- July 4, 2020
- Posted by: Michael Yinger
- Category: Recruiting and Sourcing
What is recruitment process outsourcing? What do you know about it? Are you thinking about it? Are you using it and wondering if you’re getting all you can from the program? A lot has been written on this topic, perhaps to the point where it’s difficult to ascertain the benefits, risks and challenges this type of program can present to your organization.
I’ve been the Recruitment Process Outsourcing space for nearly 20 years, managing sales, client delivery, implementation, technology, and product management. This experience has created a broad perspective for me on what works, what doesn’t, what’s a benefit, and what’s not. Below I lay out all these aspects of an RPO program. My intent is to demystify the topic to give you information that will be helpful wherever you are in a Talent Acquisition outsourcing journey.
Let’s start with the good stuff, the benefits. This commonly comes under the banner of “why should I go with RPO?” Benefits come in many forms. The general categories are cost, flexibility, process, productivity, and technology. There’s another category I call experience. I’ll explain all of these below.
Cost: This is typically a key component of why people choose to outsource all or part of their recruitment. Sometimes this means an actual cost savings of using an RPO firm vs. in-house Talent Acquisition. And then there is the distinction of hard vs. soft ROI. In reality, it’s often times hard to clearly see the cost savings because of how the data is managed internally. Ferreting out all the bits and pieces can be a challenge, making a precise hard ROI calculation challenging. Generally, with an RPO you absolutely have more visibility to the actual cost because that will all be covered in the contract. How much you actually save will be a function of how you implement the program. For example, if you intend to reduce internal staff costs as part of the justification, do you actually do that? I had a customer who built their economics on reducing the number of HR people in the field. They calculated the people reduction, and therefore the RPO savings, based on work being transferred to the RPO. In the end, they did actually reduce their team very deliberately over a couple of years (all through internal mobility or voluntary attrition) to get to the dollar savings they used to justify outsourcing in the first place. Then there are things like technology and sourcing contracts. An RPO should be able to provide tools at a lower cost due to their volume, assuming you’re willing to give up control on those contracts (see Downside Issues below). Bottomline, an RPO can generally generate savings, something that appeals to the CFO.
To determine soft ROI, there are many other benefits that are more qualitative than quantitative: faster fills (shorter vacancies); reduced attrition (less recruiting, training, lost productivity); time savings for HR and the hiring manager (they can focus on other activities); brand enhancement (better applicants, more consumers of the underlying products of your organization). Sure, you can put numbers to most of these, and to the skeptical, they can be debated. Hence the concept of soft ROI.
Flexibility: it’s a rare organization that has consistent, stable recruiting demand. This may vary month to month (stable workforce, consistent attrition, like a bank); over seasons (hiring for a garden supply company in the spring and summer); in spikes (filling call center seats to handle open season for HR benefits). An RPO inherently removes the seasonality risk from the organization because they take it on for themselves. Consider the spike example noted above. In this case, the company does all of their hiring over about 3 months. To support this demand, the RPO had to scale from a handful of year-round recruiters to more than 60 to handle the volume. At the end of the demand, the RPO then reduced back to that handful. Most companies can’t handle this type of volatility with an internal team, leaving them scrambling for recruiting resources at the peak and with a surplus of people at the trough. Clearly, having access to this flexibility is a benefit, you’re only paying for the resources when you need them.
Process: An RPO will make clear any process inefficiencies or glitches you might have. The RPO will operate the process very deliberately, eliminating variability and, sometimes, choice that might otherwise exist. This can be a good thing for efficiency, repeatability, and compliance, though there might be some grumbling about the lack of freedom (see Challenges below). If your choice of vendors is a good one, you should have access to best practices around process and compliance. This should include local regulations, local customs, as well as the utilization of tools that lead to productivity. You’ll get access to metrics that may not have been visible before, allowing you to adjust your talent acquisition in ways that improve the throughput as well as the experience (for both the applicants and the hiring managers).
Productivity: There are a few different aspects to productivity that create a benefit. First, with a standard process and best practices, the recruiting team will be able to process more requisitions and applicants. Second, while the RPO should be considered an extension of your TA team, because they are likely operating remotely (especially in a pandemic), they are somewhat immune to the distractions an in-house team has to deal with. These are not bad distractions (birthday parties, team lunches, chatting at the printer) and they do impact productivity. Third, it’s likely the RPO team will have access to more training that most TA teams. They’ll be up to speed on the latest tools and techniques, allowing them to maximize their time with their applicants and customers (the hiring managers) while growing their expertise.
