StorageTek selects RPO to build a better team.
Months into the due diligence on a strategy to outsource employment recruitment processes, project managers at global technology company StorageTek had reached the point of interviewing providers when they read an article in this magazine listing 13 vendors offering end-to-end recruitment process outsourcing. One of the companies especially caught their eyeKenexa Corporation.
Unfortunately, no request had been sent to Kenexa for a proposal on the job candidate sourcing and acquisition project. Meanwhile, the deadline for determining a provider loomed. We were at the stage of interviewing final candidates, says Cindy Fiedelman, staffing operations manager at Louisville, Colorado-based StorageTek Corp., which markets innovative storage solutions that protect a companys critical business information.
In fact, the company had whittled down the list of candidates to two when they decided to interview one more company. They called us out of the blue one night and said they had read an article in HRO Today called The Lucky 13, in which we were checked off as a buyers choice, comments Elliot Clark, chief operating officer of Kenexa. We were brought in at the eleventh hour to explain our value proposition.
Kenexa scrambled to put on a good show, preparing a one-hour presentation that stretched to more than four hours after the curtain rose. They thoroughly evaluated our approach to recruitment process outsourcing and change management, says Clark. They looked at how detailed our methodologies were as far as outsourcing process maps and guidelines. They talked to our IT people. And then they asked about our 24-hour operating model, a no sunset concept where our overseas locations provide research and candidate name generation to our 250 North American recruiters.
Clark says the discussion over the model sealed the deal. As we described the concept, one of the people in the StorageTek delegation started laughing and said this was how they did applications development work around the globe, he notes. I think we all felt cultural synergy. Fiedelman agrees: The chemistry seemed to click. They were the kind of people we knew we could work with. A deal between the companies was signed in the fourth quarter of 2004, and service to StorageTek began on January 1. The multiyear agreement calls for Kenexa to assume responsibility for managing the North American staffing operations below the executive level at StorageTek, although the original concept anticipated for the near future by both companies was to roll out the RPO strategy worldwide.
Like many large employers, StorageTek (with 2004 revenues of $2.2 billion) was attracted to an outsourced recruiting model because of the need to fill job ranks quickly and cost-effectively with high quality applicants. Several recent surveys paint a dire picture of companies unable to fill rapidly diminishing employment ranks with the best-of-the-best. According to the U.S. Bureau of Labor Statistics (BLS), 24 million workers are expected to exit the labor pool by 2010, and within the next three years, BLS projects that 10 million more jobs will be available than workers to fill them. Another survey, by The Conference Board, indicates that 79 percent of CEOs rate availability of talent as their number one concern.
To address these ominous issues, StorageTek sought to liberate its HR professionals from sporadic, time-consuming recruitment tasks to focus on more strategic staffing needs and partnering initiatives. Outsourcing fit the bill neatly: Kenexa is now accountable as the single source for StorageTek staffing operations, applicant tracking, and data management. They are also responsible for engaging and educating StorageTek managers to better understand and execute their role in the recruitment process.
Weve been through two iterations of recruitment models at StorageTek to try to meet the needs of the business, says Roger Gaston, StorageTek corporate vice president of HR. A lot of people think we went to employment process outsourcing because of the cost savings; while cost reduction was a component in our decision making, it was not the biggest reason to consider RPO, Gaston confides. The real value was our ability to access a state-ofthe- art recruitment system and dedicated processes for resume search, Web search, Web crawling, candidate screening, and applicant management that could enable StorageTek to achieve its objectives of reducing time to fill and to increase the quantity and quality of our applicant pool. This technology was not going to be high on the priority list at StorageTek, in terms of allocating resources to acquire it or in the queue for our systems people to work on internally. We wanted best-in-class recruitment capability, and outsourcing was the way to get that now.
ON THE JOB
Recruitment process outsourcing (RPO) is currently one of the hottest areas within HRO. The strategy offers companies more than the opportunity to access a providers state-of-the-art job candidate database. RPO also provides entre to highly trained and sophisticated job recruitment professionals who can quickly fill workforce ranks with top talent.
