Our checkup reveals RPO continues to deliver a steady beat of value.
By Russ Banham
Recruitment process outsourcing (RPO) no longer is the new kid on the block or simply a way to fill positions, reduce time-to-hire, and cut costs. In this protracted period of unemployment in the United States and much of Europe, and the intense hunt for talent that adds true value, RPO is increasingly seen as a game-changer.
To take the pulse on the health of RPO, HRO Today reached out to nearly a dozen providers for their diagnoses and prognoses. For the most part, they are in agreement that RPO is catching on widely because of the greater need to identify and employ skilled workers and since its becoming an increasingly mature and sophisticated enterprise in many countries.
As it becomes even more global as clients seek strong pipelines of talent to fill in needs and voids as they develop, vendors are striving to increase their footprint across the world, and are endeavoring to adapt their models to customer needs. Technology advancements in the space are staying apace of client/vendor trends, with significant momentum toward a single, integrated talent management solution.
The following comprise our questions to the industry participants and their responses, for which we are thankful. In some cases, the editors trimmed and modified the replies to elevate clarity and meaning.
HRO Today: How are economic conditions affecting RPO and company talent objectives?
Patrick Beharelle, CEO, Seaton Corp: The last economic downturn had a “game-changing” impact on RPO. On a macro basis, hiring volumes contracted and have yet to fully recover to pre-recessionary levels. But, many firms have been struggling to size their talent acquisition teams properly, as medium-term and long-term visibility to hiring needs have become highly uncertain. Hence, it has become more pressing than ever to organize a firm’s talent acquisition engine to be operationally scalable to address peak/trough hiring, and highly variable in cost to match variable hiring needs. As a result, we are seeing the adoption curve for RPO accelerate. First-time buyers are flooding the market with demand for both project-based engagements and full-cycle RPO, and decision cycles to engage an RPO provider are compressing, particularly in cases of unexpected hiring bursts.
Michael Beygelman, global practice leader and president, North America RPO, Adecco Group: As unemployment stays high, one downstream challenge is being able to find the “right” talent, and not just scanning job boards or LinkedIn for “available” talent. Poor hires can have a negative impact in any economy, but in a sluggish economy employers can choose to be picky because they simply can’t afford to add headcount that doesn’t immediately add value.
Angela Hills, executive vice president, Pinstripe Inc.: Economic uncertainty in the U.S. and abroad has forced organizations to rethink their talent acquisition strategies. They are being challenged to do more with less, and as a result many are turning to solutions like RPO that allow them to partner with experts to maintain or increase the efficacy of their talent acquisition processes, while giving them the flexibility and scalability needed to respond to an evolving business environment.
Jeanne MacDonald, vice president and general manager, RPO and project recruitment, Futurestep: The uncertainty of the economic climate means that talent objectives are shifting and equally unpredictable. The knock-on effect for RPO services is an exponential increase in demand for flexibility. More companies are looking to RPO as a way to be cost-efficient, while meeting recruitment objectives. Consequently, when it comes to signing a deal, there needs to be flexibility inherent within it. There is also a real need for international capability in the face of the economic conditions. As organizations look for business growth and success in new markets, they are asking providers ‘How quickly can you switch on a service in another country?’
Bruce Morton, chief marketing officer, Allegis Group Services: We are seeing growth opportunities in EMEA [Europe, the Middle East, and Africa], as companies look to optimize their resources through the tough times, while the economy slowly recovers there. Elsewhere, Asia-Pacific continues to grow, albeit at a slightly lower rate than the least couple of years. Latin America is the biggest growth region by percentage right now, as multinationals look to rapidly expand into this region.
HROT: Are there any regulatory or legislative developments in your region that are affecting talent management and/or RPO?
Thomas Marsden, global director of professional services, Alexander Mann Solutions: In the U.S., one of the issues the administration is facing is whether or not, in the face of an increase in the amount and value of service outsourcing, protectionist policies against the use of cheaper foreign labor by U.S.-based organizations should be introduced. In Europe, the extent to which directives like the Agency Workers Directive are being taken up is making an impact on the recruitment sector. And in Asia, there is a complex set of regulatory drivers varying significantly, from mature economies like Japan that retain strong employment protection to developing economies introducing labor protection at mixed pace.
