RPO & StaffingTalent Acquisition

Recruitment Outsourcing Spreading Across the Globe

With no real deals implemented, is global RPO truth or fiction? Some observers say it’s just a matter of time.

by Andy Teng

As senior vice president of HR at Key Safety Systems (KSS) in Sterling Heights, MI, Larry Casey knows cost savings are a priority for his company these days. The designer and manufacturer of auto products is under tremendous pressure to reduce costs in light of the global recession and credit crunch that have hit auto makers harder than just about any other companies, and Casey, a longtime veteran of the industry, is doing his part to help with the effort even as he looks to improve recruitment overseas.

KSS operates in 15 countries and, until recently, struggled with recruitment abroad, where 70 percent of its hires are made. With key markets in China, Romania, and German, the company employs a dispersed workforce of 14,000 around the globe. So when Casey saw an opportunity to outsource recruitment to one vendor who could satisfy all of its needs, he couldn’t pass up the benefits.

“For me, it was an easy sell. I was able to capture a whole bunch of money earmarked for recruiting,” he said, referring to monies that the company had previously allocated for internal recruitment, including $100,000 alone annually in monster.com and careerbuilder.com postings.

But hold on a minute—how can Casey possibly get his recruitment needs met when global recruitment process outsourcing (RPO) is largely a myth at this point? With no vendor in the marketplace that can boast a fully mature global footprint, is Casey’s dream of a single-provider solution not much more than fantasy?

Contentious Definition

If you’re looking for a perfect example of a global engagement of RPO, you’ll have to look hard because none exist today. Or you could alter the broadly accepted definition of RPO to suit the handful of multinational engagements now under way. In any case, RPO in the form that most North American practitioners have embraced is not being executed on a global basis. Most likely, industry observers say, it may be at least a year before a true global RPO deal is reached.

“The clients are pushing them, but the problem is there is not enough of an infrastructure among the RPO providers,” said Cindy Cardwell, an advisor with consulting firm EquaTerra.

As someone who regularly advises organizations on their outsourcing strategies, Cardwell said there is indeed a groundswell of interest in engaging in RPO on a global basis. For many large enterprises that have outsourced recruitment, they do so in a piecemeal fashion, employing a provider in one part of the world and another elsewhere. While the idea of consolidating services to a single vendor for all of their recruiting needs may be appealing, Cardwell said the truth is none of the vendors have that capability yet. Even those with a global presence such as some of the large staffing firms haven’t quite mastered the nuances of delivering RPO in some of the markets in which they operate, she added.

“It’s not so much as moving paper through that process. It’s understanding what’s culturally acceptable. It’s a different piece of the puzzle,” Cardwell added. “I think the model will differ by country. We are trying to define a U.S. definition, and that doesn’t work outside the U.S.; the definition for RPO will change by region. In Europe it’s a very blended model.”

Indeed, RPO practices are at various stages of maturity throughout the world. In the U.S., it is distinctly defined and a separate function from managed services programs (MSPs) and temp staffing, which are mostly not procured by HR. While there is some movement by staffing providers with RPO practices to begin selling the services together, RPO in the U.S. is still mostly bought by HR.

In Europe, however, RPO is more closely intertwined with managed services. The line separating the functions is blurred, and recruitment outsourcing may be administered through an MSP vendor, Cardwell said. Elsewhere, RPO is just starting to draw interest among employers. In particular, China could potentially be a huge growth area, while India, as Cardwell pointed out, today is not culturally ready for RPO—an ironic fact considering it’s a global hub for outsourced services. Regions such as Latin America, Eastern Europe, and others are just in the exploratory stages of outsourcing recruitment.

As a result of the disparate market maturity levels around the world, a particularly elusive and often contentious point about the idea of global RPO has emerged: what constitutes a global deal?
No global deals yet
If RPO is narrowly defined as one service provider overseeing the entire hiring cycle—from candidate sourcing through on-boarding—then global RPO must be considered along those same lines. Furthermore, global should encompass more than just one or two regions, Cardwell contended, to span all of an enterprise’s operations. And in this context, there are no deals in which one provider is delivering end-to-end services across the globe.

So what does this mean for the development of global RPO? Until the practice is well-developed throughout the world, buyers will not be able to look to one provider for all of its needs. To build a robust infrastructure will require time and a large capital outlay, and given today’s difficult economic conditions, vendors are unlikely to build out a global footprint on the chance that it can attract buyers. Even some large providers concede that global RPO, while appealing to many large organizations, remains an unfulfilled goal today.

“I think there will be a time when there will be global RPO successfully implemented, but the industry is not mature at this point,” said Patrick Beharelle, the chief operating officer of the Seaton Corporation, the parent company of RPO provider PeopleScout.

As a large domestic provider of RPO services, PeopleScout has a portfolio of global clients that could benefit from a more mature marketplace, but Beharelle said he is hoping the industry is deliberate in the way it builds out and delivers services. Today, Beharelle added, the “superior” engagement involves best-of-breed vendors who are intimately familiar with a particular region and not one that is hoping to span all major markets. Citing the past mistakes of large enterprise HRO providers, he cautioned providers and buyers to be careful about what to include in scope of service on any RPO deal.

“We’ll see global deals a couple of years down the road, but I hope the industry is thoughtful because if there is a large failure, we’ll stunt the industry,” he said.

However, momentum is certainly behind the move to globalize RPO. In the U.K., Alexander Mann delivers outsourced recruitment services to a number of countries in Europe and Asia. Recently, IBM and Kelly Outsourcing & Consulting Group (OCG) partnered to deliver a comprehensive RPO solution. And for KSS, it is relying on staffing giant Manpower to build out a global footprint to serve its needs everywhere.

Still, Casey is clearly taking a leap  of faith that its provider will be able to deliver as promised. Having had experience with outsourcing at his previous employer, he said he completely bypassed the RFP process and turned to Manpower’s senior management for assurances that it would commit to building out a global footprint that spans all of the markets in which KSS operates. Along with that, he asked the vendor to also help him some key goals such as a constant level of service, more measurable response time, consistency in the recruitment process, and reduction in costs. Although the company is still implementing the deal, he said he is confident the outsourcing engagement will be an improvement over performing the service internally.

“I have huge confidence in that they will bridge their own gap,” he said, pointing out that Manpower has a well-established infrastructure in some of his key markets such as Romania, Germany, and China. “As I told [senior Manpower executives], this will help you as much as this will help us.”

Manpower isn’t the only provider with an appetite for a share of the global market. In the case of the partnership between IBM and Kelly OCG, it is only interested in global deals. And the partners have come up with a solution that leverages the strength of Kelly on the front end of the deal—the high-touch, candidate-facing part—while taking advantage of IBM’s process strength on the back end and using one common technology.

She pointed out that potential clients are most interested in a solution that can first address their most urgent needs before implementing the solution on a global basis.

“We’re starting to talk to a lot of global prospects, and we’re finding that they are interested in first tackling where their growth is, and that’s Asia-Pacific and Latin America. If the growth and pain is coming from markets that aren’t mature, you have to figure out how you’re going to play it,” she pointed out.

And indeed that will be the challenge for buyers and providers alike as they build out the infrastructure for global RPO delivery. Regardless if the solution involves partnerships, mergers and acquisitions, or just good, ol’ organic growth, the industry will need to ensure anchor clients are satisfied and delivering profits before recruitment process outsourcing can truly be successful around the globe. That means first and foremost, the industry will need to collaborate to perfect the future state of RPO no matter where it is being implemented.

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