Outsourcing might not bring down fuel costs, but for airline giant Delta, recruitment process outsourcing will help the carrier brace for shifting talent needs ahead.
When your company is besieged by uncontrollable raw material hikes, your customers sharply cut back on spending, and your industry goes into a tailspin, how do you react as an HR leader? Think outsourcing, of course.
In Delta Air Lines’ case, current conditions add up to the perfect storm of troubles. Even in the days after 9/11, the airline industry hadn’t face today’s economic calamity. As fuel prices seem to set a new record each day, a weakening economy is also leading to a loss of passengers. Moreover, with millions of consumers no longer able to tap their home equity to splurge on things such as leisure travel, airline industry executives better keep their belts buckled for a bumpy ride ahead.
For Chris Collins, the director of HR service delivery at Delta, the economic realities of today’s travel business are out of his control. What is within control, however, is the company’s ability to react to talent demand as Delta sets a new course in the months ahead. That means turning to an outsourced recruitment service provider—in this case, PeopleScout—to help the company more effectively find and retain top talent, even when the business is retrenching. After all, as a service business, Delta relies heavily on its customer-facing employees to keep travelers coming back. And with the carrier on the cusp of merging with Northwest Airlines, recruiting talent will grow even more complex in the future.
“Delta is a very customer -focused organization, and that is the foundation of the forward-thinking model of our company. Our customers are the most important element of our business. So we spend a significant amount of time internally at Delta investing in our frontline personnel—our reservations staff, our in-flight personnel, our airport agents—who speak to the customer,” Collins said. “What distinguishes Delta is how we treat you when you are on the phone, in the airport, and on our planes. That’s what resonates with our employees. That, in turn, translates within my organization—the governance team—into a similar quality experience that we want candidates to have when they come to work for Delta.”
Branding Delta and attracting excellent talent won’t be easy to do as the airline industry faces one of its most difficult times. And for Delta, the economic downturn couldn’t come at a worse time. After having emerged from bankruptcy in 2007, the carrier in its latest quarter reported a $1 billion loss. (Before a special charge related mostly to a write-down of goodwill, the company actually reported a profit of $137 million.) Furthermore, the company in June said it would cut 2,000 jobs through an early retirement program that attracted 4,000 volunteers. And like many other airlines, Delta is planning to reduce the number of flights it offers, predicting that capacity will be down four percent in the second half of this year.
Complicating all this is the company’s merger with Northwest, which could help both airlines weather the poor economic conditions. But Northwest has its own troubles, having reported second-quarter losses of $377 million. Still, if the industry is to emerge from the travel downturn and spike in fuel costs, massive efficiency gains are necessary, and mergers have become an avenue of achieving them.
For a company that’s facing a lot of adversity, you might question how focusing on outsourcing, even as hiring is expected to decline, will help with its predicament. Like many HRO practitioners, Delta’s adoption of a recruitment process outsourcing (RPO) model will position the company to react quickly to market changes, regardless of whether headcount is taking off or on the way down. That means scalability—a cornerstone of the RPO model—is a key enabler in the carrier’s ability to cater to customer demand. After all, while demand domestically is waning, international travel continues to be strong, and company officials in releasing its most recent quarterly results predict that overseas capacity for the rest of the year will rise 14 percent. So even as demand for English-speaking flight attendants and other employees might be lower, Delta will need to staff up for overseas markets.
As a result of difficult market conditions, all airlines and other businesses are examining all aspects of their operations, Collins explained. “Internal resources must be directed to activities related to our core business: the safe transportation of passengers and cargo,” he said.
Some time ago, Delta analyzed its business structure and determined which services and activities could be performed more effectively by external service providers. In addition to payroll, compensation and benefit administration, learning and other services (which were outsourced to ACS as part of a comprehensive HRO deal), Delta has outsourced some aspects of recruitment.
Vendor Support Is Key
“In this market condition, it has become necessary for companies to focus on their primary line of business. So you find vendors to support you,” Collins added. “The biggest challenge for any of these services—whether it’s for health and welfare, retirement, recruiting, it doesn’t matter what it is—is to make sure that the vendor can assimilate to your culture.”
Indeed, a cultural fit is paramount to a successful outsourcing engagement, but then again, so is alignment of expectations. In Delta’s case, its 2005 engagement with ACS proved that while the big-box HRO provider could meet most of Delta’s HR service needs, it failed to live up to expectations in the recruitment arena. As a result, the company brought back recruitment services before it took on its current agreement with PeopleScout.
During the early days of the HRO industry, many enterprise buyers believed that global HRO service providers could do it all—payroll, benefits administration, learning, recruitment, and other provisions. But in the past three years, buyers have come to realize that comprehensive HRO hasn’t been the panacea they sought. In fact, a number of end-to-end contracts have resulted in buyers reducing scope of service by either bringing some functions back in-house or parsing them out to a best-of-breed vendor. Delta, in the latter camp, decided last year that a standalone RPO provider was its best choice, reaching a conclusion that other enterprise buyers have come to.
According to industry estimates, about two-thirds of all RPO engagements are through best-of-breed providers while one-third is reached as part of an enterprise HRO deal. However, with the number of large, comprehensive deals having dwindled during the past two years and the total number of RPO deals climbing, enterprise providers are seeing their share of the recruitment market on the decline. Moreover, because some enterprise buyers subsequently removed recruitment from their original deals, these “failures” have made best-of-breed providers more attractive.