Beygelman, Adecco: In the U.S., several states have passed laws protecting the unemployed. For example, in Oregon and Washington D.C. the unemployed have become a protected class just like other minorities—an employer in these locations cannot state to a job applicant that he or she must be currently employed to be considered for a position. Several countries in Europe are passing equal-wage laws that will impact outsourcing arrangements. For instance, outsourcing may be used as a means of [avoiding] employment obligations and social benefits. Data privacy is still very much in focus because HR deals with sensitive information. Who views that information and where it is stored are concerns for multinationals looking to streamline recruitment with a global model.
MacDonald, Futurestep: In the U.S., President Obama’s healthcare initiative [Patient Protection and Affordable Care Act] has tremendously impacted the need for hiring in the healthcare sector, particularly in IT. In biotech, the high amount of drugs coming off of patent is opening up hiring in this sector as well, particularly in sales and R&D [research and development].
HROT: What are the trends emerging among employers with regard to talent management and RPO?
Rebecca Callahan, president of RPO, Randstad Sourceright: Employer branding and recruiting within social media are becoming important points in an RPO engagement. Most organizations are not prepared to invest or have the knowledge to enable social media within their recruitment strategies. As social media becomes one of the fastest ways to interact and connect with candidates, employers will need strategies and methodologies to deploy their employer brand online.
Rajesh Ranjan, vice president, Everest Group: With increased importance of the contingent workforce and the greater alignment between procurement—which is typically responsible for the contingent workforce—and HR—typically responsible for permanent hires—organizations are seeking and taking a total talent acquisition approach. This is giving rise to a blended RPO model combining traditional RPO with MSP. We are also seeing multinational companies increasingly evaluate and adopt a multi-country approach to RPO and talent management, helping the multi-country RPO market grow considerably.
Beharelle, Seaton: Employers are increasingly viewing talent acquisition from a global perspective rather than a regional one; the number of multi-continent RPO engagements is clearly accelerating. Secondly, although pipelining candidates has always been prevalent, the focus on hard-to-fill positions has become more pronounced. The renewed focus on pipelining is largely due to the highly reported “skills shortage” in some categories, particularly IT positions. Lastly, employers are increasingly asking RPO providers to build military veteran sourcing and screening programs designed to dramatically increase the number of veteran hires.
Hills, Pinstripe: In the wake of the Great Recession, organizations are shifting their focus away from upfront cost savings to the long-term effectiveness of their recruitment strategies. The demand for skilled labor throughout the globe has made it increasingly critical for organizations to identify, recruit, and retain the talent they need to reach their strategic business objectives. They seek partners who can ensure their brand is recognized among key talent pools, analyze market and hiring trends to predict the right level of recruiting support, and leverage gaming and simulation technologies to engage candidates in unique and interesting ways. More than ever, employers want to know their talent acquisition strategies are both efficient and effective, and to find providers who can deliver on that promise.
Beygelman, Adecco: Customers want to partner with an RPO provider who can have a strategic impact on their business—not just manage the tactical aspects of filling jobs. They also want more forward-looking analytics, feedback about the market, information on competitors about talent, and consultation on ways to improve their employment brand. Customers [want] help defining the ideal candidate profile, and the key factors [describing] top-performing talent in the organization. Clients are also starting to think more strategically about consolidating their talent management needs, including temporary employment, campus recruitment and internship programs, with dynamic reporting and trend analyses.
Marsden, Alexander Mann: Employers are beginning to integrate permanent recruitment alongside their contingent workforce resourcing requirements. The changing and volatile economic conditions have prompted some employers to reevaluate their recruitment needs and adopt a more flexible, assignment and project-based approach. Companies recognize that it makes sense to view these options holistically through strategic workforce planning, but are still struggling to identify and allocate the responsibilities and governance to make this happen.
Phil Stewart, president of recruitment solutions, Kenexa: Clients are more interested in bundling services like talent assessment, technology, employment branding, and onboarding, and are looking for solutions and suggestions to address the social side of recruiting, brand support, and culture fit. Another trend we are seeing is that while skills and talent are important, culture is becoming almost more important in hiring. Fit is being looked at from a team level, as well as an overall company match.
HROT: What are the trends emerging among vendors in the RPO space?
Ranjan, Everest Group: The RPO vendor landscape is one of the most fragmented within the HRO space, and consolidation is now playing out. In the increasingly cluttered marketplace, ability to differentiate, in terms of value creation and value proposition articulation, is important. This means integrating and offering industry-specific solutions, as well as offering more enhanced services through deployment of analytics, employer branding, and outplacement services. In addition to building top-line growth, vendors also are focusing on ways to improve the bottom line, such as greater standardization, offshoring, operational leverage, and technology to increase automation.