During peak hiring periods, organizations must use external resources like extensive advertising, agencies, or independent contractors, who may not be available for the next peak period, Clark explains. This causes costly knowledge transfer. By outsourcing, companies have more flexibility with infrastructure costs than with internal resources where costs are fixed. The costs of staffing professionals assigned to an organization are shared with other clients during periods of the year when the organization is doing little hiring or is in a hiring freeze.
StorageTek had been hunting for a world-class recruitment process for the past five years. The company, with more than 7,000 employees located in 32 countries serving more than 17,000 customer sites worldwide, had tried introducing both centralized and decentralized models to reduce the time to fill open positions in its direct sales force, field service organization, and R&D engineering staff. Both recruitment strategies ultimately fell short in delivering against business needs and expectations.
Initially, we had a very centralized recruiting function for our global business positioned out of our headquarters in Louisville, just outside of Boulder, Gaston explains. We decided to decentralize that model and push our recruiters out in the field closer to their clients. When we looked at the effectiveness and productivity in what we were accomplishing, closing jobs quickly with quality people, we realized we werent meeting the needs and requirements of the business. We needed to consider other options.
At the time, StorageTek was in the thick of examining HR outsourcing to increase productivity and reduce the hands-on transactional elements of the HR processes. We had decided to change the face of our entire HR organization into a business partner focus. This demanded a reconsideration of the time and resources dedicated to the transactional elements of HR, Gaston explains. As we began exploring the components of our business that would benefit from outsourcing, the recruitment process jumped out at us. We created a Six Sigma black belt project around recruitment to arrive at the root cause of our inability to effectively support the organizations recruitment needs. While several actions were identified from this black belt project, consideration and exploration of outsourcing the recruitment process was at the top of the list.
Fiedelman says the Six Sigma effort identified different processes for improvement within recruitment and on-boarding (the post-hiring activities involving new employees). The biggest issues we faced were cycle timethe time to fill jobs here had become inordinateand consistency in the process, she explains. We needed to do things the same way across the organization. We also had issues regarding candidate quantity and the quality of the candidate pipelines. Our ability to have a strong number of solid candidates available for open positions was lacking. We often were in a reactionary mode and would only address these issues as needs came up. From a cost perspective, this was a problem.
Another problem was the need to hire expensive external recruiting agencies on an ad hoc basis to meet hiring demands at peak periods. On average, StorageTek hires roughly 1,000 people a year. When you rolled all these concerns together, says Fiedelman, outsourcing offered the long-term solution that made the best sense.
Kenexa was chosen as the provider for its technology platform, specialized expertise, and variable cost recruitment model. They scale their model appropriately to our spikes in hiring, Fiedelman says. They assign a team to usa set number of people. As our demand goes up or down, they manage through that without it costing us more. Our hiring managers still make the hiring decisions, but it is Kenexas responsibility to refer and manage this hiring.
Kenexa also demonstrated the ability to target appropriate job candidates. In addition to posting notices on job boards or in newspapers or on career sites, they had the capability to create target lists and do proactive calling into organizations where we knew we wanted to hire people, Fiedelman says. That was the big kicker. We had a hard time finding other companies with that capability.
Kenexa offers a broad menu of services, including sourcing, vendor management, and hiring process management. StorageTek opted for a full solutionstaffing department management, on-site staffing support, multi-channel sourcing strategy, development and execution, employee referral program administration, direct recruiting services, talent management, applicant tracking, and employee engagement measurement. We are their entire staffing organization in the United States below the senior executive level, says Clark. Its a comprehensive solutiona complete RPO.
StorageTek joins several major RPO customers at Kenexa, including Microsoft, Amgen, Corning, and Schering Plough. Kenexa began life as a privately-held, pureplay executive search firm in 1987 before transitioning into a provider of large scale recruitment project management five years hence. Today, it employs more than 550 people worldwide at its U.S. headquarters in Wayne, Pennsylvania; Asia headquarters in Hyderabad, India; Europe headquarters in London; and its employee research center in Lincoln, Nebraska. The company went public June 24, 2005.
