With hiring volumes down, buyers are seeking improved processes, and providers are generating new ways to deliver.
By Debbie Bolla
In a downward economy, hiring is top of mind only for a select few: the unemployed, executive-level HR leaders, and recruitment providers. With an unemployment rate hovering near 10 percent according to U.S. Bureau of Labor Statistics, the outlook for the RPO industry might seem grim. But during this time of survival of the fittest, some industry veterans and thought leaders are reporting signs of a lift.
“We’ve been in the bottom for the past 12 months, but in the last 90 days, we’ve started to crawl out,” noted Terry Terhark, president and CEO of The RightThing. “What we saw in the last quarter of 2008 and Q1 of 2009 were companies that were exploring RPO put it on the back burner simply because the hiring volume wasn’t there. We’re seeing those opportunities come back.”
Other signs are pointing up. Hary Bottka, senior advisor for consulting firm TPI, noted, “From my front row seat in advisory services and being a luxury item that is an easy thing to shed for cost savings, we are starting to see more activity on the consulting side. However, I don’t think real hiring will start until Q3 or Q4 of 2010.”
An increase in the number of request for proposals (RFPs) may also foreshadow the fact that executives are loosening the purse strings and taking a second look at their budgets for 2009. “Over the past 12 months, many clients have downsized their recruiting function because there was no short-term outlook on hiring, but we are seeing increased pickup in pipeline,” said Bob Lopes, executive vice president and head of RPO practice of Aon Consulting. “We are seeing more RFPs in the last three months than in the six to nine months prior. If RFPs are beginning to come out now, there is a confidence level, and recruiting volumes will pick up.”
However, one obstacle creating a detour on the road to recovery is the impact of hiring volumes in Q1 and Q2 of this year. According to the “Global RPO Report 2009” conducted by Kelly Outsourcing and Consulting Group (OCBG) and the HRO Association, of 614 respondents, only 36 percent anticipated hiring more than 100 permanent employees, compared with 43 percent in 2008. The numbers certainly reflect the fact that fewer companies are hiring and that more employers are putting every position under a microscope.
Deals Made This Year
But this didn’t mean all was quiet on the deal front. For instance, Asurion recently extended its RPO contract with provider PeopleScout from three to six years. Scope was also expanded to include additional position types. PeopleScout secured another contract extension from three to five years from Delta Air Lines. Also scoring a major contract was Aon Consulting, which is providing recruitment services to Transportation Security Administration (TSA) through a subcontract with HRO provider Lockheed Martin. And Adecco Group North America is providing a comprehensive RPO solution for financial services firm Morgan Stanley.
Global staffing programs manager Nury Plumley for Agilent Technologies, a provider of instrumentation, supplies, software, and services to the life science and chemical analysis markets, recently closed on an end-to-end deal with provider Pinstripe. This is the firm’s first venture into a comprehensive outsourcing deal. Previously, Plumley handled the hiring in-house for Aglient’s 19,000 global employees through a blend of 60 percent internal recruiters and 40 percent contract recruiters to accommodate its diverse hiring needs. In addition, the firm has two divisions: an electronic measurement group, which employs electrical and mechanical engineers and computer scientists, and a lifescience and chemical analysis unit that requires chemists and other scientists. The need for talent in very niche areas encouraged Plumley to tap into the expertise of an outsourced provider.
“Our objective when moving toward a fully outsourcing recruitment model was to increase our variability, scalability, and flexibility,” said Plumley. “Our service level agreement is robust and clearly defines several metrics, all of which are part of our scorecard that includes hiring satisfaction, new manager satisfaction, and cycle time. We are tracking ourselves.”
When Plumley spoke with HRO Today, the agreement had been live for only one month, making it difficult to measure improvements from Aglient’s previous arrangements or any challenges. But Plumley was quick to note that Pinstripe delivered and implemented the agreement on time—in a four-week timeframe—and on budget.
Change in Scale
While new deals and renewals are still taking place, on average commitments are much smaller when compared with those made in previous years. For many companies, cash and margins are tight. An attraction for buyers is the ability for their contracts to be scaled according to their needs.
“Our agreement is based on variability, scalability, and flexibility for the staffing and cost model,” said Plumley. “Having those three things help shape costs when [hiring is] slow and, when there’s a spike, costs should be higher.”
