance and protect his own power. Opponents of the mayor decried the way unions were being hurt by privatization. They scrutinized campaign contributions, and most recently, they found a series of violations in the way some city programs were operated, touching off a federal probe. During the past several years, the citys momentum for outsourcing has slowed and some city services, mostly for political reasons, have been brought back in-house.
Just to prove that you can’t win by caving to your opposition, now the mayor’s office is being investigated by federal authorities for violating the Shakman Decree and favoring campaign workers for city positions. Damned if you do or don’t. The mayor’s office is now under siege both for outsourcing and insourcing, with every step it takes examined under a microscope.
Whether some city-run or privatized services were tainted by corruption is for the courts and the Chicago voters to decide. But one thing is clear to any informed observer of the city’s outsourcing efforts–the mayor had it right the first time.
Privatization saved city taxpayers millions of dollars and vastly improved city services. Are there political risks to outsourcing? Certainly. But as the Mayor’s office has learned all too keenly, there are equal or even greater risks if you don’t outsource. Critics are critics and they will find a way to pick fault one way or another. Therefore, it is best to go with the course you know is right.
Fortunately for the City of Chicago, Mayor Daley now recognizes that taking his foot off the accelerator was a mistake. In the wake of the recent Shakman Decree allegations, the mayor announced that the city plans to create an independent board to oversee all of its hiring. While this board isn’t technically an outsourcing partner, it will be so similar in scope to a shared-services organization that the difference will be purely semantic.
According to a July 20, 2005, Chicago Sun-Times report, Mayor Daley has been pushing his staff since May to come up with forward-looking, aggressive proposals. One unnamed Daley advisor was quoted as saying, “This is going to stun people. Hes through nibbling at the margins.”
Mayor Daley’s experience is a good lesson for all managers. Once youve determined that outsourcing is the right thing to do, go full speed ahead. After all, would you rather defend a bold new course with proven results or a system you never wanted in the first place?
Sue Marks of Pinstripe continues her conversation on recruitment process outsourcing.
Sue Marks’ foresight and focus on staffing issues has made her an outsourcing visionary with an entrepreneur’s passion that has helped to shape and define the future of the recruitment process outsourcing (RPO) market. Through her talent acquisition firm, Pinstripe, Sue now leads a team that has successfully structured hundreds of major staffing transactions and strategic alliances using her groundbreaking R2R (Requisition-to-Results) approach. In Part Two of our interview with Sue, she discusses the top trends driving successful RPO transactions and what RPO providers need to do to differentiate themselves in the marketplace.
JV: Why is RPO getting so much attention these days?
SM: RPO cuts costs and improves hiring results. It’s as simple as that. But at a deeper level, driven by accelerating global competition, organizations feel a need for agility like never before. They must improve performance, mitigate risk, and reduce cost all at the same time. Given the forecasted labor shortages and the corresponding rising recruitment challenges, companies are looking to RPO not just to supplement, but rather to transform their talent acquisition and management functions. Executive teams are looking to their chief human resources executive to maintain and improve their business’s organizational capability and intellectual capital. In most organizations 80 percent of costs are people costs. A firms overall performance could improve drastically if their workforce had the skills, motivation, and training necessary to improve the day to day execution of their responsibilities by just 20 to 25 percent. RPO, or R2R as we call it, provides a huge opportunity to do that by improving competitive advantage with
innovative actions. It can’t help but draw attention with numbers like that.
JV: How will the use of RPO unfold in the market?
SM: Buyers will begin to realize that they can improve ROI by extending the value chain covered in RPO deals. Thats why Pinstripe’s flagship product is R2R, not simply RPO. The most astute buyers and providers know that winning the war for talent on both fronts-acquisition and retention-wins the game and reduces the need for recruiting simply to replace the churn of turnover. Early adopters are moving towards a true “end-to-end” definition of talent acquisition that extends beyond the point of hire through training. These buyers are designing their programs under this new model, believing they can capture the greatest ROI and transformational impact if they do so. They are moving from outsourcing simple “recruiting” to the real talent acquisition and management value chain, which extends through initial on-boarding, orientation, and training. Our model itself is a 1,100-step process that transforms RPO to R2R, and then to organizational ROIgiving early adopters a major competitive advantage. Over time, late adopters will be moved by competitive pressures and cost drivers and embrace RPO. We believe that after payroll and benefits, recruitment will be the third most frequently outsourced HR function.
