Representative of the new breed of RPO buyers, Open Text is rewriting the book on strategic recruitment around the globe.
By Andy Teng
When it comes to sharing the secrets to a successful RPO engagement, Tony Preston is an open book. That’s because the senior vice president of HR at Open Text, a global enterprise content management company, is an evangelist for the back-office practice, having outsourced recruitment for the past three years. During that time, he has witnessed a mostly immature market blossom into a robust industry that is enhancing many organizations’ most important asset: their human capital. And along the way, Preston is enjoying all the benefits it has to offer.
Reflecting the changing winds of the RPO industry, Preston and Open Text represent today’s mature buyers—a breed of practitioners who are done with pilots and experimental initiatives after working out most of the kinks in their engagements. These buyers have graduated to the next evolution in RPO, one that is comprehensive, standardized, highly technologically leveraged, and increasingly global. In fact, it was because Open Text was constrained by disparate services around the world that it consolidated its programs under one provider—SourceRight Solutions (formerly Spherion)—to simplify and improve efficiency. What it ended up today is a global program managed by a single provider, allowing the company to adopt the proverbial one-throat-to-choke model in its recruitment efforts and unleash its internal expertise on strategic rather than administrative tasks.
“Frankly, there really isn’t a lot more important or strategic work than recruiting new talent into the organization,” Preston said. “And after three years of working through the bugs of an RPO relationship, we felt there were some significant things we probably needed to take out to market and see what else was offered. And for us, probably the most critical thing was recruiting and the accurate, timely ability to get the best candidates into the company.”
Talent the Differentiator
If Preston seems to read like an HR textbook, it’s because he’s honed in on one of the most important aspects of today’s hot-button topic: talent management. No decent world-class organization—or even those aspiring to be one—can seriously plan for growth without examining its talent needs. As a technology business, Open Text would be hobbled without a steady incoming flow of talent. Sure, there’s a recession and most organizations are not expanding headcount, but Preston knows that like many tech-sector enterprises, his company loses 10 to 12 percent of its workforce annually due to regular turnovers. That’s not even considering the additional bodies he needs to fuel the company’s rapid growth, which is averaging 5 to 7 percent a year even in this economy. With a workforce of 3,000, Open Text is expecting to hire between 400 and 800 new professional and managerial workers this year, with possibly more if the economy finds its legs later in the year.
With its RPO engagement now second generation, Open Text took a very important but difficult step as part of the current iteration. By consolidating services under one vendor, the company is embracing a true global model. That means practices are standardized, the technology platform is the same in the U.S. as in Europe, and company executives have consistent access to data. But that also means a different set of challenges, according to Preston, who previously had employed another provider for North American recruitment but felt the need to consolidate the vendor to maximize efficiencies and clarity.
“For us, being a global company, one of the key factors that we have struggled with before is having different regional contracts with different companies. The problem that was created for us was there was no consistent reporting, no transparency of lifecycle of recruiting or managing the employee into the business, so we could never get consistent reporting end to end that said the same things because we were dealing with different vendors,” Preston explained. He added that for instance, the cycle time for European employees to leave sometimes spanned as much as six months, depending on the labor contract he or she has with the old employer. That means the new employer will have to plan for a longer transition.
Although the contract with SourceRight Solutions has only been deployed for about six months, Preston figures the deal will play a pivotal part in his company’s long-term talent acquisition strategy around the world. As robust as company growth is now, the scalability of an RPO solution may become even more critical when the economy begins to recover and Open Text ratchets up hiring. Under its RPO contract, the company hopes to shift 85 percent of its permanent hiring volume to the vendor, which will be responsible for the entire end-to-end hiring process, from sourcing candidates through new employee on-boarding. In addition, the solution includes a single technology platform that manages candidate tracking as well as provides data and analytics that Preston and his team can leverage.
But it’s the global aspect of the contract with SourceRight Solutions that is the linchpin of Open Text’s revamped recruitment strategy—one that ensures its talent needs are met efficiently, cost effectively, and with quality candidates. And those are mostly the reasons why a growing number of employers have been considering and embracing RPO these days. What’s changed about the marketplace recently is the geographic integration of programs so buyers can better manage their hiring practices everywhere they operate. This has been a significant step toward industry maturation because international organizations have for years asked for a single solution that would tend to their needs in various regions. However, most RPO vendors lacked the global reach; even now not a single one actually has RPO infrastructure everywhere around the world. In fact, most global engagements are being achieved through partnerships among various providers. In the case of Open Text, SourceRight Solutions is partnering with provider CDI to support overseas hiring.
For Preston, the idea of a two-provider solution might seem similar to what he had previously employed, but the difference this time around is that unlike his prior approach, Open Text now has only one vendor to hold accountable. Moreover, processes and technology are standardized so it expects more consistent results.
Indeed, that may be the attitude of many buyers as they consider adopting RPO on a global basis. Many have for years outsourced HR services that were provided by a network of providers, some of whom functioned as Tier 1 vendors that managed other suppliers. Partnerships have been a foundational practice in the HRO industry, and it appears RPO practitioners are now confident enough in their providers to accept service delivered through a combination of vendors. Some observers say this stems from both a maturation of the RPO marketplace and practitioners’ need for recruitment support around the world.
“I would tell you that I clearly see a pick-up in interest from a global perspective for all the reasons as it relates to a global economy and folks looking for skillsets outside of North America,” said senior vice president, RPO services, Rebecca Callahan of SourceRight Solutions. She pointed out that program consolidation has clearly emerged as one of the big trends in talent acquisition and that employers are looking to not only consolidate the number of vendors but also the various programs covering permanent, contingent, and temporary staffing. In fact, even though such a movement has roots in the European market, where companies spend a proportionately higher percentage of their staffing costs on recruitment agencies, it’s clear that reaping economies of scale has become a priority of HR leaders everywhere.
