Despite the absence of global providers and a soft economy, the RPO movement continues to win over converts looking to score greater savings and better candidates.
Even as a savvy practitioner of outsourcing recruitment services, Nadine Hogan still has trouble getting her arms around the market these days. As the global recruiting operations director of IT services provider Unisys, she is charged with helping her company develop an effective strategy for its talent needs around the world. While engaging in an recruitment process outsourcing model appears to be the ideal approach, Hogan also concedes that today’s RPO market is far from being a panacea for all of her company’s recruiting woes.
“What I’ve seen as the biggest change is that the HR function is becoming more mature so it has more experience with RPO. [HR leaders] are learning what works well in their environment and what doesn’t work well,” she reflected on the industry today. “I also learned that one vendor may not have all the solutions.”
Hogan couldn’t be more accurate in her assessment of the RPO industry, which arguably was established only a few years ago. Despite being a rapidly maturing business—bolstered by high interest among corporate buyers and a proliferation of competent providers—the outsourcing of recruitment processes is mired by an immature global infrastructure, an entrenched refusal among many organizations to give up recruiting controls, and inconsistent delivery of services by some providers. Nevertheless, RPO has captivated the attention of HR organizations everywhere because of the myriad advantages it can offer in the war for talent. So regardless if buyers are engaging in comprehensive outsourcing programs, seeking support for a specific activity such as candidate sourcing, or are just considering outsourcing for the first time, it’s clear that market interest has never been higher.
According to a broad cross section of service providers, sourcing advisors, and buyers interviewed by HRO Today, unease over outsourcing recruitment has evaporated, and HR organizations everywhere have grown markedly at ease with the idea of an external recruitment solution. And despite a weakening labor market, HR managers today are still considering adopting RPO for their companies because its inherent benefits are recession-proof, offering practitioners advantages during boom years as well as during a downturn.
“The driving force is the need to acquire talent, although the economy is faltering. There is still the pressure to get the right talent into organizations so they can be competitive,” explained Hary Bottka, director and process leader for recruiting and staffing at sourcing advisory firm TPI.
He pointed out that during these difficult economic times, as companies look to slash spending, any unnecessary fixed will be potentially on the chopping block, and maintaining a robust recruitment staff when hiring drops off simply doesn’t make sense. Instead, RPO is a scalable solution that accommodates the practitioner’s needs, regardless of hiring volume. Of course most RPO providers require some sort of minimum volume to justify their investment, but they tend to be flexible to clients’ needs.
For a cornucopia of reasons, RPO is emerging as the new recruitment model for a number of organizations. As Bottka explained, the need for excellent talent never goes away, so employers must become more adept at attracting and retaining them. An outsourced solution provides several clear benefits: lower costs, scalability, access to best practice, access to cutting-edge technology, sourcing expertise, accountability supported by measured outcomes and metrics, and user community interaction. Although costs remain one of the central pillars supporting the RPO proposition, some buyers are willing to invest as much if not more in external spend than internal costs if the results warrant it. After all, what’s the price of lost opportunity if a company can’t staff up its sales force in time to support a new product launch or if a key position remains unfilled for weeks or months? It’s concerns like these, along with the shifting demographics, that have many companies squarely focused on an outsourced solution.
Just ask Tim Powelke, the HR manager for Navistar International Truck’s Melrose Park, IL plant. As part of a 15,000-employee North American business, the site builds truck engines and other parts and requires a well-trained staff of hourly workers to keep its products rolling out the door. However, when the company needed to quickly ramp up production, it didn’t have the ability to recruit quickly enough. Instead, it turned over end-to-end recruitment to Select International, an RPO provider that also specializes in assessments. In fact, the vendor has been providing assessment services to Navistar since 2000 at various locations.
Operating in a highly decentralized culture, he said the time spent on recruiting, including the administrative tasks, became overwhelming. “The difficulty was the time involved. There was a tremendous amount of time involved in recruiting, and I didn’t have the ability to do assessments,” Powelke added.
Instead, he called in Select International to perform an assortment of tasks, from installing a more robust applicant tracking system to candidate processing to competency assessment, and interview support. Its responsibilities ended at the offer letter, which Navistar prepares internally. The results are undeniable. Time to hire has declined by weeks but more importantly the quality of candidates and hires has improved. He attributes the vendor’s disciplined approach to working with hiring managers.
“They did a great job of getting buy-in from everyone,” he commented, adding that the managers were especially happy because they no longer had to contend with many of the administrative burdens.
Powelke is among countless number of HR professionals who have discovered the results of outsourcing recruitment. Their growing ranks, industry observers say, are validation of the momentum behind RPO, and as the industry further builds out competencies, expect an acceleration in adoption rates.
“The industry is 6 or 7 years old now, so it is relatively new, but I think clearly the market has shown it believes in the value proposition. I believe the market has validation,” said Rebecca Callahan, the vice president of RPO for provider Spherion, which recently partnered with CDI to deliver on a global recruitment contract for the Hertz Corp.