JV: Do you think it will be the larger RPO firms or the more intimate ones that will be in highest demand?
SM: The RPO firms that help their clients win in the market will be the ones that win in the RPO marketplace. As buyers continue to feel pressure to drive throughput and improve service levels, they will increasingly look to RPO firms that can bring world-class processes and change management tools to their organization. Buyers will begin to demand significant domain expertise from their providers, fueling an industry trend towards verticalization. The provider’s ability to “see around corners” for clients, their ability to harness technological innovation, and, finally, their ability to really execute and get real HR and business results is what the market leading RPO provider will offer. Providers that have “organizational DNA” composed of Six Sigma process excellence and true BPO expertise will trump those that are simply high-volume recruiting firms. Providers will need to have the ability to help the client transform business processes, and as the talent gap continues to grow, RPO providers will have to rise above the mundane, same old, same old ways of sourcing and moving talent through the value chain from beginning to end. The RPOs that understand their clients businesses-marketing, branding, process, supply chain, metrics, etc.-will be the ones that thrive.
JV: How do you see the use of physical supply chain techniques affecting the future marketplace?
SM: The physical supply chain is a key driver and competitive advantage for organizations like Wal-Mart. However, in a world where competitive advantage doesn’t last long, where products can be replicated with relative ease and cranked out quickly in low-cost manufacturing countries, knowledge and innovation-the purview of an organizations people-make the difference. Almost no one today is thinking of labor-based supply chains the models simply do not exist. IBM recently announced a labor supply chain initiative that they estimate will save them hundreds of millions of dollars annually. Where firms like IBM go, the rest of the world will follow. RPO providers with VMS [vendor management system] and supply chain management expertise will be the big winners here as they help organizations plan and deploy their total workforce. Adapting demand-driven supply chain techniques will help clients achieve significant business performance improvements. Process and technology innovations in this area will bring some organizations closer to the goal of “Total Workforce Management.”
JV: Taking on a new venture like RPO is a big step for some companies entering into this market for the first time. How will providers ease the minds of new buyers?
SM: Risk mitigation is a huge issue. With industry scrutiny, an unforgiving regulatory environment, Sarbanes-Oxley risk management is taking a bigger and bigger piece of executive managements attention today. RPO providers must be true experts at process excellence and internal controls to help their clients manage and reduce risk today. With technology access and optimization, business process integration and centralization, business flexibility, business expansion and speed to generation of new revenue streams, and regulatory compliance-some companies and individuals worry they will “lose control” if they outsource.
In our view, if they are really honest about what is happening today in their organizations, they don’t have good baselines of how they are spending their time and money and efforts now. If done properly, organizations gain better control. In a properly conceived and executed outsourced environment, they will have clear processes and better performance metrics than they’ve ever had. They can reprioritize quickly and change focus areas, and with that control, they will have minimized their risk.
JV: RPO has yet to break into the global marketplace. Do you see offshoring in its future, and how will it fare?
SM: RPOs need to have refined standardized processes, extraordinary training, quality control mechanisms, and global management and technology capabilities to support clients’ global needs and extended value chains. Contracts for recruitment process outsourcing will begin to contain an offshore component, taking advantage of the time difference and labor arbitrage. Corporate culture match will become a legitimate buying point in outsourcing contracts, knowing how hard they are to start and how much harder contracts are to unwind.
Cost isn’t the only measurement; organizations must contract for service levels as well. And those service level agreements must be balanced in a way that holds providers and buyers accountable for the robustness of the partnership and their results. Governance of relationships will evolve. Those relationships with the best culture match will have the best channels of communication. When outsourcing deals fail, most people believe it is poor performance on the part of the provider. But the root cause can almost always be traced to poor communication.
JV: What benefits should an organization expect to achieve from an RPO provider?
