It’s a big world after all, especially when trying to understand the essence of a global outsourcing engagement. Understand that no provider in the market has yet developed competent delivery capabilities.
What in the world is global RPO? No one is quite certain what it is, but be assured it is coming. It is part of a natural evolution of this increasingly important and successful part of the HRO industry. To truly understand global RPO as a concept, one must understand the genesis of RPO and where it is today and where it is going.
First, let’s discuss how to define RPO. This is the subject of considerable debate. RPO engagements take two forms. Rather than debate the terms, it is better to review the forms of service. One form of RPO is “event” driven and tends to be “project” oriented. This form usually involves managing a given number of hires in a given time period. It is event driven as it almost always relates to a new product launch, a new facility opening, or some other defining event. These project- or on-demand RPO programs are measured on meeting specific number of hires.
The second form of RPO is ongoing management of specific parts of or all of the staffing processes for an organization. In this format, the provider organization becomes part of or the entire staffing department for a multi-year engagement of typically 3 or 5 years or longer. This form of RPO service involves considerable responsibility for process excellence. It begins with a comprehensive implementation strategy and a change management protocol as the provider organization integrates with the retained staffing organization. This form of RPO is closer in concept and design to benefits outsourcing, payroll outsourcing, learning outsourcing, or even enterprise, multi-process HR outsourcing.
Estimates by executives at several of the HRO Today Bakers Dozen RPO providers say as many as one third of current RFIs and RFPs asking about global delivery capability. This level is a dramatic escalation in global capability from just a few years ago.
What Buyers Want
I recently had the pleasure of attending one session with the RPO Buyers Group of the HROA. In the session discussing upcoming survey research, we received feedback on the topic of global RPO. While many buyers admit having interest in employing one worldwide provider, a new term emerged in the meeting that should be seen as part of the debate about what is “global “RPO.” This new category was termed “multi-country” RPO. In short, many ongoing RPO engagements involve more than one nation. For example, many U.S. providers recruit for companies in both the U.S. and Canada. This is multi-country. Does this then qualify as global RPO and a global RPO provider? One hardly thinks so. In fact, Canada is not considered international by most U.S. providers, but Mexico is considered international because Spanish is the native language. It can get confusing.
One of the executives at the meeting questioned whether he had a global RPO engagement because his company received service in 14 countries. This seems a pretty good candidate for a global engagement, but the organization had never viewed it in that fashion. It needed support in multiple countries, and one of the providers had the right solution for its needs in the right countries. The format of the engagement was not so much the issue as the number of countries. This example shows that employers buy a “solution.” They are always evaluating the quality of the mousetraps currently used and seeking a better one for the future.
The reason so many inquire about global RPO is that they are beginning to recognize that there is a potential for considerable economies of scale. In fact, the buying community seems most concerned that any solution that can bring cost reductions can also bring process excellence. In the 2008 HRO Today Bakers Dozen RPO Survey of 262 current buyers, the results demonstrated cost is not always the primary driver of outsourcing staffing. This does not mean cost is not a factor, but it shows that quality of process and access to technology are also key components (Fig. 1).
The buying community clearly is ranking scalability and the improvement of process-related outcomes as critical to the outsourcing decision. If this type of calculus is true, how does it translate into the purchase decision of global RPO? Clearly, buyers want formatted solutions, and they are justifiably concerned about an RPO solution set from any provider that requires significant development to be functional. Metaphorically, they do not want to build an RPO race car during the race.
One other significant obstacle is the internal HR departmental structure. Staffing is typically owned by local HR and has a dotted line to the corporate staffing functions. Local country HR managers resist a globally centralized solution, arguing that no one can understand the intricacies of their local labor market as well as they do. These internal organizational structures make the prospect of global RPO under any definition the latest source of “geo-political tension.”
What Providers Provide
Domestic RPO for most enterprise providers that perform multi-year RPO services is genuinely about process excellence and efficiency. They specifically organize their businesses to provide clients with scalability, top-tier technology solutions, and strong process measurement and execution. Many of them are now established or are building service centers that perform data management activities or actual candidate contact activities from remote locations. Some North American providers have established centers in India, Mexico, or Western Europe. Some of the major European firms have established centers in Eastern Europe and central service centers in Asia.
To clarify definitions, global RPO should not be about a service center in India performing recruiting activities in the U.S. Rather, it should be about performing services for the same client on several continents or countries under the aegis of a single agreement. Providers purport that they have or are close to having global capability. Some U.S. providers, however, still do not understand the cultural and regulatory complexity of doing business in other countries. These less sophisticated providers are the ones that make buyers nervous.
Clearly, global RPO must evolve. Its evolution will not mirror the evolution of RPO itself. Most RPO providers began doing work on a project or on-demand basis. They developed infrastructure, technology, and process capability over many projects and then the competence to secure multi-year engagements. To evolve the same way, global RPO requires significant investment in overseas capability or beginning a project business in many countries. Even if the providers go this route, there are start-up business expenses. Either way, to achieve global RPO ability, providers will have to make considerable investment. The RPO providers best positioned to do this quickly are the ones that are growing up inside global staffing firms. These firms have can leverage infrastructure and local expertise in many nations, yet few have been able to build an RPO business that crosses regional or divisional lines. Pure-play RPO firms are also quickly exploring or investing in global capability.
What Are the Barriers?
If we step back and say the definition of global RPO is the simultaneous delivery of RPO services by a single provider to a single client in more than one of following regions—Americas, EMEA or APA—and a solution that spans several countries within those regions, then we have a large, complex, and challenging program requiring global change management and governance on both sides.
The challenges to the development of global RPO are no provider has yet to develop a truly global delivery capability, and no one will buy global RPO until he believes it exists. Buyers must also believe that the engagement can be centrally managed but locally delivered. Providers must be willing to make the investment to address these concerns.
The good news is that many buyers and providers are rapidly coming together, and a small number of global programs are being managed today with many new ones being contemplated based upon the definition in the paragraph above. So far what we hear at HRO Today is that these existing programs, while challenging, are for the most part successful so the trend will only accelerate.