For the most part, the financial downturn has simply increased RPO’s value proposition.
By Debbie Bolla
The buzzword for RPO in 2010? Scalability. Just ask Kris Phillips, talent acquisition placement manager for manufacturing at Chrysler. “We obviously went through bankruptcy last year, so we found ourselves in a position when the tide started turning that we needed a lot of people very quickly,” she says. “In the past year, we’ve reestablished our entire talent acquisition group.”
Chrysler’s restructuring started by enlisting four placement managers (Phillips is one of them) to oversee different divisions of internal and external staffing for Chrysler’s increased volume of 2,500 hourly hires and 1,200 salaried hires. The company had a longstanding relationship with Aon for its contingent workforce, but made a strategic move to include full-time staffing in its outsourcing agreement when it found itself needing to staff up quickly. Phillips discovered this to be beneficial, since she could leverage Aon’s expertise to decrease her time to hire while increasing the quality of hire.
“For us, RPO was a necessity,” she notes. “We had lost our talent acquisition group, so we had no history, so we had to lean on our partners to have them help us through this. And it’s a big wave that keeps getting bigger. We continually get approval for new hires.”
As hiring volumes come back for Chrysler, the global economy on the whole is looking more up than down, which was certainly not the case in 2009. The Great Recession provided a challenging year for organizations, but strengthened RPO’s value proposition.
“Most organizations had to cut their internal staff considerably during 2008 and 2009,” notes Terry Terhark, CEO of The RightThing. “As we are starting to come out of this, RPO is being seen as a viable business option, and more companies are considering it as a way to do staff and recruiting in the future. One of the key drivers is the ability to scale up quickly.”
Predictability is another quality that favors the value proposition of RPO. Every level of every organization had to take a hard look at bottom-line figures. “In that economy, there wasn’t a single function, especially in HR, that wasn’t hit for a demand to reduce costs,” explains Jim McCoy, vice president for Manpower Business Solutions. Companies with RPO could say with exact specificity what it cost to bring talent into their organization. RPO became a way for companies to better predict what their costs for talent delivery would be.”
So perhaps it’s these two factors—predictability and scalability—that are boosting RPO’s numbers half-way through 2010. According to NelsonHall’s quarterly BPO index, HRO total contract value (TCV) revenue increased 38 percent in 1H10 in a year-over-year comparison to 1H09. This increase is due heavily to recruiting, which accounted for 32 percent of BPO deals, including wins from Manpower Business Solutions, Kenexa, OchreHouse, Pinstripe, CPH Consulting, Alexander Mann Solutions, KellyOCG, and PeopleScout (See Figure 1). Providers are also reporting Q1 revenues are up. SeatonCorp, Manpower Business Solutions, Kelly Services, SFN Group, Adecco, and Kenexa reported revenue growth up to 20 percent.
While the new economic landscape has proven RPO’s value, it has not left it unscathed. Providers are reporting that more sophisticated buyers are calling for more flexible contracts and co-sourced or hybrid models.
“Deal structures are changing now,” notes Bob Lopes, executive vice president for Aon. “Today, it’s transaction-based, and pricing structures are different. There is more pressure on vendors to produce.”
Today’s contracts don’t always include minimum volume levels and are often reviewed on a quarterly basis to make amendments suitable for buyers. A hybrid model, which supports multiple needs, is becoming a valuable option.
“A lot of buyers are looking for a hybrid model,” says McCoy. “A straight cost-per-hire or contract recruiting model isn’t as popular as a combination of the two. I think it’s driven by the uncertainty because some companies still don’t know exactly what they need. And budgets have come back faster in operating units than in HR.”
The restructuring of internal HR departments is another factor driving co-sourcing. “We are seeing a surge in requests for a co-sourcing model,” says Lopes. “Companies have decreased in-house recruiting to respond to expense control, but they might rebuild with some more strategic roles in place, and need outsourcing for administrative needs.”
Zain Wadee, director of hyphen, reports similar trends across Europe. “We are seeing companies like Logica maintaining a small in-house team to set up strategy for talent acquisition, but they will then partner with us for the heavy lifting. I’ve seen that trend with a number of organizations, a modular approach with what companies want to outsource.”
