Annual RPO Alliance survey reveals good and bad news for providers. Buyers are reluctant to outsource more, but they also admit to not being well-informed about the marketplace.
Recruitment process outsourcing (RPO) might be one of the hottest sectors in HRO these days, but most employers still have not engaged in this proliferating service, according to survey results recently released by the RPO Alliance, an industry trade group representing service providers. In gauging the interests of 3,500 employers, the group reported that only 42 percent outsource recruitment with the largest organizations reporting the highest rate of deployment.
Despite rising attention to RPO in HR, the rate of adoption might not edge much higher than 42 percent, the survey, conducted in the third quarter of 2005, found. While it was not surprising that small and mid-sized businesses were less enthusiastic about outsourcing recruitment, what the survey also revealed was that 44 percent of current buyers said they don’t plan on expanding their RPO program. This was especially true of companies with more than 50,000 employees.
According to the RPO Alliance, the survey, which is conducted annually and will again be compiled later this year with more probing questions, indicates that the marketplace needs more education and communication. It served as a launching pad for the Alliance to put together tools to reach a larger audience.
“We felt that people wanted information about RPO, and the survey bore out that there is a lot of hunger,” said Jason Berkowitz, VP of business development for Hyrian and the head of the Alliance. “The challenge for the industry is that people don’t really understand what RPO is. They have a visceral understanding, but they don’t have a thorough understanding.”
As any HR manager under a deadline to fill a position knows, RPO is perhaps the go-to tool these days. Not only can it help employers source quickly, but it also can speed up the screening and on-boarding steps at a considerably lower cost than internal efforts. Thanks to cutting-edge technology that many RPO providers bring to the table, clients also get access to goodies such as candidate tracking.
And that’s why, according to the survey, many buyers look to RPO. Among key benefits cited by employers, the biggest block said lower cost was the No. 1 reason for using RPO; just as many said faster time to hire was the second-most important draw. Other reasons cited for using RPO include gaining access to technology, integrating multiple sourcing channels; enhancing quality of recruits; and limiting the number of third-party providers.
Clearly, the traditional reasons for companies to engage in HRO are also those driving RPO: costs, quality improvements, and access to technology. Moreover, use of RPO appears to be across myriad functions, including sourcing, screening, testing, performance tracking, administration, on-boarding, vendor management, and others.
If you want to find companies employing RPO, look for these telltale signs: global employers with tens of thousands of workers and operating in the service industry. About 75 percent of organizations with 50,000 workers or more said they use RPO in one form or another. The penetration rate decreased proportionally with company size. Among those surveyed with 1,000 workers or less, the penetration rate was only 20 percent.
Among those who outsource, here are the kinds of employees they outsource for: 37 percent use RPO company wide; about the same do so for contingent and temp workers; 23 percent are for non-exempt administrative positions; 26 percent are for exempt professional jobs; 15 percent are for specific business units; and 23 percent are in other areas.
Despite strong growth in the RPO market, the survey also revealed continuing concerns about the service. For instance, many organizations say they view RPOs troublesome for several reasons: perceived loss of control; possibly scrapping current investment in people and processes; a decline in quality of hires; and unfulfilled cost-savings goals.
For instance, employers said that a decrease in the quality of hires was their biggest concern, followed by time to hire and cost of hire; still others cited the quality of recruiters and hiring managers’ satisfaction as perceived problems with RPO. In fact, 46 percent of respondents said they would not increase the amount of outsourcing in recruitment, with at least one-third of companies in each size category echoing the sentiment.
The reluctance to outsource recruitment was most clear among small employers. Of those surveyed not using RPO, 58 percent were companies with 1,000 or fewer workers. Only six percent were from companies with 50,000 or more employees.
Those employers not outsourcing, don’t blame their lack of knowledge about the existence of RPO as the reason for holding out. In fact, 84 percent said they were at least somewhat familiar with RPO, indicating that they consciously stayed away. They cited reasons such as their small company size, inability to define an RPO fit, no compelling reason for RPO, a useful existing internal process, and poor past experience. As a result, 63 percent said they don’t plan to outsource.
What does it all mean? According to Berkowitz, the numbers tell two stories: RPO is well recognized among employers, but the signs show few converts ready to adopt RPO en masse. Still the market may be able to change that through greater education because while an overwhelming majority is somewhat familiar about RPO, only 16 percent considered themselves knowledgeable. And that offers potential for the market to tap.
He added that the Alliance is now developing tools to help buyers and providers speak the same language. For instance, employers often have a different understanding of terminology than the provider community. By putting both sides on the same page, there is less misunderstanding of RPO and how it can better serve employers, he said.
“I think we recognize there is a real educational opportunity out there to help buyers or prospective buyers to understand RPO,” he added.