Technology: This is often an underutilizing benefit of an RPO. You probably already have technology in place, maybe mandated by your HRIS, maybe because someone in the past created a justification for the system and got it implemented. Again, these are not bad things, and taking advantage of the technology from an RPO can benefit you in several ways. First, the RPO team will be most familiar with their technology, operating at a high level of efficiency. This is especially true where the RPO has created a technology stack to use in the recruitment process. Second, most RPOs are constantly reviewing new technologies (5-10 new products come out weekly in the HR Tech space), giving you the benefit of that investigation. Third, by using the technology the RPO brings to the table, you may be able to eliminate the cost of your own technology that is no longer needed.
Experience: Partnering with an RPO will change the way all the participants interact with the talent acquisition process. If you’ve ever been a job applicant where the company was working through an RPO, you probably recall how different that felt. Usually, there is a pace to it, with communication throughout, that distinguishes recruitment via an RPO. I’m not saying internal TA does a bad job, and with a singular focus on the experience, generally the RPO creates a more engaging experience. The hiring managers may see something similar in their interactions with their recruiter. Typically, the RPO will generate more points of communication, a swifter conclusion, supported by more transparency. These are all good things for the applicant, the hiring manger, and the employer brand.
Let’s shift focus and look at the challenges you may encounter when you select an RPO. Certainly, there will be change management to consider because how the internal players interact with TA will be different from the status quo. The process will likely shift, the players will change. Resist the temptation to take change management out of the implementation
Integrating your technology with the RPO will not be easy. Speaking from experience, the concept of plug and play when it comes to enterprise systems is generally inaccurate. It’ll take patience and perseverance to see integration through to the end. It’s very likely this will be the critical path (the longest one) in the project plan to implement an RPO program.
There are a few more challenges to consider: first, how will you handle participation in the program? People will want to do things the old way (see change management above). Are you going to mandate that they participate? How will this be monitored and enforced? Second, where you are operating in multiple jurisdictions, your RPO will need to keep track of local regulations, local customs, differing process (i.e. dealing with the Works Councils in Germany). They should be set up for this (see Process above) and it’s a critical success factor. Finally, creating and negotiating the contract with the RPO can be frustrating. It never goes as fast as you want and often not as fast as you planned. The process of negotiation can sour (or enhance) your relationship. This is the beginning of a partnership, and how it kicks off is critical to the longevity and success of the program.
Aside from the challenges above, there are some downside issues to using an RPO (after all, no solution is perfect nor for every organization). Perhaps the biggest issue will be the shift of control from the hiring managers and TA to the RPO. This will feel like loss of control, loss of choice. This feeling may be accurate, and the shift is deliberate. Where things were decentralized in the past, they now may be consolidated. Where the HM controlled the entire process, they now may be focused just on interviewing and decision making, and they may not like that. Where HR was involved all the way through, they now may be only involved in problem solving. Another aspect of control are the existing contract (sourcing tool, recruitment technology, staffing agencies). Depending on decisions made during the contracting process, current contract owners may lose control of different aspects of the recruiting infrastructure, to be replaced by systems and tools under the control of the RPO.
Other issues include the loss of variability (you’re going to be asking your team to follow a standard process, with less choice); there will be contractual commitments on the part of the RPO as to how things get done that were negotiated in the contract, though not might not have been vetted by the people in the business (the business may not like the changes – for example, the HM is no longer empowered to use a staffing agency to fill their requisition because the RPO has first right of refusal on filling the job). And finally, you’re entrusting your brand to an outside vendor. How well they execute on your behalf could have an impact on how the applicants and the market perceive your organization. It’s likely this will be positive (there’s a reason that RPO clients win CANDE Awards every year) and you’ll want to watch their execution to be sure it matches your expectations for a brand ambassador.
The last category to consider are what I call toss-ups. It depends on your perspective whether these are good or not. A few specific items come to mind. First, one of the benefits of having an RPO is that TA will have a single point of contact for communication. On the one hand, you will know exactly who to talk with, on the other hand, all your people will have to filter issues through this interface, where before they would have had access to TA directly (probably). Next is the issue of blame. When you have an RPO, it’s may be tempting to point your finger at them, whatever the problem. The flipside of this is while you’re pointed at the RPO as the problem, someone might be pointed at you for the choice you made (whether or not the particular issue was indeed caused by the RPO). Finally, the people working for the RPO are no longer your employees. At times it will be tempting to direct them to do things, particularly if part of the team is on-site at one of your facilities. This raises the specter of co-employment as well as loss of control and conflicting priorities. All of these can be handled with planning, communications, and a good governance process. If ignored, they can trip you up.
There are lots of benefits available to you in choosing to outsource all or part of your talent acquisition. While there are challenges and issues, the upside benefits generally outweigh the downside. As you work through the decision process, find a neutral party who can help you balance the positive with the issues that are not so you can get to a positive solution with both hard and soft ROI.