Something that hasn’t changed is the type of service level agreements (SLAs) that HR executives expect. Companies continue to seek RPO for cost containment, reduction in time to hire, and increase in quality of candidate.
Time to hire was a priority for Lucille Mason. With an annual hiring volume of more than 500, the vice president of human resources for Princeton HealthCare System took a leap of faith and entered a recruiting engagement with Pinstripe in early August 2009.
Working with a small staff of four recruiters, Mason says the overwhelming workload could no longer be effectively accommodated in-house. For example, she explains that the overabundance of applicants made sourcing and screening a major challenge for her staff. At a job fair in early 2009, she recalled 250 people showing up for a handful of open positions.
“We decided to move to a new model, because the resources were not here,” she notes. “We needed an organization who could provide technology to generate real-time reports that vice presidents and managers look for.”
Mason had to build a business case for partnership with Pinstripe, since the healthcare systems provider had never gone down that route for its recruiting function. She gained support by demonstrating the data and metrics that Pinstripe could provide under the agreement. The end-to-end engagement delivers sourcing, screening, on-boarding, an alumni program, and exit interviews.
Coming up on the one-year anniversary, Mason is reaping the rewards of her move toward outsourcing. She says she is seeing improvements in her time to fill. Plus, management is pleased with the ease of technology, communication, and availability of reports. She says she is looking forward to see how her costs have been affected over the course of the year.
Reduction of cost and increase in efficiencies has been a standard SLA of recruitment process outsourcing from its inception. All organizations hope to slash budgets by making the move to outsourcing, especially those looking to fill non-exempt positions. While quality of hire isn’t a new metric, the emphasis on its importance has increased.
“The demand for quality of hire has always been high, but the trick is how you measure it,” says McCoy. “A traditional measurement is retainment—is the person retained or not? I think clients are getting more sophisticated. You can take a look at hiring data through an RPO and how well people perform once they are on the job.”
Mike Bradley was a pioneer for RPO for temporary labor at his global organization, Rolls Royce. The high-end car manufacturer entered a cradle-to-grave agreement with Alexander Mann Solutions (AMS) in June 2009 to handle hiring of its temporary workforce for its U.K. locations. Bradley says while hiring numbers were around 400 last year, they are back to typical marks at around 600 subcontractors.
He says he is looking to have efficiency around the management of the temporary labor, and AMS is delivering.
“Time to hire was most important for me,” notes Bradley. “We had a 14-day service level agreement, and they are consistently meeting that. We also have requirements for them to execute background checks in time and at a certain level, and they are exceeding those.”
Bradley’s success is encouraging him to make the business case for outsourcing for Rolls Royce’s other locations. He feels that AMS has a strong market presence and the potential to deliver the same quality in other divisions of the global organization.
“We’re the first location to adopt this full-managed service model, but we are talking to a number of Rolls Royce entities around the world about adopting,” he says.
Some argue that globalization is the future of RPO. “The single biggest requirement we are seeing right now from buyers is global capability,” says Rebecca Callahan, president of SourceRight Solutions. Multinationals are looking to RPO to support talent acquisition in a multitude of countries. Some practitioners require an actual presence in the country while others feel a reach or footprint is sufficient.
“I think knowledge is key, and for hiring people you need to understand the culture and compliancy,” notes Wadee of hyphen. “Logica expanded our service from U.K. to France and Finland, and we’re looking at some other countries. The environment is much more complex, and we’re working closely with Adecco on the ground to tap into their expertise. Being able to tap into that local expertise is key. I think a physical presence helps, but companies are willing to look at hub-and-spoke models as well.”
While the need and drivers for global RPO are certainly here, the movement is far from mature. Some industry experts argue that very few—if any—true global deals have been executed. Most reported the market being very young and needing three to six years to mature.
Given the past two years, of course, most industries would welcome any growing pains.
