Not sure how to separate the prince from the toads when looking for an RPO partner? Plenty of resources are available for the uninitiated buyer.
By Andy Teng
Choosing the right outsourcing provider is never an easy task, but when it comes to rapidly emerging segments, a proliferation of vendors is inevitable. That means for buyers, separating the wheat from the chaff can be vexing and time consuming. And in a climate in which companies have little patience for drawn-out selection processes because they need to quickly realize a return on investment, the vetting can indeed frustrate the most patient HR executives.
That may be the case for many new prospective buyers in the recruitment process outsourcing domain, where it seems new vendors are joining the marketplace fray each week. With a low barrier to entry, the RPO segment continues to draw significant interest among staffing and recruitment firms looking to broaden their reach and take advantage of the trend to consolidate the number of vendors a company uses.
Although buyers generally benefit from a greater number of providers in the marketplace—resulting in greater competition—it also means a more confusing array of choices and a greater opportunity for ending up with the wrong vendor. Further exacerbating the confusion is that the industry still has not reached broad consensus on the definition of RPO. Some companies continue to sell on-demand services as RPO while others argue that it must include comprehensive, end-to-end services. Even as RPO providers debate the merits of their arguments, prospective buyers are caught in the middle of the issue.
Still, there are numerous steps employers can take to ensure they end up with the right RPO provider, and depending on their budget, it can be a completely internally driven process or one in which external advisors play a significant role in the selection. While these steps are not absolute guarantees that a deal won’t sour, they do effectively address most problems that arise in any contract.
According to Hary Bottka, a director with advisory firm TPI, one of the biggest mistakes RPO buyers are prone to make is not fully grasping their needs. Buyers should clearly define the positions they need to fill long before they turn to the RPO marketplace because it would save them time and money.
“They really need to make sure they understand what it is they are buying. Are they looking for a strategic partner for their regular placement so that these are W-2 employees, or are they looking for someone to help them supplement with contingent labor, whether it’s temporary labor, contract labor, or even consulting matter?” he questioned. “They need to have a clear understanding of the type of labor they want to acquire as part of their outsourced administration process.”
Bottka said once buyers have a handle on their labor needs, vetting the market isn’t as difficult as it seems. He said many publicly available resources can help point the way, and buyers should expect to roll up their sleeves to search for the most appropriate vendors and when requesting for proposals. For instance, he noted, employers planning to hire thousands of permanent workers a year could turn to resources such as HRO Today’s RPO Baker’s Dozen (a feature published in the July/August issue that ranks the top providers in the market; also available online at www.hrotoday.com) as a starting point.
From there, employers should carefully vet potential suitors, questioning their capabilities, examining their portfolio of clients, and understanding the infrastructure and geographic footprint. They should also interview existing clients to gauge whether the vendor has performed to expectation, assess the quality of service delivery and the cultural fit, and perform benchmarking. Bottka said he believes the exercise will provide prospective buyers a clear picture of a vendor’s competencies and flexibility.
For those with bigger budgets, employing a sourcing advisor has been one of the fastest and most thorough ways of finding an appropriate provider. Firms such as TPI, EquaTerra, Pillsbury Winthrop, and others have been called upon to work on some of the biggest RPO deals to date. With deep domain expertise, relationships with all of the major RPO vendors, and access to market data and trends, the advisory firms can help buyers develop their strategic outsourcing plan, quickly identify vendors for the RFP process, and narrow the field of suitors down to a small group of finalists.
“They are looking to us for help on understanding the market, who to talk to, and help them formulate what their outsourcing strategy is. These are all areas where sourcing advisors provide a perspective and have deep knowledge,” Bottka said. “We’re less and less becoming the RFP transaction people and more and more becoming strategic advisors.”
Whatever the route RPO shoppers take—through the use of an advisor or internal resources such as the procurement department—they should keep in mind that this market segment remains dynamic and is changing constantly. That means a selection made six months ago may actually require a refreshed look today to determine if the decision is still valid. And that remains one of the main challenges of the rapidly evolving RPO market segment—keeping pace with the most up-to-date developments.