SI Review: May 2013

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Big Money

The facts behind the growth of RPO

By Craig Johnson

It’s easy to think big when it comes to recruitment process outsourcing

For example, ManpowerGroup Inc. announced in April 2012 it renewed an RPO deal with the Australian Defence Force valued at $400 million over five years. It was described by the company as the world’s largest RPO partnership.

But the Australian military isn’t the only large staffing buyer with an interest in RPO. Surveys by Staffing Industry Analysts found more and more large staffing buyers are turning to RPO.

In fact, global RPO revenue reached $4 billion in 2012, according to a report by Staffing Industry Analysts released in March.

“The U.S. and European markets each claim between $1.5 billion and $2 billion of it,” says Bryan Peña, vice president, contingent workforce strategies and research, at Staffing Industry Analysts. “The substantial size of the European RPO market is partly driven by the fact that in markets such as the U.K., RPO service often includes recruiting of contingent workers as well as ‘permanent’ workers.”

However, RPO isn’t temporary staffing, and it isn’t direct hire. RPO is a different animal. If you’re planning on going the RPO route, here are some facts to know as taken from Staffing Industry Analysts’ latest RPO report, based on a survey of eight large RPO providers:

Not direct hire. RPO is typically used to recruit permanent workers in the U.S., but it’s more broad and strategic than direct hire. It also typically includes filling all openings; direct hire placement does not ordinarily receive exclusivity on vacancies.

Leaning professional. According to the providers surveyed in the report, office/clerical and industrial skills represented only 32 percent of global hires.

Untapped market? The $4 billion estimated global revenue of RPO seems small in comparison to temporary staffing — which is $99 billion in the U.S. alone. That may give reason for optimism about market growth. However, temporary staffing revenue includes the full pay rate of temporary workers and other costs for the duration of temps’ assignments. RPO revenue includes only fees charged to buyers.

Pricing. Approximately half of firms surveyed based pricing on “price per hire” and about a quarter used price per hire and management fees. In addition, all respondents noted that they have implementation fees and separate fees for internal and external hires. The implementation fee is a one-time service fee for implementing a recruiting solution. Also, 75 percent of respondents reported passing on service costs such as the use of job boards.

Per-hire earnings. Revenue per hire among the respondents ranged from $1,212 at the 25th percentile to $1,999 at the 75th percentile. And revenue can vary based on the occupations sourced, the share of workers who are sourced internally and whether the RPO is providing end-to-end recruitment outsourcing or on-demand.

Too few hires? The median survey respondent said only 30 percent of clients had minimum hire clauses in their contracts.

Features? Virtually all of the respondent’s global client RPO contracts included candidate assessment and screening, candidate care, change management, implementation management and standard process status reporting among the features of their RPO offerings:

  • Candidate assessment and screening is an automated process of funneling candidates based on skill set, knowledge level, etc.
  • Candidate care refers to the management of an applicant through the entire process from application to hire.
  • Change management is the training and communication strategy for driving adoption among hiring managers when there is a change in the RPO process.
  • Standard process reporting includes standard reporting provided by an applicant tracking system.

And 97 percent of the median respondent’s global client contracts included candidate sourcing as a feature. Among contracts that included diversity recruiting, the median response was 80 percent. And for contracts that included background checking, the median response was 75 percent. Interestingly, none included relocation management.

More information can be found in the report “Staffing Industry Analysts Recruitment Process Outsourcing Survey Results,” which is available at www.staffingindustry.com.

Craig Johnson is managing editor of Staffing Industry Review. cjohnson@staffingindustry.com

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