Such a lofty goal might not have been so easy to reach a few years ago, when the RPO industry was still building out. Indeed, when Open Text first began outsourcing RPO services three years ago, the market was just getting ahead of steam as many employers began investing in pilot recruitment projects. Since then, RPO has pretty much gone mainstream, winning acceptance in organizations large and small, domestically and abroad. In fact, in addition to a crop of new vendors emerging onto the scene, offering specialization in various industries and practices, the market is perfecting various outsourcing models that give practitioners more or less responsibility in the recruitment process, depending on their needs. Clearly the practice has achieved a new level of sophistication.
Reaping the Benefits
Such evolutionary changes are bringing a new level of benefits to practitioners like never before. For Preston, being able to source 85 percent of his company’s candidates from one provider has clear advantages. For instance, SourceRight’s team will be more familiar with Open Text’s global talent needs than any other provider in the past. In addition, the single technology platform and standardized processes mean HR leaders can more easily track metrics and identify problems early on. Furthermore, by reducing agency spend, the company expects cost per hire to decline markedly. And of course the partnership’s global footprint is critical to Open Text because its two largest recruitment areas are located near Munich, Germany, and near London, England.
Benefits can be reaped for the short term and for the long term, and Preston said he believes the company’s current RPO engagement will produce results that are equally satisfying. In the short term, he said, Open Text’s return on investment should enable it to realize savings quickly. In the long term, however, it is ensuring that the company has an ample pipeline of candidates to source from. Although that’s a ROI more difficult to quantify, it is also more valuable to a company with high-growth aspirations.
These gains don’t come easily, however. As any outsourcing practitioner will point out, a successful program—whether recruitment HR administration or even plain ol’ payroll—begins with diligent vetting of vendors, a well-orchestrated change management effort, and vigilant governance of the deal. Without these elements in an outsourcing deal, buyers may experience a myriad of letdowns that ultimately could poison the viability of the contract.
Preston understood these dynamics early on, and he pointed out that Open Text was careful in planning its global RPO engagement. Initially, he only considered the largest players selected in past years’ RPO Baker’s Dozen. He then worked with Open Text’s procurement department to develop what he described as a “robust” request for proposal—a process in which a field of around 10 vendors was pared down to three. This required close scrutiny of each provider’s capabilities, he recalled, including conducting site visits and interviews with referenced clients.
When he began the process last year, Preston said the marketplace still lacked the ability to deliver all the capabilities Open Text needed. However, a few providers demonstrated strong potential to eventually meet its needs, he said. “At the beginning they all seem to offer very similar things, but as you begin to peel the onion, you learn very quickly they were either very strong at recruiting and not very strong on the back-office technology side, or the other way around,” Preston noted.
However, recruitment expertise was considered the most critical component of the solution, and Preston said he felt SourceRight Solutions—which under the Spherion brand—had stood out for its recruitment and offered a blend of process and technology knowledge with candidate sourcing insight. Without such recruitment expertise, his hiring managers would lose confidence in the RPO solution and look to agencies to fill their openings, which would marginalize the value of the RPO provider. It’s a concern echoed by practitioners everywhere, especially those who are sensitive to cost overruns.
But as in any partnerships, the vendor had its own concerns with taking on a new customer. As part of the due diligence process, SourceRight Solutions had to send its teams to various parts of the world to collect data about the prospective client; that was an unusual experience for the company, which had previously operated in a mostly domestic environment. Furthermore, because Open Text had operated disparate systems, it had trouble producing some of that data itself.
Because some of the company’s overseas operations experienced mixed results with RPO, SourceRight Solutions faced an uphill battle when it brought in its processes and needed to quickly convince hiring managers there that it could more effectively tend to their needs, added Annamarie Phillips, vice president of SourceRight Solutions’ RPO practice. “The European operations had struggled a little bit with the European provider. We needed to win these people early on,” she added.
Instilling confidence in hiring managers was no small task, especially considering that Open Text was one of SourceRight Solutions’ first global implementations, so the lack of experience or presence in Europe did raise concerns about whether it could deliver the quality of service required. However, after the provider laid out a comprehensive plan with its European partner, Preston said any fears were allayed.
This was just one of a number of concerns pertaining to compatibility, which can only be assured if provider and buyer share similar cultural values. Vetting vendors by cultural fit can be tricky if the buyer is unsure of its own culture and goals. However, as any good outsourcing practitioner would advise, HR needs to further involve all of its stakeholders so a good fit with the vendor is assured before the companies enter into a partnership. In Open Text’s case, Preston solicited the opinions of his business colleagues on the solution to ensure they would turn to SourceRight Solutions for their recruitment needs.
“This was not an HR solution; this is a company solution. That’s [the approach] we always came from in that we all win or we all lose by this strategic solution to bring in the right talent. Even though we manage the contract, it does affect every part of the business,” he said.
Preston conceded that while it’s too early to tell if the service will eventually improve recruitment in the long run, so far it has produced some clear benefits. Anecdotal evidence including feedback from hiring managers suggests there isn’t the level of internal resistance that had been feared; also hiring managers appear more confident in this solution than its previous patchwork of vendors. And even when it comes to implementation, the rollout has gone mostly according to plan, with a few minor issues that required a little more time to resolve than the two companies had anticipated.
What will be more telling about the success of the contract, however, is the company’s assessment a year after implementation. If SourceRight Solutions can deliver according to contract terms across all of Open Text’s markets, and if it truly embeds itself as a pivotal tool in its client’s global talent acquisition strategy, it won’t be hard to read Preston’s thoughts about RPO, which will surely be positive.