Jay Andre, senior manager for executive hiring for Booz Allen Hamilton, has been working with TalentFusion for three years. This year, has been slightly more challenging for the consulting firm, which performs a lot of public sector work. “We scaled back our RPO usage because the summer of 2008 was a record year of new hires. Now we are spending time with on-boarding.”
Overall, smaller deals are leading to a sizeably lower dollar volume for providers. To debunk this factor, RPO providers are expanding their scope of solutions.
To offset the reality of lower hiring volumes and smaller scope of deals and renewals, providers reported becoming more strategic in their processes and offerings for clients. As noted in the “Global RPO Report 2009,” the most common use of recruitment firms is for sourcing, screening, and testing, cited by more than 90 percent of respondents.
Andre said Booz Allen Hamilton supplements its in-house recruiting service through external sourcing. “We don’t have to spend the time sourcing a candidate, which can be time consuming. [Provider TalentFusion] is continually in the market so they can leverage talent. The real value is finding that talent. It frees us up so we can focus on our internal client and helps enhance the client and candidate experience,” Andre explained.
A sharp increase in the number of applicants is an inevitable side effect of growing unemployment. Frequently, the resumes of unqualified candidates or those looking to transfer previous job skills into a new industry are added to the endless pile. “Right now the trick is finding the needle in the haystack since the haystack is large,” said Bottka. “There’s more emphasis on the prequalification and prescreening to find the right candidate that is the right fit.”
Aon is leveraging technology in its approach to prescreening through realistic job previews. This sourcing technique provides applicants with a first-hand look at an opening. A video of employees shows the culture and job requirements—which reduces the pool of candidates by 7 to 9 percent.
“It’s a more automatic fashion to filter down the large number of candidates,” said Lopes. “By watching a video of people already in the job, candidates have a good understanding of what a job really is.”
Once the right candidate is sourced, keeping them at the company is key. Kelly Cartwright, vice president of marketing for Futurestep, noted a recent increase in expectations for longevity. “It’s beyond just filling required requisitions,” she said. “Acquisition is now top of mind because clients are looking for a critical skillset that they are having trouble hiring.”
This points to the evolution of RPO into talent acquisition. Because the number of requisitions sought is lower compared with previous years, providers are reassigning internal resources to offer clients with more qualified and tenured candidates. Terhark noted that clients are seeking more strategic-level planning around hiring, which led to The RightThing’s offering of competitive organizational mapping. “We’ll build an organization map of who their competitors are and who the key talent is in their competitors,” he explained. “It’s a way to find the very best people.”
The surge of social media is another avenue RPO providers are utilizing for sourcing strategies. Web sites such as LinkedIn, Facebook, and Twitter are changing the face of networking, allowing recruiters to narrow the pool and seek qualified candidates in competing organizations for niche positions.
“There is a particular focus on organizations reaching the right talent, whether it’s through acquisition strategies or retention strategies, or how they are dealing with other talent management issues such as performance and succession,” Cartwright added. “We are building a customized solution. That includes bringing other tools such as video interviewing, e-reference checking, and other enhanced services.”
There’s one thing that’s certain in the unprecedented economy of 2009: uncertainty. It’s tough to predict the future of any business right now, but an increase in the number of RFPs and buyers putting out feelers is shedding some positive light. The need for hiring will always exist. According to the report “Recruitment Process Outsourcing: Today’s Challenges and opportunities,” by Ross Jones, senior researcher for the Human Capital Institute, 59 percent of organizations surveyed currently outsource some or all of recruiting processes, and 50 percent say they will use RPO in the next five years. The survey, conducted with Futurestep, contained a sampling of 381 business leaders with more than 75 percent working in HR or talent management.
Rebuilding from within may not be an option. Noted Zachary Misko, global director of RPO for Kelly OCG, “As the economy rebounds, many companies have cut their internal HR teams, so who is going to do the hiring? RPO may be the answer.”
That’s one question that some companies are already struggling with these days. As the prospect for better days in the future grows, there’s no doubt that hiring will likely pick up in the months ahead. For companies pondering such a scenario, RPO may indeed be the solution to their dilemma.