Callahan said one indicator of the industry’s maturity is discussions around outsourcing on a global scale. In the seminal days of comprehensive HRO, deal scope was often not global in nature, or at least not successful on a global basis. However, since then, multi-regional engagements have caught on, and Callahan said RPO may follow the same maturity path. The difference, she pointed out, is RPO providers increasingly will team up to serve the needs of their clients instead of going at it alone.
“I think we will prove to the buyers that we are willing to partner. As some of these become official, there will be more confidence for the buyers,” she added.
Global Not a Reality
While the Hertz deal may help push the envelope in RPO engagement, the reality is that no vendor today has built a true global footprint, and it’s a limitation that someone such as Unisys’ Hogan is painfully aware of.
Because of its operations around the world, having one vendor accountable for its recruitment efforts would be ideal for Unisys. But Hogan, who previously worked with RPO while at Astra Zeneca, said after surveying the landscape, she concluded the industry just isn’t mature enough.
“Because of that, we decided to move to a regional RPO approach. We are working on our Asia-Pacific region right now in identifying a vendor,” she pointed out, adding that the company has used Talent2 for its needs in that region. In North America, the company has turned over to the RightThing comprehensive recruitment functions for two of its six job bands and some services for band 3. Although the RightThing has emerged as one of the largest RPO providers in the U.S., its capabilities outside of the continent are limited.
But the lack of global competencies is just one obstacle facing this nascent industry.
Although there is consensus that the hobbling economy won’t severely diminish interest in outsourced solutions, it is, however, giving buyers pause in committing to this model. Just ask sector leaders such as Rosaleen Blair, the CEO of London-based Alexander Mann Solution. She said the year kicked off with trepidation among HR organizations because they simply were unsure of their companies’ growth. That led to a temporary pullback of contract commitments.
“At the start of the year, a lot of things in place were stuck for the first three months. There was a lot of uncertainty,” she pointed out. “Since then, it has opened up.”
One reason, she added, was that companies now realize how badly the economy is hobbling and are moving ahead anyway with their plans to outsource for cost savings or scalability.
Brandt Hamby, VP of global RPO marketing for Kenexa, which in April acquired London-based Quorum to shore up its European presence, added that buyers are spending a lot of time “kicking tires” because they are still somewhat hesitant about adoption. Many simply want to affirm the business case or document improved service quality. In addition, he added, they realize they need to capture the metrics of the current state so they can make comparisons post outsourcing.
“We’re seeing an uptick in the number of RFPs, but at the same time the adoption rates are still relatively moderate,” he said.
For those that commit, they often begin with a pilot program for a specific project and then move to a broader engagement. This approach enables a buyer to make sure that outsourcing and the choice of vendor are an appropriate fit for the company before taking it on throughout the organization. Some of the largest deals to date have followed the same path. Still, most RPO activities today take place as project work, with only a minority of practitioners replacing their internal recruitment with an external one.
While employers might differ on how they engage in RPO, they are singular about the desired end results. Vendors note that early-generation deals largely focused on cost savings, but more recently employers are interested in value-added services that help elevate the talent in their organizations. For instance,time-to-hire and cost-of-hire have always been a pivotal measure of success, but for some HR leaders, these can be false indicators of RPO’s effectiveness.
So how are their expectations shifting? For one, buyers are looking at ways in which
recruitment activity data captured through providers technology can be used to improve recruitment efficiencies as well as the quality of candidates. Candy Lewandowski, vice president of RPO for Kelly Outsourcing and Consulting, pointed out that practitioners want to use the data to help them plan their workforce, bolster their talent management efforts, and engage workers.
“They’re beginning to ask for information around reporting and analytics,” she added. “There is definitely a play toward a more total workforce management concept.”
Unquestionably, robust technological tools are one of the reasons why employers look to RPO, Lewandowski added. However, she noted, most RPO engagements are not decided on a provider’s applicant tracking system (ATS) offering; in many instances, buyers have already invested in one. Even when they are in need of a better ATS, buyers choose vendors based on their overall ability to deliver service and not just on their technology platform. In any case, RPO providers tout that they are technologically agnostic.
Another shift in what employers look for in RPO is branding savvy. Once a domain of the employer, branding responsibilities are quickly being shifted to vendors. Even though it’s the customer who establishes the brand and culture, RPO providers have become especially adept at communicating the brands. As Terry Terhark, CEO of provider firm the RightThing, observed: “Branding is absolutely hot right now as part of the consulting services.”
As the head of one of the largest RPO providers in the industry, he noted that along with services, customers are also shifting their preference in how RPO is priced. While in the past they purchased services piecemeal, today they are seeking an all-in-one method that is inclusive of recruitment, screening, and other services. This approach provides a bottom-line number instead of a fee-plus structure that could vary as service requirements change. Furthermore, post-employment support—through surveys and assessments—will likely become a part of the service mix.
It’s clear that as the industry matures, pricing and best practices will evolve, vendors will come and go, and practitioners will shift expectations. One thing is for sure: RPO will clearly have an impact on how organization around the world find and retain talent.