Figure 1: RPO Contracts Signed in 2010
- Manpower Business Solutions & Vietnam’s Techcombank
- Kenexa & US Air Force
- OchreHouse & Agilent Technologies (in the EMEA region)
- CPH Consulting & Knadel
- Alexander Mann Solutions & Cobham
- KellyOCG & Novartis Pharma France
- PeopleScout & US Airways
- Pinstripe & Stanley Black&Decker
Hiring on Demand
Duncan Taylor often finds himself needing to staff up by the hundreds—and fast. He is director of recruitment and talent acquisition for Holiday Retirement, a family of more than 300 communities for all-inclusive independent retirement for seniors. As of late July, he was wrapping up a six-month project, hiring 250 management teams. Aiding him on his quick-turnaround sourcing and hiring is recruitment provider Decision Toolbox
“Project-based recruiting works for our organization, because we have the tendency to need a rapid increase in staffing in certain areas,” says Taylor. “We use outsourcing, because it gives us the flexibility around our recruiting needs without expanding our overhead.”
Requirements under Taylor’s engagement with Decision Toolbox include a watermark of resumes, phone screens, candidates presented, and number of hires. “The bottom line is they have to provide us with candidates worthy of being hired—and they do,” he says.
Up next for Taylor? Another project requiring rapid growth—he’ll be working with Decision Toolbox to source and hire 100 to 160 recruits.
Companies looking to scale up quickly while containing costs often look to recruitment process outsourcing on a project basis. HR executives can hand off time-consuming administrative work that project staffing often requires. Providers have the bandwidth to manage multiple hires in a specific timeframe.
“We always have buyers who aren’t looking to make a long-term commitment and want to do a project,” explains Steven Lindner, CEO for The Workplace Group. “They have need right now, and they don’t know what the need will be after it ends. They are looking to leverage industry expertise through RPO. They need help getting individuals from interview to job offer to on-site.”
The economy has also increased project RPO’s value proposition. “We are definitely seeing buyers who are hesitant to commit, since they don’t know what their volumes will be,” notes Loren Miller, COO for Decision Toolbox. “A project-by-project basis offers flexibility and meets the company’s needs by having someone augment or expand their bandwidth, helping them with phone screens, sourcing, and other administrative work.”
Hiring Strategies for Today’s Environment
(Source: Manpower Business Solutions)
With so many out-of-work people, finding quality candidates should be easier than ever, right? There certainly is no shortage of individuals to choose from. However, an influx of people in the marketplace does not lessen the challenge of recruiting the right candidates with the right skills for the right job.
One Manpower Business Solutions client has 18,683 applicants in their ATS, but only 67 of them have experience in the relevant field. But companies can implement strategies to optimize the talent that is available. To develop a pool of right-fit candidates that meet your business requirements, consider these seven strategies:
• Know what you need, but be flexible. Define what you need, but be willing to broaden the scope of skills and talents you are looking for, based on what is available. Consider redesigning jobs so they become more engaging for the people undertaking them.
• Identify individuals with transferable skills. Think about candidates with comparable skills from other industries, or expand your search by sourcing candidates in different geographies.
• Hire for innate talent, and be willing to invest in training. You might find a candidate with the right attitude, experience, and problem-solving skills, but who is lacking a certain certification or skill set. Once you have defined the skills and talents required for a position, prioritize the characteristics most important to get the job done and areas that can be successfully achieved through training.
• Draw from your in-house talent pool. Identify internal resources you can grow and nurture. Cross-train your workforce so they are able to perform a broader variety of tasks.
• Make diversity a reality. To bolster diversity, make sure the organization culture will enable diverse employees to thrive. Be willing to invest in training so you can meet diversity goals. Identify and create alliances with national minority organizations or trade associations.
• Build a candidate pipeline. Finding qualified talent is complex and time consuming. Build bench strength by cultivating relationships with candidates whose skills align with your organization’s future needs. This way, when you have an open position, you can tap into a readily accessible talent pool.
• Gain access to expertise. Consider partnering with an RPO provider to manage administrative work, improve process, and deliver a better candidate experience.
—Adapted from Optimizing the Talent Pool by Sarah Peiker