SI Review: May 2013

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… 5, 4, R, P, O

Why this talent acquisition model is taking off

By Stephen Clancy

There has been much talk about recruitment process outsourcing. Just a decade ago, industry insiders dismissed staffing providers who claimed they had an RPO arm. And even five years ago, only 14 percent of buyers responding to Staffing Industry Analysts’ annual buyer survey said they used some type of RPO solution and the rest showed little interest exploring this talent acquisition solution. Fast forward to today. It has become an established part of the staffing industry landscape and it continues to grow. Recent numbers indicate that 38 percent of buyers today are engaging RPO solutions and another 18 percent are seriously considering it in the near future. Staffing Industry Analysts estimates that the global RPO marketplace revenue was $4 billion in 2012. Why is there this surge of interest in RPO?

The main reasons buyers are drawn to RPO services are: acquiring high-skilled labor, retaining best practice recruiting capabilities and recruiting resource scalability.

Tough Skill Sets

Even in a marketplace of stubborn unemployment levels, certain high-skilled labor is not easy to come by. As a consequence, some buyer organizations are challenged in their ability to acquire required skill sets. Today’s buyer organizations respond with lightning speed to their customers and market changes, and labor requirements and specific skillset needs emerge swiftly and unplanned. This leaves the in-house recruiting function in an organization with a requirement to move with a speed and expertise that sometimes it is not capable of.

On the Edge

Ensuring cutting-edge recruiting skills is also a practical challenge for internal recruiting teams because this function is not a core service or product value that the buyer’s organization delivers to its marketplace and clients. This is not to say that talent is not a critical component of any successful buyer organization, but the “art and science” of recruiting is changing faster than some staffing companies themselves can keep pace with, let alone an internal corporate recruiting team. New efficiencies and recruiting competitiveness provided by disruptive technologies and methods, such as social media, are driving dramatic changes in the field. How does an in-house buyer recruiting team keep pace? Not impossible, but very challenging!

Need to Scale

Finally, over the last decade or so, recruiting teams (both external and internal) have had to scale their organizations up and down significantly two to three times. In many cases the internal recruiting team resources were decreased to skeleton levels with ongoing resource improvements curtailed to a minimum. Similar actions during these economic downdrafts were experienced by the RPO provider community, but they have a larger customer base to leverage in weathering the storm and smoothing out these costly changes during turbulent, unplanned ups and downs in hiring demand. It is also very costly to climb back up these unplanned economic roller coasters, because fast-rising hiring demand requires expensive investment to meet the business’ recovered hiring demand. For those buyer organizations with comprehensive RPO engagements, it must have been very cost effective to only pay for what they used with a traditional “price-and-hire” arrangement during the recent financial recession (so long as they stayed above their contract volume minimum).

Other reasons why buyers engage RPO range from more efficient talent acquisition processes to access to new specialized recruiting expertise and tools. These new competitive recruiting practices deliver significant, initial cost-savings when deployed in comparison to internal resourcing and funding of the recruiting process.

There is no doubt that RPO solutions have a strong, proven, value proposition as evidenced by the current growth and adoption in the marketplace. Staffing companies that position and resource their RPO services and solutions carefully to align with buyers’ needs, will find a marketplace they can do quite well in.

Stephen Clancy is director of contingent workforce strategies and research at Staffing Industry Analysts. sclancy@staffingindustry.com 

[SIDEBAR]

A Bird, a Plane? No, it’s RPO

Staffing Industry Analysts defines recruitment process outsourcing as the partial or full outsourcing of the internal recruitment function to a third-party specialist provider, which serves to provide the necessary skills, activities, tools, technologies, related recruitment supply chain partners and process methodologies to assume the role of the client’s recruiting department by owning and managing its recruitment process and related recruitment supply chain partner relationships. RPO is more commonly used as a method for employers to recruit direct-hire personnel, particularly in the U.S. In Europe, contingent workers will also be included within that scope in some instances.

Full outsourcing of the internal recruitment function is sometimes called enterprise or end-to-end RPO, while partial outsourcing is sometimes called functional or project RPO.

[SIDEBAR 2]

Functional or Project RPO

  • Generally 10 to 200 external hires
  • Shorter-term contract, usually finite timeframe or evergreen
  • May be limited to specific tasks
  • Could be end-to-end for specific group of hires or geography

Examples:

  • New product release: 100 sales reps, 20 new locations, over six months
  • Selected functions/positions: sales candidate sourcing, first-level candidate screening, call center staff only, etc.

End-to-End or Enterprise RPO

  • 200 to 2,000+ annual hires (exclusive)
  • Three- to five-year contractual relationship
  • Includes all tasks related to hire process
  • Includes both internal placements and external hires
  • Ownership, management and/or administration of ATS technology
  • Partner becomes “in-house recruiting department”
  • Services entire company or a discreet portion of company (specific group or geography)
  • Handles all requisitions to completion
  • Is recruiting face of client to all candidates and hiring managers included in scope.

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