SM: At the end of the day, the three most important things a buyer should be confident they will get from their RPO provider are: performance improvement, organizational flexibility, and cost savings. While RPO is process-centric, and process excellence is paramount-process is about doing things right-smart buyers will realize they first need to be doing the right things. It’s all about execution. Business value will be driven by the real melding of people, process, and technology in a way that seamlessly integrates into the client organization through a mix of delivery methods and geographies.
Sue Marks is the CEO of Pinstripe. For more information she can be reached by telephone at 1-877- 797-3379 or by email at email@example.com.
This article was co-authored by Kerry Ann Vales. For more information she can be reached at KAVales@aol.com.
Recruitment specialist the hotgroup plc today announces the acquisition of Profiles Resource Management Ltd (PRM) for 750,0001 in a cash buyout. PRM provides outsourced recruitment services2 to some of the UKs leading employers. This acquisition adds a new capability to the hotgroups services, representing a strategic move into HR managed services which will complement its existing online and traditional recruitment capabilities.
Recruitment process outsourcing is experiencing rapid growth3 and the acquisition of PRM builds on the hotgroups strategy of deploying technology to increase efficiency in the recruitment process for employers
– The RightThing Screens 20,000 applicants resulting in 200 hires –
Findlay, Ohio – August 8, 2005 -The Right Thing Inc., an end-to-end provider of employment process outsourcing, today announced the successful completion of its agreement with Cyberonics (NASDQ: CYBX) to hire a fully qualified team for its recently FDA-approved VNS Therapy System for treatment resistant depression. Resulting in a national team of more than 200 new personnel, The RightThing Inc
[Toledo, OH – July26, 2005] – TalentTrack announced today that it has won a contract to provide recruitment process outsourcing services to Shands Jacksonville, a Level I Trauma Center with over 4000 employees.
Under the terms of the contract, TalentTrack will provide complete end-to-end recruitment outsourcing services for the hiring of critical care nurses for their trauma service. According to Mark Melfi, Executive Vice President of TalentTrack, “We are excited to begin this new partnership with Shands Jacksonville and look forward to helping them achieve their hiring goals by placing top nursing talent into their organization in a timely and cost effective manner
Kenexa (NASDAQ: KNXA), a provider of talent acquisition and retention solutions, announced that it will be providing Caterpillars workforce with a comprehensive survey offering to gather valuable employee feedback. Caterpillar is Continue reading →
Case Study: Recruitment Case Study
When a company discovers a trustworthy recruitment process outsourcing (RPO) partner that has expertise in a category with special demands, its wise to share the reins of responsibility to effectively and efficiently meet the demands of the business.
Such is the case for Owens Corning HOMExperts, who specializes in delivering a wide variety of construction services to builders, retailers, and direct to the homeowner. With beginnings in Boston, Minneapolis, and Indianapolis, HOMExperts is now providing a wide range of construction services in 14 key metropolitan areas across the United States, with additional expansion planned for 2005. To best support the demands of this high growth business, we recently signed a long-term contract with an RPO partner named TalentTrack.
Our decision to outsource began a couple of years ago, when the growth of HOMExperts continued to increase dramatically. To maintain our leadership position in the construction services industry, it is imperative for HOMExperts to only hire and deploy technicians who are highly skilled, trained, certified, and fully insured. The HOMExperts technician bills out at an hourly rateso every hire we make represents an ongoing and incremental revenue opportunity for the business.
Yet the recruiting and hiring challenges for HOMExperts are decidedly different from that of our typical corporate requirements. Our in-house HR team partners with field recruiters to improve and sustain our base of employees nationwide. But our corporate HR experience historically has focused on salaried employeesnot hourly workers who are the backbone of the construction services industry. Another challenge is the sheer volume of technicians HOMExperts needs in the short term, coupled with fluctuations in long-term staffing requirements. As HOMExperts expands business into additional markets, the demand for technicians will continue to grow.
In 2004, HOMExperts hired more than 800 technicians nationwide. As the business continues to grow exponentially, we anticipate adding an additional 1,400 new technicians every year. Once HOMExperts reaches our goal of geographic expansion, the fluctuations in demand for construction services will require an RPO partner to help scale the hiring requirements efficiently.