Beygelman, Adecco: RPO providers are finally starting to embrace regionalized delivery to support global RPO programs. The days of a global program delivered from a single country are quickly fading and many RPO providers are scrambling to build delivery shared service centers or partnerships to allow them to have an “in country” and regional presence in all the major markets of the world. The focus on data and analytics is on the rise as providers are working to turn the avalanche of data that is generated throughout the recruitment process into business intelligence clients can use to make smarter business decisions.
MacDonald, Futurestep: The RPO space is shifting as the definition of RPO expands and changes. Vendors need to look carefully at what they are providing back to the buying community beyond just sourcing the right talent—what else they bring to the table. In some cases it’s about technology optimization and building talent communities, and in others it’s right back to basics moving from spreadsheets to automation. The maturity of the offerings needs to differ globally and providers need to get the balance and the fit right.
Hills, Pinstripe: The demand for highly skilled workers is forcing RPO providers to focus on sourcing candidates and building a strong pipeline of prospective employees who can fill niche, high-demand positions. Having the people, processes, and systems in place to help organizations with their recruitment strategies is now table stakes. Another trend is the use of social media, which continues to evolve recruitment processes. Best-in-class RPO providers are leveraging social media platforms to engage segmented talent pools and develop a “warm” pipeline of qualified candidates.
Callahan, Randstad Sourceright: Employer branding practices are playing a larger role in RPO. There is also growing investment by providers in sourcing and social media strategies. We’re seeing many RPO vendors focusing on smaller mid-market opportunities and shying away from the larger engagements.
Stewart, Kenexa: One trend is the continued change from a “just filling a vacancy” mindset to a “quality of hire” mindset. Also, providers who were once purely full-time employee or contingent hiring [firms] are now being asked to provide blended services.
HROT: Are there any developments in RPO technology that are changing how companies are serviced, and thereby altering the competitive situation for vendors?
Hills, Pinstripe: RPO providers must be able to aggregate local and global talent information and qualify employment candidates in real-time. Those with the technology to do so faster and better than the competition will have a real, competitive advantage.
There is also an increasing demand from organizations for RPO providers who can effectively build brand awareness and loyalty. Providers must be able to effectively communicate the employer brand and explain why candidates should choose these organizations over others. The use of video, online referrals, talent intelligence and “gamification” [are helping] providers engage candidates and differentiate themselves.
MacDonald, Futurestep: A key role for technology is to find and keep in touch with candidates whom employers will want tomorrow, rather than the talent they need today.
Tools that enable vendors to stay in touch with and push messages to people the client will need to grow their business in future can provide a competitive advantage. In terms of servicing clients globally, a requirement firmly on the rise, providers need to draw on both global and local technologies and integrate them. There are channels we use in North America that are not at all effective in China, for instance. The challenge is using the right tools in each country and integrating the information to come up with the right solutions.
HROT: Do you have a prognosis for the next three years?
John Wilson, CEO of WilsonHCG: RPO is evolving and becoming a more fluid solution for companies both large and small. Continued economic headwinds coupled with the baby boom generation’s imminent retirement means that scalability and quality will be more important than ever before. RPO providers therefore need to increase creativity and flexibility, while continuing to deliver top talent. In the past few years, blended RPO solutions have grown in popularity, and I see this increasing as “box solutions” fade and more agile solutions take shape. In an effort to catapult to the next level, companies will increase spending not just in recruitment, but in HR consulting and employment branding—areas that have been left on the backburner during the global economic slowdown.
Stewart, Kenexa: We will continue to see customers expand globally, either organically or through acquisitions. As they become more global, the need for providers that can offer global solutions will continue to grow. It can be a challenge for a company headquartered in the U.S. to effectively and efficiently manage recruiting in Abu Dhabi, or for a company headquartered in Europe to recruit talent in Shanghai.
Beharelle, Seaton: Our view is that RPO could be in the second year of a five-year “super-cycle.” Many RPO providers reported 2011 top-line growth rates in excess of 60 percent and are seeing similar results in 2012. Considering that hiring volumes have yet to fully recover, adoption rates are still below 30 percent, and the RPO value proposition is highly compelling. Moreover, providers will continue to develop more sophisticated and global delivery capabilities. The wildcard is whether the industry will face economic headwinds or economic tailwinds that accelerate or depress hiring in the next few years.