RPO & StaffingTalent Acquisition

Recession or No, Here We Go

However the current state of the global market is gauged, RPO’s time has come.  
By Gary Bragar 
Though the global job market is slow to rebound, you might have heard that RPO has done well this year. The question I’m asked: Is it real or just hype? Friends, it is reality. First, I’ll tell you why, and then I’ll support it with some 2010 data and provide a prognosis for 2011.

First, NelsonHall tracks RPO activity globally, and we know many contracts have been awarded, some with thousands of annual hires. For example, Hays was awarded an RPO contract by Santander in November to perform some 4,000 annual hires. But the reason I see— supported by interviews I’ve conducted thus far for my third global RPO market report to be published Q1 2011—is that internal client organizations drastically reduced their HR and recruiting departments during the last recession. This is arguably the third such action in recent memory (the first being the dot.com bust, the second following 9/11, though that might have just extended the dot.com bust, and the third being the current/recent recession). Thus, clients do not want to reinvest in rebuilding their recruiting departments only to downsize again.

Rather, why not outsource to a provider that can quickly scale up or down to meet fluctuations in hiring needs? This has particular appeal because it can be achieved while helping clients to better control cost by paying more on a variable basis, i.e., per hire, versus the fixed cost of an internal recruiting department that might be left idle when hiring is slow.

In addition, though unemployment levels are high, there is still a shortage of talent, only compounding the problem and making the case for why now is the time for RPO. The reason is that, prior to the latest recession, recruiters would often say they received dozens or even 100-plus candidates for every open job requisition. Recruiters I’ve spoken to recently say they can easily get hundreds of job applicants for every requisition, sometimes 1,000-plus. So, how does a limited recruiting staff go through all of those resumes to discover the best talent and be responsive to non-qualified applicants—who may someday be potential clients if they’re not already—without the latest selection and assessment tools? Especially when there is no money to invest in capital expenditures? RPO is the answer.

Now, for supporting data: First, Q1 2010 financial results reported by public staffing companies showed overall revenue growth, which includes RPO, since it’s not separately reported out, beginning to return for most providers, averaging single digits, but going as high as mid-teens compared to Q1 2009. Next, Q2 showed a big turnaround with year-over-year growth reported at approximately 21 percent. Finally, Q3 revenues were approximately 24 percent compared to Q3 2009.

Based on discussions I’ve had recently with RPO providers, expect full year 2010 RPO revenues to be much higher than what the overall data indicates for the staffing industry as a whole for the first three quarters of 2010. Looking ahead to 2011, per NelsonHall’s quarterly HR Outsourcing Confidence Index (HROCI), RPO is expected to grow by about 30 percent. This data is just slightly higher than what I’m hearing thus far in my current interviews. From an analyst perspective, it’s good to have a second set of data points to confirm validity.

Now that I’ve told you that RPO growth is real, where is it coming from? Most people you talk with say future growth will come from emerging markets, including APAC. I agree, but data in NelsonHall’s tracking service of announced contracts supports growth being global, with 2010 year-to-date announced contracts awarded in North America 41 percent, Europe 31 percent, APAC 10 percent, Latin and South America 9 percent.

Speaking of global RPO, I was at the November HRO Summit in Europe and participated on an RPO panel at which the following questions were posed: How should global RPO be defined, and where do you see global RPO in the future? NelsonHall defines global RPO as two or more continents. To date, very few global RPO contracts have been awarded, but coincidentally the same month saw FutureStep awarded a global multi-
continent RPO contract by Cummins Inc. to provide RPO services in North America, Europe, Africa, APAC, and South America. On the same day Allegis Group Services and Talent2, in partnership, was awarded a multi-continent RPO contract by an unnamed global financial services company to provide RPO in North America and APAC. My view is that demand is there by global clients to have one vendor to manage all recruitment, but it’s a large change management issue to get buy-in from business leaders in local countries. I believe both buyers and providers will be watching the success of these new global deals, creating the impetus for us to see several more global RPO contracts in 2011.
Gary Bragar is HRO director for NelsonHall’s HR outsourcing program. He 
can be reached at gary.bragar@nelson-hall.com. Information contained in this article includes the latest analysis from NelsonHall’s quarterly HRO Confidence Index, tracking service and preliminary information from NelsonHall’s Third Global RPO Market Analysis to be published in Q1 2011.

Tags: HRO Today Forum APAC, HRO Today Forum Europe, HRO Today Forum North America, HRO Today Global, HRO Today STA, RPO Staffing, Talent Acquisition

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