RPO & StaffingTalent Acquisition

Editor’s Note: Rough Waters Ahead for RPO?

Latest decline in job growth raises questions of whether outsourcing will become an imperative or a distraction for employers. Conventional thinking may yet rule the day.

by Andy Teng

I am a regular reader of The Onion, the farcical news organization that poke fun of just about everyone deserving ridicule. On any day, even the ones in which I wished I hadn’t gotten out of bed, I’ll bust a gut scanning The Onion’s headlines.

One of my favorite news items was about the White House, in a budget-reduction effort, announcing a cutback in the hours of U.S. Labor Secretary Elaine Chao. A photo of Chao holding up a check was accompanied by the caption, “Chao displays her reduced paycheck.” You won’t find this kind of snort-inducing reporting in the Wall Street Journal.

The U.S. labor market isn’t so dire that we have to cut back the hours of cabinet members, but some recent employment reports aren’t all that reassuring either. According to the Labor Department’s August report, the number of Americans with jobs fell for the first time in four year, signaling a precipitous turn in the economy. Until now, job growth has been positive, if not robust, in the second term of the Bush Administration, but the latest numbers are worrisome, especially as the economy faces a terrible credit crunch in light of the sub-prime mortgage meltdown.

So that got me thinking: In a dynamic HRO segment such as RPO, what does the weakening labor market mean for industry growth?

If you are a conventional thinker, the tendency is to predict troubles ahead. One of the value propositions of RPO has been its ability to quickly fill positions in a tight labor market. Now that demand for labor is weakening, the argument to outsource seems to lose some of its merit. Employers should find it easier to recruit candidates on their own, and if the economy does take a dive, there won’t be much hiring anyway. That’s the conventional thinking.

But if I were a progressive kind of HR leader, one who is trying to better understand the business needs of my organization (and there are so few of us around), I’d say the outsourcing proposition would be greater in times of economic duress.

Look, to help reduce back-office expenses, organizations are much better off with a variable-cost model than a fixed one, regardless if your business is expanding or contracting. The fact that RPO minimizes internal HR headcount during business downturns—and can ramp up recruitment capacity during the ensuing growth spurt—is an awfully compelling reason to consider outsourcing, no matter where we are in the business cycle. RPO offers a level of efficiency, best practices, and accountability many internal HR departments lack.

Recruitment, as we all know, is a skilled profession, but too often HR generalists are ushered into these positions without proper training and the networking prowess good recruiters possess. Furthermore, even when an organization isn’t hiring, it doesn’t invest much time tracking candidates and maintaining a good pipeline of talent for future boom times. But for RPO providers, managing candidates is a 365-day-a -year activity, regardless of whether the broader employment market is up or down.

Considering these arguments in favor of outsourcing, how will the declining employment trend play out in adoption? You might think any initiative with a compelling business case will surely capture the attention of HR leaders, but I predict that growth in RPO engagements will cool a bit, driven by conventional thinking no less. HR leaders, a generally play-it-safe crowd, are probably less inclined to take on risks during rough times. Undoubtedly, a sense of self-preservation will likely surreptitiously creep into thoughts surround outsourcing .

That’s not to say outsourcing practices such as RPO will dry up; on the contrary, plenty of HR organizations are exploring outsourcing recruitment today and will continue to do so in the future. However, until we arrive at the day when HR leaders incorporate business considerations as a regular part of their decision-making process, and until they are willing to take bold steps to realize those business benefits, HR will not get a seat at the table. And any headlines touting HR’s importance to the business will more likely be found in the pages of The Onion than in the Wall Street Journal.

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