The unique and demanding characteristics of HOMExperts hiring led us to search for a reliable RPO partner to supplement our inhouse staff. When we discovered TalentTrack, we provided them with two pilot markets where they were allowed to demonstrate their ability to partner with HOMExperts and help us meet the very demanding hiring needs of our business.
As our relationship with TalentTrack has evolved, we believe it provides a blueprint worth considering for any company facing the RPO decision:
1) Admit when you need a specialist. Recruiting and hiring skilled home improvement technicians was beyond the core competencies of our in-house HR staff. TalentTrack, on the other hand, has expertise in this category. They pay attention to contractor trends and have proven processes to identify, locate, and attract qualified recruits. We recognized that Owens Corning HOMExperts could benefit from TalentTracks strengths, and their assistance would enable us to stay focused on growing the business.
2) Find a true partner. With the war for talent in todays job markets, a successful recruiter must sell the company to prospective employees. The recruiter becomes the face of the company to potential employees and represents the brand in the marketplace. For these reasons, an RPO partner must reflect the corporate culture and values. We found that TalentTracks people, skills, and strategies serve as a seamless extension of our business.
3) Define expectations up front. Expectations are more than the terms of the RPO contract. In fact, they should define important intangibles. With TalentTrack, we emphasized how their services would represent the Owens Corning brand and our values in the marketplace. We also had open discussions about possible fluctuations in the construction market down the road and how TalentTracks scalability would allow adjustments to fit changing needs.
4) Put performance measures in place. Establishing metrics for any business relationship is critical for evaluating success. Were impressed with the technologies and tools TalentTrack offers, including cuttingedge Web platforms. TalentTrack provides real-time reporting on recruiting and hiring activities, as well as tools such as productivity reports on their hires. Relevant data thats updated constantly helps us monitor, refine, and improve overall goals such as reduced time to fill, lower cost per hire, and greater ROI.
5) Communicate, communicate, communicate. TalentTracks extensive reporting capabilities help us stay on the pulse of their activities for HOMExperts. But nothing beats picking up the phone or getting together for personal updates. We talk with TalentTrack on a regular basis to keep each other informed on new developments today and new opportunities for tomorrow.
In May 2005, Owens Corning HOMExperts delegated their recruiting and hiring responsibilities nationwide to TalentTrack. And even in this short time, HOMExperts has already found that working together with an RPO expert can provide powerful advantages for the business.
Case Study: During a time of transition, CRI helped this global company meet its staffing needs.
Recently, H.J. Heinz Company, one of the worlds leading marketers of branded foods, faced a hiring challenge. The company sold several of its business divisions to Del Monte. To complete the transaction, Heinz had to set up a fully-staffed support operation in Pittsburgh, Pennsylvania, to manage finance, HR, IT, and several other functions for the Del Monte businesses. Six months earlier, Heinz instituted a hiring freeze to counteract the unknown impact the Del Monte transaction would have on employment. This hiring freeze created an immediate need for more than 200 new hireshalf for the Del Monte support operation and the rest for other Heinz divisions. The aggressive timetable forced us to determine the best way to quickly staff an entirely new organization with well-qualified candidates, said Steve Clark, Director of HR for Heinz Food Service Division. In jobs where Heinz had one staff member, they now needed two. Basically, Clark recalls, we had to build entire departments from scratch.
Clark realized that Heinz needed help managing this unexpected hiring increase. Hiring new in-house recruiters to manage this one-time recruitment spike was costly, and the risk of direct employment was too great. He did not believe that a traditional recruiter strategy would work for this challenge because Heinz needed more than just sources for multiple hires. He wanted competent recruiters who could interface with internal Heinz client managers to understand the particular demands of the job, the environment, and the division. Clark knew that CRI could meet this demand. I developed a lot of confidence in the CRI team during the Olympic recruitment project, said Clark, who served as Director of Staffing for the 2002 Salt Lake City Winter Olympic Games. He felt that CRI could do an excellent job with the size and tight time frame of the Heinz project.
