Sue Marks of Pinstripe continues her conversation on recruitment process outsourcing.
Sue Marks’ foresight and focus on staffing issues has made her an outsourcing visionary with an entrepreneur’s passion that has helped to shape and define the future of the recruitment process outsourcing (RPO) market. Through her talent acquisition firm, Pinstripe, Sue now leads a team that has successfully structured hundreds of major staffing transactions and strategic alliances using her groundbreaking R2R (Requisition-to-Results) approach. In Part Two of our interview with Sue, she discusses the top trends driving successful RPO transactions and what RPO providers need to do to differentiate themselves in the marketplace.
JV: Why is RPO getting so much attention these days?
SM: RPO cuts costs and improves hiring results. It’s as simple as that. But at a deeper level, driven by accelerating global competition, organizations feel a need for agility like never before. They must improve performance, mitigate risk, and reduce cost all at the same time. Given the forecasted labor shortages and the corresponding rising recruitment challenges, companies are looking to RPO not just to supplement, but rather to transform their talent acquisition and management functions. Executive teams are looking to their chief human resources executive to maintain and improve their business’s organizational capability and intellectual capital. In most organizations 80 percent of costs are people costs. A firms overall performance could improve drastically if their workforce had the skills, motivation, and training necessary to improve the day to day execution of their responsibilities by just 20 to 25 percent. RPO, or R2R as we call it, provides a huge opportunity to do that by improving competitive advantage with
innovative actions. It can’t help but draw attention with numbers like that.
JV: How will the use of RPO unfold in the market?
SM: Buyers will begin to realize that they can improve ROI by extending the value chain covered in RPO deals. Thats why Pinstripe’s flagship product is R2R, not simply RPO. The most astute buyers and providers know that winning the war for talent on both fronts-acquisition and retention-wins the game and reduces the need for recruiting simply to replace the churn of turnover. Early adopters are moving towards a true “end-to-end” definition of talent acquisition that extends beyond the point of hire through training. These buyers are designing their programs under this new model, believing they can capture the greatest ROI and transformational impact if they do so. They are moving from outsourcing simple “recruiting” to the real talent acquisition and management value chain, which extends through initial on-boarding, orientation, and training. Our model itself is a 1,100-step process that transforms RPO to R2R, and then to organizational ROIgiving early adopters a major competitive advantage. Over time, late adopters will be moved by competitive pressures and cost drivers and embrace RPO. We believe that after payroll and benefits, recruitment will be the third most frequently outsourced HR function.
JV: Do you think it will be the larger RPO firms or the more intimate ones that will be in highest demand?
SM: The RPO firms that help their clients win in the market will be the ones that win in the RPO marketplace. As buyers continue to feel pressure to drive throughput and improve service levels, they will increasingly look to RPO firms that can bring world-class processes and change management tools to their organization. Buyers will begin to demand significant domain expertise from their providers, fueling an industry trend towards verticalization. The provider’s ability to “see around corners” for clients, their ability to harness technological innovation, and, finally, their ability to really execute and get real HR and business results is what the market leading RPO provider will offer. Providers that have “organizational DNA” composed of Six Sigma process excellence and true BPO expertise will trump those that are simply high-volume recruiting firms. Providers will need to have the ability to help the client transform business processes, and as the talent gap continues to grow, RPO providers will have to rise above the mundane, same old, same old ways of sourcing and moving talent through the value chain from beginning to end. The RPOs that understand their clients businesses-marketing, branding, process, supply chain, metrics, etc.-will be the ones that thrive.
JV: How do you see the use of physical supply chain techniques affecting the future marketplace?
SM: The physical supply chain is a key driver and competitive advantage for organizations like Wal-Mart. However, in a world where competitive advantage doesn’t last long, where products can be replicated with relative ease and cranked out quickly in low-cost manufacturing countries, knowledge and innovation-the purview of an organizations people-make the difference. Almost no one today is thinking of labor-based supply chains the models simply do not exist. IBM recently announced a labor supply chain initiative that they estimate will save them hundreds of millions of dollars annually. Where firms like IBM go, the rest of the world will follow. RPO providers with VMS [vendor management system] and supply chain management expertise will be the big winners here as they help organizations plan and deploy their total workforce. Adapting demand-driven supply chain techniques will help clients achieve significant business performance improvements. Process and technology innovations in this area will bring some organizations closer to the goal of “Total Workforce Management.”
JV: Taking on a new venture like RPO is a big step for some companies entering into this market for the first time. How will providers ease the minds of new buyers?
SM: Risk mitigation is a huge issue. With industry scrutiny, an unforgiving regulatory environment, Sarbanes-Oxley risk management is taking a bigger and bigger piece of executive managements attention today. RPO providers must be true experts at process excellence and internal controls to help their clients manage and reduce risk today. With technology access and optimization, business process integration and centralization, business flexibility, business expansion and speed to generation of new revenue streams, and regulatory compliance-some companies and individuals worry they will “lose control” if they outsource.
In our view, if they are really honest about what is happening today in their organizations, they don’t have good baselines of how they are spending their time and money and efforts now. If done properly, organizations gain better control. In a properly conceived and executed outsourced environment, they will have clear processes and better performance metrics than they’ve ever had. They can reprioritize quickly and change focus areas, and with that control, they will have minimized their risk.
JV: RPO has yet to break into the global marketplace. Do you see offshoring in its future, and how will it fare?
SM: RPOs need to have refined standardized processes, extraordinary training, quality control mechanisms, and global management and technology capabilities to support clients’ global needs and extended value chains. Contracts for recruitment process outsourcing will begin to contain an offshore component, taking advantage of the time difference and labor arbitrage. Corporate culture match will become a legitimate buying point in outsourcing contracts, knowing how hard they are to start and how much harder contracts are to unwind.
Cost isn’t the only measurement; organizations must contract for service levels as well. And those service level agreements must be balanced in a way that holds providers and buyers accountable for the robustness of the partnership and their results. Governance of relationships will evolve. Those relationships with the best culture match will have the best channels of communication. When outsourcing deals fail, most people believe it is poor performance on the part of the provider. But the root cause can almost always be traced to poor communication.
JV: What benefits should an organization expect to achieve from an RPO provider?
SM: At the end of the day, the three most important things a buyer should be confident they will get from their RPO provider are: performance improvement, organizational flexibility, and cost savings. While RPO is process-centric, and process excellence is paramount-process is about doing things right-smart buyers will realize they first need to be doing the right things. It’s all about execution. Business value will be driven by the real melding of people, process, and technology in a way that seamlessly integrates into the client organization through a mix of delivery methods and geographies.
Sue Marks is the CEO of Pinstripe. For more information she can be reached by telephone at 1-877- 797-3379 or by email at firstname.lastname@example.org.
This article was co-authored by Kerry Ann Vales. For more information she can be reached at KAVales@aol.com.