· 7 min read · Features

Recruitment process outsourcing: recruiting the recruiter

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The recruitment process outsourcing (RPO) market has enjoyed healthy growth over the past couple of years. North America accounts for over half of all RPO adoption, but there are signs that Europe is catching up.

Although there are a large number of RPO suppliers with international capabilities, the majority of deals continue to be single-country and, if anything, this trend appears to be accelerating. Manufacturing companies are the biggest users of RPO, but there is rapid growth in the professional services, hotels and education sectors.

That's a snapshot of the market, but what are the underlying trends? What is driving uptake and which factors should be taken into consideration when deciding whether or how to implement RPO?

Erin Peterson, leader, recruitment process outsourcing at Aon Hewitt, takes the view it has been primarily fuelled by the rebounding global economy. "Many HR and recruitment professionals were made redundant during the economic downturn, but as demand returns, forward-thinking companies are considering new ways to manage recruitment before they simply rebuild old models," she says. "When it is done well with a close partnership, RPO can be a strategic answer to the call for higher quality hires and a better recruitment process."

It is a misconception that RPO is turned to most frequently as a cost-cutting measure. Surveys show that quality is the number one factor, but that is not to say RPO providers are not under pressure to keep costs under control.

Sue Marks, CEO at RPO firm Pinstripe, believes that the lack of investment on the part of some organisations is the biggest barrier to success, given that it costs money to be truly strategic and to recruit "at the top of your game". In her view, employers must balance budget concerns with a commitment to candidate quality and quality of hire, yet too many employers are still allowing a cost-conscious mindset to limit the success of their RPO initiative.

Richard Jackson, COO at Hays, says some truly global clients are starting to look for recruiting partners that can serve them around all their worldwide operations in a co-ordinated and joined-up way.

Whereas in the past, companies may have been just looking for an outsourcer to take care of the admin tasks, "today, many decisions are driven by obtaining access to the latest technology", says Jackson. The ability to scale up or scale down an engagement with an RPO provider when needed is appealing to companies, allowing them to flex their resources - preventing an internal recruitment team from being swamped or under-utilised.

Stephen Gilbert, RPO practice lead at Manpower Group Solutions, points to instances where RPO has been adopted as a global strategy to help drive globalisation and transformation within the whole HR organisation. He believes having a third party's service drive the global agenda can leverage the debate and change aspects needed for organisations to globalise. But Gilbert adds: "Generally speaking, a global RPO strategy will work when all countries and stakeholders are in alignment, or there is a recognition that one size does not fit all, but one size fits each country's needs. There is a debate within the global HR community saying that there are only a very small number of recruitment companies that can operate to the same quality and delivery in every market."

Gilbert predicts that the major global staffing companies will continue to build out their RPO infrastructure over the coming years, leaving smaller providers unable to deliver a global solution.

But as Tom Marsden, director of professional services at recruiters Alexander Mann Solutions, says: "Holistic RPO on a global basis is still quite limited. In fact, the most common approach we see from employers is to extend their national strategy to specific regions, for example European, Asian or American markets, rather than having a truly global strategy. However, there are a few segments of RPO which clients are now thinking of on a global basis, in particular, graduate programmes and MBA recruitment."

In some companies, workforce strategies are regional or local, rather than global, tailored by business unit and geography. As a result, RPO also tends to be regional or local. Other barriers to incorporating it within a global workforce strategy include lack of awareness of the availability of services within the RPO market, challenges associated with deploying services into geographies with limited hiring volumes and a reluctance among HR and business stakeholders to accept new ways of doing business.

"While the ability to secure boutique search firms for specialised positions can be an advantage to a multi-vendor strategy, it is important to also consider disadvantages, such as the inconsistent delivery of services which can impact on brand, diluted client purchasing power and the challenge of managing multiple vendor relationships," says Jill Goldstein, senior manager, HR outsourcing at consultants Accenture.

For companies going down the multi-vendor RPO solutions route, some experts believe this works best when there is one 'master provider' which owns the client relationship and is accountable for ensuring standard operating procedures are in place worldwide.

Of course, outsourcing recruitment is not always advantageous. Dangers can occur when the process is mismanaged. If buyers decide to outsource their recruitment processes because they have problems here, this will solve very little. "Companies need to understand where their problems lie before outsourcing, and then work in partnership with their provider," says Mark Lee, managing director EMEA RPO at recruitment agency Futurestep. "The client will get a lot more out of RPO if they put work into the process and that relationship, rather than just passing on the ownership of a problem."

If an RPO team is brought on board, it is essential they have a 'sponsor', such as the HR department, which makes a sound business case for their involvement and communicates it effectively throughout the organisation. Full backing also needs to be secured from the board, senior management, procurement and finance departments so that RPO is not isolated within the HR function, according to Phil Clarke, director of HR consultancy, Independent.