CRIs Collaborative Service Model is a comprehensive suite of RPO solutions, allowing CRI to become a direct extension of Heinzs internal HR department and to conduct recruiting specific to the needs of Heinz. This unique business process allows them to find higher quality candidates, execute more efficiently, achieve results in fewer days, and save money for clients. CRI knew that the best candidates for Heinz would be from the pool of the already employed, so they sourced candidates from competing companies. Expert recruiters interviewed candidates, networked with them to find additional candidates, and worked together with hiring managers to match candidates to jobs. One of the biggest challenges was the quick ramp-up time needed to start hiring. CRI did not know Pittsburgh or the Heinz culture, yet Clark needed the project to produce results very quickly to achieve hiring goals. CRI management presented their proposal just three days after Clark initially contacted them. Within two weeks, the first recruiters were ready to work. In close to 30 days, the first positions were filled.
For Heinz, CRI segmented staffing needs by determining which positions were absolutely critical; which would be nice to fill quickly, but were not critical; and those that could be filled later. The team used this prioritization system as a working guide. Through our work with a variety of worldclass staffing organizations, we created a standardized, proprietary system of recruiting that helps our clients find and hire the best candidates, said Winn Van Brimer, CRI Vice President, Recruiting Operations. For Heinz, that meant matching candidates with the skills and competencies needed for the job openings and locating hard-to-find, qualified candidates who were not necessarily looking for a job at the current time. Most search firms promise to fill openings in 60 days. We needed to fill our jobs faster, said Clark. When CRI told us they believed they could significantly outperform the 60-day average, we were impressed. They delivered on the promise, with an average of 33 days to hire.
Clark also reports that CRI added value in other ways:
*They helped Heinz attract qualified candidates that Heinz could not have found otherwise.
*They supplemented Heinzs workforce to act as in-house recruiters, providing administration relief in addition to candidate searches.
*They saved Heinz money over an in-house or traditional contingency-fee recruitment program.
They are talented and committed people wed like to work with again. Not only were they technically qualified, but they fit very well into the Heinz culture. Clark notes that the hourly-billing business model used by CRI is the only way to foster these relationships. CRIs alignment with Heinzs needs built the necessary trust needed to successfully complete the recruitment project.
Spherion delivers a total workforce acquisition solution.
A global technology company was one of the few IT firms that actually grew during the most recent IT industry slump. Millions of users rely on the companys IT infrastructure solutions servicing businesses, government agencies, and educational institutions. The firm needed to develop a more reliable, scalable, and cost effective talent acquisition process and resource that would support expected growth prospects in the next decade. They were faced with critical business issues such as an out-of-balance HR focus; heavy, expensive reliance on outside hiring agencies; limited control of contingent labor; and increased dependence on sophisticated, but disconnected high-maintenance systems.
The technology company decided to streamline its talent acquisition process with Spherions Total Workforce Acquisition (TWA) solution. The partnership mitigated the clients need to use multiple outside hiring agencies and ended its relationship with multiple vendors for staffing services. TWA delivers both RPO and staffing solutions via an integrated, dedicated, delivery infrastructure made up of onsite recruiters with access to Spherions national network of 2,150 plus recruiters, its virtual recruiting resources, and its recruitment transaction center.
Spherion has assumed responsibility for the employment process services in the clients new employee provisioning services strategy. Hiring volume is expected to grow by about 20 percent each year over the five-year term of the contract. They will also manage and support the clients college recruiting program and provide administrative support for intern hires, executive hires, and internal promotions. Spherion has also implemented its KnowledgeSphere technology platform to enable the employment solution functions, employee assimilation process, and the reporting/tracking for all the partnerships services. This includes the integration of Peopleclicks Recruitment Management System (RMS). In addition, all information within the technology platform and process, and other applicable source systems from the client, is integrated to KnowledgeSpheres Reporting and Analysis Platform (RAP). Both RAP and RMS will be Web-based to enable all authorized users access via the Internet.
Strategically, the solution has created a scalable, hiring manager client-focused, talent-acquisition services system and process to support strategic, financial, and operational growth objectives. The solution is governed by a 24/7 metrics and reporting structure to ensure performance and results.
