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RPO, KPO, and HR’s Role in the Search for Tomorrow’s Talent

You think you’ve got recruitment problems? Try filling 23 million jobs. Look for RPO and KPO to help address some of these shortages.

by Scott Gildner

One of the primary drivers in exploring outsourcing alternatives in the HR delivery space is the ability to free up more time within HR for strategic activities. While this is a laudable objective in any circumstances, it may become absolutely critical given the expected gaps in talent that are emerging.

More than 8,000 baby boomers are now retiring each day, and will for the next decade—leaving behind an enormous vacuum of experienced professionals across every aspect and function of industry.

In a related study, the U.S. Bureau of Labor Statistics estimates in the U.S. that 52 million positions will need to be filled and the potential employee pool is only 29 million, creating a 23-million employee gap. So it is not surprising that in a recently conducted survey by The Corporate Executive Board (CEB) of senior HR managers, three quarters of respondents said that “attracting and retaining” talent was their No. 1 priority.

So how can HR position itself to be proactive in the upcoming war for talent? Two tactics that deserve some consideration are recruitment process outsourcing (RPO) and knowledge process outsourcing (KPO).

RPO is the simpler of the two options. Many organizations have historically not allocated significant resources and attention to their recruitment and staffing functions, relying on HR generalists and local managers to perform most of the candidate-sourcing activities. Those organizations may want to improve their recruitment operations by transferring responsibilities for these activities to an RPO provider who can provide better applicant tracking technology, more scalability of the function, broader local geographic coverage, and access to specialized and experienced recruiting professionals.

With the ultimate goal of finding qualified candidates quickly, several world class RPO providers are emerging and delivering value through process engineering, end-to-end recruiting, and cost management techniques as their core competency. We are seeing a significant increase in large organizations evaluating RPO options as a way to prepare for the talent shortage and create a real competitive advantage. The question those organizations are asking is how they can leverage the external support of an RPO provider to either supplement their internal recruiting efforts or to segment their recruiting needs so that internal resources can focus on certain employees.

As HR organizations evaluate future human capital needs, their strategic workforce planning is uncovering some disturbing trends in relation to the significant gaps in mid- to senior-level positions, what some are calling “knowledge workers.” In reaction to these gaps, companies are looking to global labor markets as a means of supplementing their domestic recruiting activities. One way of gaining access to this global labor market is via KPO.

KPO is simply defined as the outsourcing of high-end knowledge or judgment services generally focused on primary and secondary research. For example, there are several India-based outsourcing providers who focus on hiring newly graduated knowledge workers in that country. Some 95 percent of their workforce are engineers, MBAs, doctors, and other highly skilled professionals. Unlike the English-speaking requirements of BPO, KPO puts a major emphasis on educational qualification. Evalueserve predicts that India will have 250,000 knowledge workers by 2010 and that the KPO market for their services may reach $17 billion.

While the major factor in the drive to leverage KPO is the expected shortage of skilled professionals in Western countries, the secondary factor in the pursuit of KPO is potential cost savings. KPO provides a low-risk alternative for companies to not only acquire access to new talent pools but also to perform some level of labor arbitrage. KPO positions in India tend to only cost 50 to 65 percent on a fully loaded basis, in comparison with their U.S. counterparts where these jobs typically range from $175,000 to $250,000.

As evidenced by the growth and interest in RPO and KPO, the standard approach to acquiring talent is dramatically changing. Over the past 40 years, only five percent of Fortune 500 companies grew revenues in excess of the rate of inflation. In a global economy of slowing growth, and with economic prowess shifting to emerging markets, HR leaders are driving new and exciting strategies for developing and finding talent as more organizations seek to differentiate themselves competitively through the quality of their staff.

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