Collins said although ACS couldn’t fulfill Delta’s expectations around RPO, he was convinced by last year that a number of third-party providers could. Delta found PeopleScout to be a close match to its culture. PeopleScout had previously worked with Delta for about a year on a smaller scale to hire customer-facing employees in its larger stations, including its international gateway at JFK airport in New York City. Next Delta initiated a large-scale pilot project of 1,500 hires. Larger than most pilot projects, Collins said the initiative called for hiring multilingual flight attendants during an 18-week period. He said the results were encouraging.
“We gave them a strategic direction for sourcing and—this is one of the key components of the governance model—we set the standards we expected them to achieve. In this pilot project, one of the main successes was a branded, innovative end-to-end experience for flight attendant candidates,” he recalled. “With PeopleScout, we created a branded web site that eventually evolved into a branded on-boarding experience, resulting in a very cohesive new hire process for flight attendants.”
Ensuring that candidates are fully familiar with the Delta brand was critical in improving quality of hires, he said, because new recruits with clear expectations tend to be more engaged and satisfied employees. One of the most impressive aspects of PeopleScout’s service was its ability to capture and convey the Delta culture and brand, Collins noted.
“It’s important because what happens so often is that candidates are sold something at the time of the recruiting experience that either doesn’t come to fruition or the brand that they were sold on is not actually what they want as an employee,” he said.
Karen Browne, president at PeopleScout, said a key to sourcing candidates is targeting the right audience and leveraging high-touch tools that promote engagement and timeliness in the process. “Filling positions to meet the needs of the Delta organization requires a streamlined process that moves qualified candidates to the next step quickly. This is referenced by PeopleScout’s ability to source and hire more than 1,200 flight attendants over 12 weeks representing more than 15 different, hard-to-fill language requirements. When you have a qualified candidate who speaks Mandarin, you don’t want to keep them waiting or in the dark about the next step in the recruitment process.”
With many buyers today seeking vendors with specific industry experience, it was no accident that Delta chose PeopleScout. The provider had previously worked with Northwest Airlines as well—an experience that not only gave the company insight into how the industry recruits but also prepared it for the expected merger of the two companies.
From that initial pilot, PeopleScout is now responsible for about 10,000 North American hires a year, with 8,500 being non-exempt positions and another 1,500 exempt jobs. For all hourly workers, it delivers an end-to-end service spanning sourcing, all administrative functions up to the point of the interview, and all pre-employment services through the on-boarding step. To help manage the process, Delta employs PeopleScout’s own applicant tracking system. The vendor is also responsible for branding functions such as creating ads, operating the career microsite, and others.
Although Collins said it’s too early to tell how this new recruitment service model will affect Delta in the long run, initial signs are positive. In an informal survey of newly hired flight attendants and flight attendant managers in a town hall-like meeting, Collins said the hires gave HR a standing ovation when asked about their on-boarding experience. Similarly, managers said the quality of candidates was on target with Delta’s hiring model.
“That is not necessarily a scientific assessment, but it was very nice to get that type of feedback. These new hires are saying, ‘I knew the Delta brand before I started with the company, and the brand they sold me was the same brand I actually experienced on my job,’” Collins noted. “We’ve learned that explaining upfront who we are, what we expect from our employees, and what they can expect from us gets us a better-quality candidate in the long run.”
Collins said Delta’s selection of PeopleScout was based on several traits that are indicators of a good RPO service provider. At the top of that list is the candidate experience PeopleScout can create. From a user-friendly landing page to responsive web and call-center support, its branding prowess and gentle handling of recruits dovetailed with Delta’s own culture, he said. Secondarily, he credited the vendor for its ability to course correct. Having had prior outsourcing experience, Collins said he realizes that a partner who can change according to customer needs is critical to a successful relationship. He added that he has been impressed with Browne and other senior leaders at PeopleScout who have remained engaged with the Delta team throughout the relationship.
“Many times we find that once a contract is signed and delivered, then all the big box players who signed the contract move on. “Karen Browne personally stays involved with me and my governance team,” Collins noted.
But Collins also credited Delta’s own governance structure for ensuring providers such as PeopleScout and ACS maintain their focus. Although PeopleScout made great strides to bring innovation to Delta’s recruitment efforts, he said there were times when the company needed to nudge the vendor back on course.
“Their innovation was so strong that sometimes they lost sight of the discipline of project management. You get to the point of building the candy store but forget to put the candy in the store,” he said.
Although Delta is overall pleased with the RPO relationship so far, it remains too early to predict the long-term success of the engagement. On its own, Delta might have no trouble rolling out the model, but with the integration of Northwest just around the corner, it’s unclear what impact it will have on the partnership. Collins said one of his biggest concerns is assimilating the cultures and making sure that the merged organization offers a consistent candidate experience regardless of the city in which they are based.
PeopleScout’s Browne said she was also confident that the merged business would pose no difficulty for her company. “We’re well positioned to handle the complexity simply because of our experience with high-volume clients and our proven results within the airline industry,” she added.
However, one unknown factor looming over the entire travel industry is the price of fuel. With costs skyrocketing during the past year, Collins laments that there is little that Delta or the industry can do. For now, HR can only support the ebb and flow of the travel industry, supporting growth efforts when needed and helping the organization to brace for unforeseen declines. But with a flexible and scalable recruitment process in place, the company at least has a tool to help HR leaders react quickly.