The TWA partnership has produced tangible results. There are baseline operating costs savings of 40 percent, and the client is on track to cut outside agency usage by 60 percent during the first three years. The arrangement also implemented lower standardized pricing for contingent labor, minimized the number of contingent labor providers, established quality standards, and streamlined the talent-acquisition process for hiring managers and candidates.
StorageTek selects RPO to build a better team.
Months into the due diligence on a strategy to outsource employment recruitment processes, project managers at global technology company StorageTek had reached the point of interviewing providers when they read an article in this magazine listing 13 vendors offering end-to-end recruitment process outsourcing. One of the companies especially caught their eyeKenexa Corporation.
Unfortunately, no request had been sent to Kenexa for a proposal on the job candidate sourcing and acquisition project. Meanwhile, the deadline for determining a provider loomed. We were at the stage of interviewing final candidates, says Cindy Fiedelman, staffing operations manager at Louisville, Colorado-based StorageTek Corp., which markets innovative storage solutions that protect a companys critical business information.
In fact, the company had whittled down the list of candidates to two when they decided to interview one more company. They called us out of the blue one night and said they had read an article in HRO Today called The Lucky 13, in which we were checked off as a buyers choice, comments Elliot Clark, chief operating officer of Kenexa. We were brought in at the eleventh hour to explain our value proposition.
Kenexa scrambled to put on a good show, preparing a one-hour presentation that stretched to more than four hours after the curtain rose. They thoroughly evaluated our approach to recruitment process outsourcing and change management, says Clark. They looked at how detailed our methodologies were as far as outsourcing process maps and guidelines. They talked to our IT people. And then they asked about our 24-hour operating model, a no sunset concept where our overseas locations provide research and candidate name generation to our 250 North American recruiters.
Clark says the discussion over the model sealed the deal. As we described the concept, one of the people in the StorageTek delegation started laughing and said this was how they did applications development work around the globe, he notes. I think we all felt cultural synergy. Fiedelman agrees: The chemistry seemed to click. They were the kind of people we knew we could work with. A deal between the companies was signed in the fourth quarter of 2004, and service to StorageTek began on January 1. The multiyear agreement calls for Kenexa to assume responsibility for managing the North American staffing operations below the executive level at StorageTek, although the original concept anticipated for the near future by both companies was to roll out the RPO strategy worldwide.
Like many large employers, StorageTek (with 2004 revenues of $2.2 billion) was attracted to an outsourced recruiting model because of the need to fill job ranks quickly and cost-effectively with high quality applicants. Several recent surveys paint a dire picture of companies unable to fill rapidly diminishing employment ranks with the best-of-the-best. According to the U.S. Bureau of Labor Statistics (BLS), 24 million workers are expected to exit the labor pool by 2010, and within the next three years, BLS projects that 10 million more jobs will be available than workers to fill them. Another survey, by The Conference Board, indicates that 79 percent of CEOs rate availability of talent as their number one concern.
To address these ominous issues, StorageTek sought to liberate its HR professionals from sporadic, time-consuming recruitment tasks to focus on more strategic staffing needs and partnering initiatives. Outsourcing fit the bill neatly: Kenexa is now accountable as the single source for StorageTek staffing operations, applicant tracking, and data management. They are also responsible for engaging and educating StorageTek managers to better understand and execute their role in the recruitment process.
Weve been through two iterations of recruitment models at StorageTek to try to meet the needs of the business, says Roger Gaston, StorageTek corporate vice president of HR. A lot of people think we went to employment process outsourcing because of the cost savings; while cost reduction was a component in our decision making, it was not the biggest reason to consider RPO, Gaston confides. The real value was our ability to access a state-ofthe- art recruitment system and dedicated processes for resume search, Web search, Web crawling, candidate screening, and applicant management that could enable StorageTek to achieve its objectives of reducing time to fill and to increase the quantity and quality of our applicant pool. This technology was not going to be high on the priority list at StorageTek, in terms of allocating resources to acquire it or in the queue for our systems people to work on internally. We wanted best-in-class recruitment capability, and outsourcing was the way to get that now.
