Back to the RPO Future

Industry experts give their insight into the future of recruitment and recruitment process outsourcing.

by Denise Doig

A few years ago, recruitment process outsourcing (RPO) was just another acronym being thrown around. Yes, there were a few early adopters who had the foresight to outsource their recruitment needs to an outside provider. But the past year has marked an explosion in the industry on multiple fronts: More companies are taking the plunge and outsourcing some or all of their recruitment processes; more staffing and recruiting companies are broadening their services to offer end-to-end RPO; and HR professionals are establishing associations, like the RPO Alliance and RPO Association, to develop standards and best practices.

What is the drive for this RPO growth? With U.S. job unemployment at its lowest point in four years, many of the hiring freezes and downsizings that were instituted due to the economy are being rolled back. Companies large, small, and in betweenare desperate to find the right people as quickly as possible. Many of these companies are seeking relief from the headaches associated with finding qualified candidates, scheduling the interview process, screening potential hires, assembling offer packages, bringing new employees on board, and simultaneously keeping record of the entire process. They are turning to RPO, which has been shown to save time, money, and aggravation. This years first RPO Bakers Dozen is a perfect example of the change in the industry. Many of the providers on the list can boast of an increasing number of contracts with broader and better results.

ADDRESSING THE SHRINKING WORKFORCE
With predictions that the United States is facing a labor shortage sooner rather than later, the recruiting and staffing field will more than likely be affected. But in what ways? Brian Margarita, CEO of TalentFuse, states, Recruiting and staffing should be very well situated to grow a lot, as long as we can find the internal talent who are going to find the candidates for our clients. As baby boomers rapidly approach retirement, there needs to be a well-educated, well-trained, and skillful labor force to take their place. There has been great debate if future generations will meet the necessary qualifica- tions for employment or if America will increasingly need to look to overseas workers to meet workforce needs.

Steven Berchem, VP of Communications and Research for the American Staffing Association notes, There just arent enough skills in this country to meet the growing needs of businesses and some of that comes back to our education system. There are two parts here: Do they have the skills and do they meet the customer requirements?

How can companies and recruitment professionals prepare themselves for these inevitable changes? As it becomes increasingly difficult to find qualified candidates, companies and their recruitment partners will have to think of innovative ways to search, source, screen, and hire employees. With the coming labor shortage, companies are not going to be able to be reactive in terms of how they go about identifying candidates. Being on job boards and doing the things they have traditionally done are just not going to work for them anymore, says Terry Terhark, President of The Right Thing. Theyre going to have to develop strategies that are a bit more far reaching and a bit more proactive in terms of going after those candidates who meet their profile. Companies and recruitment providers alike have to be prepared for this change in the availability, demographics, and quality of potential employees.

When asked how RPO providers might address the potential labor shortage, Berchem had several suggestions: Employers are going to have to look to seniors or older workers to fill their needs. Older workers may not want to work full-time, they may not want to work on a continuous basis, and they want breaks in their time. Employers are also going to have to look at recruiting for a more diverse workforce, particularly with Spanish-speaking populations. Other strategies include alternate workforces such as contingent, home workers, and temporaries.

ALTERNATE WORKFORCE STRATEGIES
In late 2004, IDC released a study about the increased use of home sourcing, which found that there were 100,000 home-based workers or remote agents in the United States and that number was growing. The airline Jet Blue, for example, began with 30 virtual employees in December 1999 and, less than six years later, that number has increased 30-fold to 900 home agents. Companies are seeing increases in productivity, work quality, and retention, and employees are satisfied with the flexibility that home sourcing allows. Another area of rapid growth is the contingent workertemps, consultants, or contractors who are brought on temporarily for specific projects. Contingent workers are expected to make up 25 percent of the U.S. workforce in the next five years. With the inclusion of home-based workers and contingent workers, there will be a growth in the talent pool.

RPO offers an opportunity for companies to better reach this pool of candidates, if, notes Karen Browne, Vice President of Operations for PeopleScout, the RPO providers learn how to source, screen, and manage these types of candidates. While the increase in the candidate pool is really going to be helped by the home employee, the one thing that RPOs are going to be required to do is also to have the technical ability to assess the talent in terms of the recruiting strategy. Of course, there are some drawbacks to this alternate workforcesuch as tracking employee time, managing work quality and performance, and legal issues such as workplace safetybut one of the advantages of outsourcing is that providers take on part of the responsibility for some of these issues.

Another growing staffing trend is temp-topermanent arrangements. Due to negative hiring experiences or an interest in flexibility, some organizations want to test drive potential employees. There is tremendous interest on the part of customers in temp-to-hire arrangements, so that businesses are using staffing firms as a way to not only recruit employees but also try them out in their roles first before actually making a hiring decision. Thats shown a lot of growth this year and promises to continue, says ASAs Berchem.

RPO FOR THE MID MARKET
Although many of the first adopters of RPO were global giants (like Kellogg and Hershey), RPO is not for the enterprise market alone. With the industry offering a growing pool of RPO providers, who now have measurable results and client references, many mid-market businesses are matching themselves with mid-sized or even regional providers.

What were hearing from large and small staffing firms is a shift away from an emphasis on the high-volume, low-margin business to greater emphasis on mid- and small-market employers. There is greater opportunity for growth there. With that shift in [consumer] interest, the sales interest will follow, says Berchem. According to Browne, RPO providers are also having increasing experience working with mid-market buyers, We see more mid-volume employers, and even our high-volume employers are moving us into some of the mid-volume positions.

Terhark has some tips for mid-market buyers looking to outsource their recruitment functions. As long as the company can do its proper research in terms of what specifically theyre looking for, in terms of outsourcing, they should be able find a provider that meets their philosophical as well as their real needs. Sometimes the larger firms arent the best to serve the mid-sized company, but there are plenty of firms out there who do high-quality work and will be more than happy to work with mid-sized organizations.

As RPO continues to grow and evolve, advisors recommend that potential buyers take the time to make sure their arrangement is best suited to their needs. Clearly define your organizations needs and goals. Then find an experienced provider who can not only meet those needs but also take you to the next level as your organization continues to grow. And buyers beware: A big name doesnt necessarily mean big resultslook for companies that can give you references that are applicable to your company (size, scope, industry, and/or culture.)

Perhaps most critical to successful RPO and improving your companys workforce and employee retention is having a good understanding of your current recruitment processes and future needs and goals. Companies should be well documented in what they hope to achieve through outsourcing, states Terhark, meaning that they should have good process already. If they outsource a bad process, their provider may have some of the same bad results. He also emphasizes that cost should not be the main driver in RPOits access to a better talent pool and improvements in efficiency. Browne adds, Its important for organizations to piece off what they are going to outsource, clearly understand what is the return on investment in terms of partnering, and make sure that they partner with someone who is very clear and metric based.

Posted July 10, 2005 in Talent Acquisition

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