Outsourcing service buyers and providers are partnering to grow the top line rather than just focus in on cost savings.
By Patrick Beharelle
As the market for RPO has evolved over the past several years, so have the reasons why buyers make “go or no-go” decisions to outsource recruiting. RPO business cases have historically been predicated on cost savings and occasionally included concepts more difficult to quantify such as risk avoidance or candidate quality. Traditional business case elements are noted below and still hold true today for many buyers.
- Cost savings via reduced reliance on higher cost contingency firms
- and/or redeploying/cutting in-house resources;
- More variable cost structure in periods of high seasonal or cyclical
- hiring peaks/troughs;
- Improved process and regulatory compliance;
- Access to enterprise-wide technology, data, and analytics;
- More process control and consistency via centralized delivery;
- Reduced early stage attrition, particularly for non-exempt
- Improved time-to-fill or fill ratio;
- Improving candidate quality via more effective sourcing and
- screening of candidates;
- More robust employment branding efforts; and
- Enhanced candidate experience.
Top Line Emerges
It has been historically rare for the central premise of an RPO business case to be “revenue based.” However, during the past 12 months or so, the RPO business case has been evolving like never before. With a deluge of qualified candidates knocking on the door, coupled with a backdrop of a devastating reduction in hiring volumes, many buyers are not impressed with “improved candidate quality,” “better data/analytics,” or “ability to scale.” HR buyers, more than ever, are motivated by a bullet-proof business case based on hard-dollar impacts to the P&L. Otherwise, approval from executive teams facing heavy bottom line pressure is highly elusive.
One comment RPO providers continue to hear from potential buyers is, “We don’t have a cost problem, we’ve already cut to the bone. We have a top line problem. What can your firm do to help us grow revenue, without hiring a bunch of new sales people?” This, of course, is both a reasonable and vexing question, particularly when one considers how long it takes to hire, train, and assimilate a new salesperson. Rule of thumb breakeven points vary by industry for a new sales hire, but most are in excess of nine months.
Some sophisticated buyers, with the help of their RPO provider, have successfully answered the vexing question, “How to grow top line without a significant upfront investment in new sales hiring?” And with each “top line” success story, more and more buyers are using revenue growth as the great motivator for RPO, not just the traditional reasons noted previously.
Solutions That Work
A Retailer Example. One example is a multi-billion-dollar retailer seeking to improve revenue without hiring additional front-line producers. The client had conducted time studies that revealed front line managers (who are the sales engine for this firm) were allocating a disproportionate amount of time to recruiting and other non-sales/non-servicing activities. The business case for the RPO engagement was largely based on the premise that experienced front-line managers could allocate substantially more time to selling and servicing activities, if the recruiting activities were offloaded to an RPO provider.
The business case ultimately was proven successful. Following full implementation of the RPO engagement, a subsequent study revealed that front-line managers were allocating substantially (by a double-digit percentage) more time to selling/servicing activities. The downstream benefit of the time re-allocation was, of course, a favorable impact on the firm’s top line, all without adding a single headcount.
A Financial Services Firm. A second engagement involves a multi-billion-dollar financial services institution seeking to improve revenues in its retail branches. More specifically, the client and the RPO provider redesigned the recruiting process for front-line sales personnel. The specific objective was to improve revenue by replacing recent losses with new hires who possessed enhanced sales attributes, all without adding to overall headcount or increasing costs. Under a highly controlled pilot study, sales were 20 percent higher from hires participating in the RPO hiring process versus those hired via the traditional hiring process. Based on the favorable results of the RPO pilot, the engagement was expanded across the entire firm, where similar results have been achieved enterprise wide.
No doubt the central role of an RPO provider is to enhance the recruitment process. But for it to be truly transformational, much more should be asked of it than simply bringing people, process, and technology to manage a client’s recruitment activity to save a few dollars. Ultimately, world-class delivery and world-class partnership require a consultative approach, a deep understanding of the client’s fundamental business objectives, and creative solutions that are laser targeted to those objectives. The economic downturn has companies calling (some begging) for ideas on how to grow top line, whether it be from RPO providers or whomever. It is incumbent for these vendors to help educate potential buyers on the top-line benefits of RPO, not just the traditional justifications.
Buyer motivations tend to evolve over time. What motivates a buyer today will not necessarily motivate a buyer tomorrow. In the coming years, buyers may be asking providers a different set of questions. “We laid off our recruiting staff and open reqs are up 500 percent. How quickly can your team scale up?” Well, one can hope anyway.
Patrick Beharelle is the chief operating officer of SeatonCorp, a staffing and recruiting company that operates under the PeopleScout, Staff Management, and StudentScout brands. He can be reached at email@example.com or at 312-397-3269.