The process for hiring at StorageTek today begins with a formal job requisition made by a business unit or functional department using Kenexas technology platform. Once the requisition is approved, the hiring manager meets with Kenexas on-site recruiter to scope out exactly what is needed, Fiedelman explains. This information is delivered back to the sourcing center at Kenexas Wayne headquarters. Their people now begin early discussions with candidates. A slate of people is then submitted back to the on-site recruiter who takes the next step in the interview processdetermining with the hiring manager who to bring in for the interview, given certain metrics around the number of people they need to see for every search. Once the hiring manager meets the candidates and the selection is made, a recruiting team from Kenexa puts together all the administrative components of the job offering, equipping the new hire to be ready for the first day of work.
StorageTek anticipates the RPO agreement will be cost neutral for the first couple years, and then begin reaping dividends once the new process becomes routine. Its already beginning to click in terms of hiring managers understanding the true value of a recruitment partner, says Gaston. Plans are being discussed as to the dynamics of rolling out the strategy worldwide, although they are potentially complicated by the recent announcement that Sun Microsystems is buying StorageTek for $4.1 billion. Sun has an RPO agreement in place with another outsourcing provider. Our plan has been to start here in the United States and analyze the potential for a global rollout, says Gaston. We felt the complexities of going global right out of the gate were more than StorageTek wanted to bite off.
Clark is hopeful that the relationship with StorageTek will continue beyond domestic shores. We were in the midst of putting a timetable together (for a global strategy) when the merger was announced, he notes. But, weve had some great outcomes with them so far, and Im optimistic. I know Sun also is a company that appreciates outsourcing and is undergoing a significant HRO effort. We look forward to the opportunity to work with them.
Whether or not the engagement becomes worldwide, the RPO endeavor remains significant for several reasons. Says Gaston, A significant portion of our employees are in the United States, and that is where weve had the biggest push in the last year and a half as far as recruitment to meet the needs of both a growing Sales and Services organization and a highly technical Research, Development and Engineering organization. Like all big projects, this is a work in progress.
MEASURING MAKES PERFECT
In implementing the recruitment process outsourcing project, StorageTek and Kenexa pulled together a team of project managers and technology implementation consultants, which launched an exhaustive 90-day process of planning, mapping, and measuring. We looked at data and systems, basically the reports that StorageTek previously had generated, and then mapped out all the technology and the data interchanges between their HRIS system and our applicant tracking system, says Elliot Clark, Kenexa chief operating officer. The idea is to have our system seamlessly update their HRIS system every night.
Once the mapping was completed, the project team assembled a change management plan that was rolled out across the company in road shows with key executives. We believe that any service providers world should be about living inside the customers world, Clark says. What people buy from Kenexa is speed, cost reduction, and quality, but what we sell is process, execution, and measurement.
The road show introduced the planned changes and solicited feedback. StorageTek has very tight product development cycles and a lot of what the executives were concerned about was speed of execution, Clark notes. They wanted to know if we could fill jobs quickly with high quality people and measure this to be sure it took place. We had several executive sessions that culminated in very detailed service level agreements.
The SLAs are proprietary, although Clark says they are tied to two tiers of metrics. The first tier includes routine metrics like average time to fill a job, cost per hire, customer satisfaction, and various diversity indices. The second tier pulls business outcomes data, which is analyzed by Kenexas statisticians at its employee research center in Lincoln.
Their job, in part, is to evaluate the correlation between hiring practices and business outcomes, Clark explains. They measure things like the relationship between job retention and profitability, using data on absenteeism, workers compensation claims, job turnover, etc. With their analysis, a new hire will be correlated against certain outcomes that can be translated into business dollars.
Since implementing the full RPO in January 2005, StorageTek has seen significant improvement in those processes and metrics that are easily measured in weekly and monthly timeframes. Overall, both parties are pleased with the progress of the relationship and look forward to seeing the positive impact on long-term profitability of the organization.