ON THE JOB
Recruitment process outsourcing (RPO) is currently one of the hottest areas within HRO. The strategy offers companies more than the opportunity to access a providers state-of-the-art job candidate database. RPO also provides entre to highly trained and sophisticated job recruitment professionals who can quickly fill workforce ranks with top talent.
During peak hiring periods, organizations must use external resources like extensive advertising, agencies, or independent contractors, who may not be available for the next peak period, Clark explains. This causes costly knowledge transfer. By outsourcing, companies have more flexibility with infrastructure costs than with internal resources where costs are fixed. The costs of staffing professionals assigned to an organization are shared with other clients during periods of the year when the organization is doing little hiring or is in a hiring freeze.
StorageTek had been hunting for a world-class recruitment process for the past five years. The company, with more than 7,000 employees located in 32 countries serving more than 17,000 customer sites worldwide, had tried introducing both centralized and decentralized models to reduce the time to fill open positions in its direct sales force, field service organization, and R&D engineering staff. Both recruitment strategies ultimately fell short in delivering against business needs and expectations.
Initially, we had a very centralized recruiting function for our global business positioned out of our headquarters in Louisville, just outside of Boulder, Gaston explains. We decided to decentralize that model and push our recruiters out in the field closer to their clients. When we looked at the effectiveness and productivity in what we were accomplishing, closing jobs quickly with quality people, we realized we werent meeting the needs and requirements of the business. We needed to consider other options.
At the time, StorageTek was in the thick of examining HR outsourcing to increase productivity and reduce the hands-on transactional elements of the HR processes. We had decided to change the face of our entire HR organization into a business partner focus. This demanded a reconsideration of the time and resources dedicated to the transactional elements of HR, Gaston explains. As we began exploring the components of our business that would benefit from outsourcing, the recruitment process jumped out at us. We created a Six Sigma black belt project around recruitment to arrive at the root cause of our inability to effectively support the organizations recruitment needs. While several actions were identified from this black belt project, consideration and exploration of outsourcing the recruitment process was at the top of the list.
Fiedelman says the Six Sigma effort identified different processes for improvement within recruitment and on-boarding (the post-hiring activities involving new employees). The biggest issues we faced were cycle timethe time to fill jobs here had become inordinateand consistency in the process, she explains. We needed to do things the same way across the organization. We also had issues regarding candidate quantity and the quality of the candidate pipelines. Our ability to have a strong number of solid candidates available for open positions was lacking. We often were in a reactionary mode and would only address these issues as needs came up. From a cost perspective, this was a problem.
Another problem was the need to hire expensive external recruiting agencies on an ad hoc basis to meet hiring demands at peak periods. On average, StorageTek hires roughly 1,000 people a year. When you rolled all these concerns together, says Fiedelman, outsourcing offered the long-term solution that made the best sense.
Kenexa was chosen as the provider for its technology platform, specialized expertise, and variable cost recruitment model. They scale their model appropriately to our spikes in hiring, Fiedelman says. They assign a team to usa set number of people. As our demand goes up or down, they manage through that without it costing us more. Our hiring managers still make the hiring decisions, but it is Kenexas responsibility to refer and manage this hiring.
Kenexa also demonstrated the ability to target appropriate job candidates. In addition to posting notices on job boards or in newspapers or on career sites, they had the capability to create target lists and do proactive calling into organizations where we knew we wanted to hire people, Fiedelman says. That was the big kicker. We had a hard time finding other companies with that capability.
Kenexa offers a broad menu of services, including sourcing, vendor management, and hiring process management. StorageTek opted for a full solutionstaffing department management, on-site staffing support, multi-channel sourcing strategy, development and execution, employee referral program administration, direct recruiting services, talent management, applicant tracking, and employee engagement measurement. We are their entire staffing organization in the United States below the senior executive level, says Clark. Its a comprehensive solutiona complete RPO.
StorageTek joins several major RPO customers at Kenexa, including Microsoft, Amgen, Corning, and Schering Plough. Kenexa began life as a privately-held, pureplay executive search firm in 1987 before transitioning into a provider of large scale recruitment project management five years hence. Today, it employs more than 550 people worldwide at its U.S. headquarters in Wayne, Pennsylvania; Asia headquarters in Hyderabad, India; Europe headquarters in London; and its employee research center in Lincoln, Nebraska. The company went public June 24, 2005.
