CEO’s Letter: To Outsource or Not to Outsource—That is Not the Question

HRO Today

By Elliot H. Clark

When Hamlet contemplates “To be or not to be,” he is actually thinking about suicide, so forgive the title of this column. I am not comparing outsourcing—or not outsourcing—to self-destruction. In fact, I don’t even think outsourcing is a “strategy.” It is a tactical approach to achieve a given set of HR-related tasks or outcomes. That is it. It is not a gut-wrenching test of your philosophical gestalt. It is a big decision to use an external fi rm, but in the modern world of RPO with so many top quality providers, it is an equally big decision to keep recruiting in-house. I have heard of a few big companies that are now working to bring recruiting back in-house. Most of them will fail.

I have seen this movie before. When the unemployment rate drops below the full-employment level, recruiting—and retention, but that is a subject for another day—difficulty rises proportionally. As time to interview and time to fill rise, hiring manager frustrations begin to boil over. The object of their displeasure is the recruiting infrastructure. The talent acquisition leadership and the CHRO come under fire and eventually decide their provider cannot get “the job” done. Then they will make the momentous decision to bring TA back in-house. Welcome to 2005 and 2006! It’s back to the future. The main problem is it largely failed back then. Most of the insourced deals wound up back in the hands of a provider after a few years.

There were several reasons for this. One is the economy, not the effort level. There are also systemic reasons for the difficulty that are often at fault regardless of whether the source attends your Christmas party or is an RPO firm. Do hiring managers respond immediately to resumes? Do they schedule interviews within a few weeks of receiving interest? Do they provide quick feedback and make decisions? Do they compare candidates to each other or to the job? Or how about the CHRO who once told me she was quite proud that their pay ranges were set to the bottom quartile of the market to ensure higher profitability than her Silicon Valley rivals, but then she couldn’t understand why their offer decline rates had risen steadily since she implemented a salary freeze to accomplish it? If you’re going to look to fill jobs quickly, you have to accept that wage inflation is part of the competitive labor market and allow for it. If your offers are not competitive, neither insourced or outsourced recruitment services will succeed.

In addition, most insourced talent acquisition departments don’t have the time or the budget to innovate, deploy new technology, or have the technological firepower of RPO providers for that matter. They simply cannot afford it.

I would hope that the impetus of a few big firms recently going in-house for TA was not because the leaders were trying to buy a year of respite from the incessant complaints of hiring managers. Because if you are not doing better at recruiting when that year is up, it will be a bloodbath in the HR suite.

In truth, the macro market looks pretty good. The statistical mean for our “Quality of Service” measure in our annual Baker’s Dozen Customer Satisfaction Ratings for the RPO industry is 251.70—up from the 2018 statistical mean of 234.70. A year-over-year improvement of seven percent is not small. Most providers are doing a good job and most clients respect their efforts in an era of record low unemployment in many of the largest global economies, including the United States.

If you are struggling with talent acquisition, answer the questions in the paragraph above before you get to the question of “in or out” on the TA team. To view the leaders of this year’s RPO Baker’s Dozen Customer Satisfaction Ratings, click here.

Posted September 19, 2019 in RPO & Staffingin Talent Acquisition

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