BenefitsEngaged Workforce

CEO’s Corner: RPO Market Outlook: Boom Not Doom

A letter from HRO Today CEO.

by Elliot Clark

Markets talk in all kinds of way. As we all know, markets are composed of two groups: buyers and sellers. We almost always hear from sellers. They issue press releases, post advertising, and have robust web sites.

Buyers are more subtle. We need to analyze trends to know what they are thinking. This month we analyze in great detail the responses of 262 buyers who responded to our RPO Baker’s Dozen Survey. They are telling a great deal about the future of the industry. We congratulate The RightThing, Inc. for being the top-rated RPO firm of the top 13 firms. We also congratulate Alexander Mann Solutions for being the top of the RPO Global Leader List and Accolo for the being the top-rated Project/On Demand RPO solution provider.

We also have invaluable aggregate market data. You can find this in the web cast on www.hrotoday.com, and we will cover it in more detail at the upcoming RPO Summit along with another intensive qualitative survey being published in that program (see http://www.rposummit.com/agenda.asp ).

Our aggregate survey showed a high degree of customer satisfaction with RPO. That is not to say there have not been poor outcomes or problem implementations. But, on the whole buyers are very satisfied with RPO. Statistically, satisfaction was also higher than other industry segments.

The first buyer trend we saw was the increase in deal size related to hiring volume. This year we cataloged 36 programs that exceeded 2,500 hires per year and 14 that exceeded 5,000. When looking at satisfaction on these programs, the numbers were very good. RPO is now an option for major global employers and it seems to work. We asked if the buyers saw the provider as an “extension” of their team. The “Strongly Agree” group was 58 percent and the “Agree” group was 34 percent for an overall 92-percent agreement. RPO firms are doing a good job integrating with their clients.

The last question we will cover here is whether the buyer would refer a friend or colleague to their provider. The response showed 56 percent strong agreement and 34 percent agreement for an overall 90-percent agreement. This is vastly superior to what we have seen in other surveys using the same sample selection methodology.

But will all the goodwill save the RPO industry from an economic downturn? I have heard that question a great deal. Certainly, success fees are affected by slower hiring. The firms that are more focused on non-exempt hiring will suffer the most on this point. However, what we have seen in the past is that as the economy suffers, internal departments become more resource constrained and the use of agencies and advertising rises in the first few quarters of a downturn. The pressure to reduce corporate G&A then leads companies that have not outsourced to pursue that path to reduce costs.

This leads to an influx of new customers for established firms, ameliorating the impact of the reduced success fees from existing engagements. In the first two quarters, sales pipelines swelled but deals did not close as the macro market took a “deep breath” to appraise the economy. After this period, the CHRO or the CFO will order the budgets reduced, and RPO engagements will be signed. We may see a few weak providers fail, but the top tier of the market will continue to grow. We saw this effect in 2002 and are still riding the wave off that economic downturn.

We will see more global deals and more consolidation, and RPO based on excellent service and customer adoption will continue to show strong growth rates for next year.

Tags: Benefits, Engaged Workforce

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