The process for hiring at StorageTek today begins with a formal job requisition made by a business unit or functional department using Kenexas technology platform. Once the requisition is approved, the hiring manager meets with Kenexas on-site recruiter to scope out exactly what is needed, Fiedelman explains. This information is delivered back to the sourcing center at Kenexas Wayne headquarters. Their people now begin early discussions with candidates. A slate of people is then submitted back to the on-site recruiter who takes the next step in the interview processdetermining with the hiring manager who to bring in for the interview, given certain metrics around the number of people they need to see for every search. Once the hiring manager meets the candidates and the selection is made, a recruiting team from Kenexa puts together all the administrative components of the job offering, equipping the new hire to be ready for the first day of work.
StorageTek anticipates the RPO agreement will be cost neutral for the first couple years, and then begin reaping dividends once the new process becomes routine. Its already beginning to click in terms of hiring managers understanding the true value of a recruitment partner, says Gaston. Plans are being discussed as to the dynamics of rolling out the strategy worldwide, although they are potentially complicated by the recent announcement that Sun Microsystems is buying StorageTek for $4.1 billion. Sun has an RPO agreement in place with another outsourcing provider. Our plan has been to start here in the United States and analyze the potential for a global rollout, says Gaston. We felt the complexities of going global right out of the gate were more than StorageTek wanted to bite off.
Clark is hopeful that the relationship with StorageTek will continue beyond domestic shores. We were in the midst of putting a timetable together (for a global strategy) when the merger was announced, he notes. But, weve had some great outcomes with them so far, and Im optimistic. I know Sun also is a company that appreciates outsourcing and is undergoing a significant HRO effort. We look forward to the opportunity to work with them.
Whether or not the engagement becomes worldwide, the RPO endeavor remains significant for several reasons. Says Gaston, A significant portion of our employees are in the United States, and that is where weve had the biggest push in the last year and a half as far as recruitment to meet the needs of both a growing Sales and Services organization and a highly technical Research, Development and Engineering organization. Like all big projects, this is a work in progress.
MEASURING MAKES PERFECT
In implementing the recruitment process outsourcing project, StorageTek and Kenexa pulled together a team of project managers and technology implementation consultants, which launched an exhaustive 90-day process of planning, mapping, and measuring. We looked at data and systems, basically the reports that StorageTek previously had generated, and then mapped out all the technology and the data interchanges between their HRIS system and our applicant tracking system, says Elliot Clark, Kenexa chief operating officer. The idea is to have our system seamlessly update their HRIS system every night.
Once the mapping was completed, the project team assembled a change management plan that was rolled out across the company in road shows with key executives. We believe that any service providers world should be about living inside the customers world, Clark says. What people buy from Kenexa is speed, cost reduction, and quality, but what we sell is process, execution, and measurement.
The road show introduced the planned changes and solicited feedback. StorageTek has very tight product development cycles and a lot of what the executives were concerned about was speed of execution, Clark notes. They wanted to know if we could fill jobs quickly with high quality people and measure this to be sure it took place. We had several executive sessions that culminated in very detailed service level agreements.
The SLAs are proprietary, although Clark says they are tied to two tiers of metrics. The first tier includes routine metrics like average time to fill a job, cost per hire, customer satisfaction, and various diversity indices. The second tier pulls business outcomes data, which is analyzed by Kenexas statisticians at its employee research center in Lincoln.
Their job, in part, is to evaluate the correlation between hiring practices and business outcomes, Clark explains. They measure things like the relationship between job retention and profitability, using data on absenteeism, workers compensation claims, job turnover, etc. With their analysis, a new hire will be correlated against certain outcomes that can be translated into business dollars.
Since implementing the full RPO in January 2005, StorageTek has seen significant improvement in those processes and metrics that are easily measured in weekly and monthly timeframes. Overall, both parties are pleased with the progress of the relationship and look forward to seeing the positive impact on long-term profitability of the organization.
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