When internal recruiting efforts are creating exciting chaos, don’t take it on the run. Think strategic outsourcing but not out-tasking. This will ensure a more dramatic transformation of your organization’s staffing approach.
HR leaders whose talent acquisition and management practices resemble the myth of Sisyphus, endlessly pushing a big boulder up a hill only to see it roll back down and having to start all over again, should dust off some of their old LP’s—that’s right, vintage vinyl—and take a cue from REO Speedwagon’s “You Can Tune A Piano, but You Can’t Tuna Fish.”
Sound talent acquisition and management strategies come to life when they are fine-tuned by service delivery capability, capacity, and technology automation. Unfortunately, HR organizations are being asked to do more with fewer resources, so the notion of building and integrating these key elements in-house has turned out not to be a realistic expectation. The answer? How about RPO.
Recruitment process outsourcing can be distilled down to three components: capability, which translates into strategic recruitment know-how; capacity, which translates into having a sufficient number of properly trained people to successfully perform the function; and supporting recruitment technology, to enable a more effective recruitment process. In practicality, organizations have been buying recruitment capability, capacity, and technology for more than 40 years, so the concept of buying these services from third-party service providers is not necessarily new.
Nevertheless, it should come as no surprise that HR organizations have been besieged by a series of point improvements rather than systemic change because over the years these recruitment services have been sourced and implemented as point solutions within organizational silos. While point improvements can appear to be solid business plans on paper, and might even effectively make one area appear better, they frequently fail to have any sustainable impact on the organization’s holistic performance or its bottom line.
Point improvements tend to pass inefficiencies from one area to another without solving the root cause of the problem for the recruitment process as a whole. Six Sigma lean practitioners call these point improvements “exciting chaos,” in which an organization thinks it is making progress, but in reality, the effect is isolated to fixing one recruitment issue or improving one recruitment function without being directly connected to the organization’s entire recruitment process or strategy.
Typically, Exciting Chaos yields results that are minimal or much less than anticipated, so when organizations complain about ineffective recruitment operations, it is usually because of their point-improvement focus. For example, a recruitment organization within a company might think that it’s really good at selling the company and the job to a candidate, but that it’s not good at doing research, sourcing, building an employment brand, or managing recruitment technology. This organization might hire a number of contract recruiters to perform research and sourcing, hire a recruitment-consulting firm to help build employer brand, and buy leading recruitment automation technology to automate the recruitment process.
However, after implementing these point solutions, the real problem comes to the forefront—their internal recruitment organization was only good at selling the company and selling the job to three to five candidates per month, while their upgraded business plan called for hiring 30 people per month. Although the example is fictitious, what it alludes to happens every single day and makes it more apparent to HR leaders that their existing recruitment organizations are not the kind of instruments that could be effectively fine-tuned to successfully compete for and retain elusive talent. Implementing recruitment point solutions and passing inefficiencies from one functional recruitment silo to another, especially with the added backdrop of the heightening war for talent, is simply not sustainable.
A recent Staffing.org survey of more than 4,000 organizations revealed that the total recruiting-cost ratio—that is the sum of internal fixed costs and external variable costs divided by the direct labor wage—has climbed from 11.6 percent in 2001 to 15.2 percent in Q1 of 2006. This translates into a recruiting efficiency drop from 88.4 to 84.8 percent.
However, buying bulk permanent recruitment at a discount is neither transformational nor strategic RPO, but more properly analogous to “out-tasking” instead of outsourcing. For example, out-tasking 160 new hires during the next 12 months might accomplish a specific task or objective, but in all likelihood, it will not have a sustainable transformational effect on your organization. Remember exciting chaos? On the other hand, outsourcing to an expert the ongoing execution of one or more components of your corporate talent acquisition strategy will be transformational.
HR represents only one percent of total organizational costs, according to Tim Palmer of sourcing advisory firm EquaTerra, and only a small percentage of that is allocated towards recruitment. Bruce Tulgan, in his “Winning the Talent Wars,” states, “If you’re not great at it—whatever it is—stop doing it, or else outsource it to a vendor that is truly great. The financial reason is diversification of risk and cost. But there is a much more important reason: diversification of excellence.”
With compelling market data in front of the backdrop of increasingly heightened expectations from already overburdened and under-resourced HR departments, organizations are jumping on the RPO Speedwagon and are rolling with the changes. Organizational outsourcing of recruitment processes and capabilities to third-party service providers is not an admission of failure, but rather represents a strategic decision to increase recruitment speed and efficiency, while at the same time reducing the recruitment-cost ratio. After all, even the most astute musicians buy their musical instruments and then fine-tune them for maximum performance. Building a musical instrument when best-in-class musical instruments are readily available—and typically at a fraction of the cost—is simply a bad decision that will more than likely lead to a lousy performance.
HR practitioners on the buy side, however, are still finding it challenging to develop a base case to drive a broader RPO consideration life cycle, which is a critical first step to embarking on a competitive sourcing initiative with a handful of RPO providers. Developing a base case is even more critical to an HR practitioner who also needs to sell the initiative to internal organizational stakeholders. Nevertheless, even these organizations are moving forward with selective recruitment process outsourcing as a precursor to broader RPO implementations.
For example, an organization struggling with recruiting and retaining sales people might outsource all of its sales recruiting, while another organization might outsource all of its recruitment in one geographic location. In many respects, this type of selective recruitment process outsourcing could be categorized more precisely as collaborative sourcing or “co-sourcing;” yet it could prove to be an excellent opportunity for an organization to benchmark its internal recruitment performance versus that of their selected RPO service provider, while at the same time benchmarking the performance of their selected RPO service provider against others in the industry.
Organizational recruitment functions take center stage every day. They need to continually elevate the quality of their performance to an internal audience, where corporate expectations are on the rise, and to an external audience where the war for talent is very real. In response, HR leaders increasingly are selecting RPO to amplify their organizational recruitment performance rather than continuing to facilitate organizational Exciting Chaos, which only passes inefficiencies from one organizational process to the next.