So, how are companies using RPO? Tyre manufacturer Goodyear signed an end-to-end recruitment process outsourcing deal with The Right Thing in 2009. Goodyear says the arrangement has delivered improvement in key measurement areas including average days to offer, diversity outreach, turnover and quality of hire. "We understood early on that a successful outsourcing partnership was a two-way street and the ability to be open and flexible was key," says Chastity Duskey, manager of talent acquisition at Goodyear. "When we hire someone new into the organisation, we recognise there will always be a learning curve in the beginning and it was the same for our RPO partnership."

Core team members from The Right Thing were invited to attend a three-day new hire orientation programme at Goodyear, providing education on the entire company and insight into how each area of the business directly affects overall performance. Additionally, The Right Thing team members met with key business and HR leaders and spent time with employees to learn about their experience during their candidacy for employment. "By strategically integrating The Right Thing team members as much as we could into our internal culture and day-to-day life, they became better equipped to truly understand what Goodyear is all about," says Duskey.

International retail financial services group Prudential, meanwhile, uses Randstad Managed Services (RMS) as exclusive provider of outsourced recruitment services for its global Momentum programme for future leaders. The brief is for RMS to source and review more than 5,000 candidates from over 100 countries, from which to identify 30 'star performers'. RMS is managing the entire process for Prudential, including the planning and purchase of online and offline advertisements, liaison with leading global business schools and initial candidate telephone interviews, through to assessment centre management and final interviews. Sophie James, group resourcing and development consultant at Prudential, says that when selecting a human capital partner for such a "complex and high-profile campaign", it was necessary to make sure the company had "the right track record, global infrastructure and consultative approach."

Although high-tech engineering company e2v is enjoying significant growth across its territories including the UK, US and Asia, it has taken a more localised approach to RPO. Last year, it appointed HR consultancy Independent to help it with its expansion needs, particularly in the UK. "This arrangement is proving to be a productive and cost-effective partnership," says e2v HR director Dina Knight. "The Independent team understands the nature of our business and how we operate and has quickly established itself, delivering quality candidates in a competitive marketplace where skills shortages are high. Its role has been as a key partner in meeting the fluctuating demand and specific technical requirements in the UK which continue to characterise our expansion."

Employers are taking differing approaches to RPO shaped by scale, geography and objectives. Yet while their individual needs vary, there is every indication, now momentum is building, that RPO will continue its growth.

The stats

A recent Aberdeen Group benchmark report on RPO, Outsourcing Recruitment is Not Evil: RPO builds its business case on flexibility, scalability and outcomes, concluded that companies using RPO achieved results that were on a par with, if not better than, all others. The study looked at almost 200 companies and found that, of those pursuing RPO solutions, 77% indicated they would recommend it to peers.

This comes at a time of strong growth in the RPO market. A research study released by global services advisory firm Everest Group late last year projected market growth of between 25% and 30% in 2011. This will take the annual contract value of RPO from an estimated US$1.1 billion to somewhere between US$1.38 billion to $1.45 billion.

Other key findings in the Everest study, Recruitment Process Outsourcing 2010 - A year of rapid growth and intense competition, included: most RPO deals continue to be single country, and there was a perceptible increase in this trend; a lack of comprehensive global RPO offerings led to a large percentage of buyers adopting a multi-vendor strategy; adoption of global sourcing saw a gradual increase in 2010, although it still lags behind significantly, compared to more mature HR outsourcing processes.

According to Everest, there are 23 'major' RPO service providers - defined as having signed at least one deal that covers 3,000-plus buyer employees and four or more recruitment sub-processes.

Case study: Virgin Media

Virgin Media - previously ntl:Telewest - has about 15,000 UK employees. Hays has been its managed service provider for temporary workers since 1999. During that time the scope has been extended to all temporary recruitment across Virgin Media's channels, including broadband, mobile, home phone and TV. In 2008, the scope of the contract was expanded to include a permanent recruitment project into Virgin Media's retail division, resulting in the creation of a delivery team to ensure service levels were upheld.

Delivery teams are based both onsite at key Virgin Media offices and offsite at Hays' shared service centres. The teams consist of consultants dedicated to managing the relationships with hiring managers, vacancy and supplier management, compliance and management information production. Electronic timesheets provide Virgin Media hiring managers a quick authorisation and escalation process for disputed timesheets.

Following Virgin Media's retail division re-brand and growth period in 2008, Hays' flexible service delivery team was able to meet permanent recruitment targets across all new stores, including those in 'hard-to-fill' locations. A centralised invoicing service consolidates all invoices into one, reducing back office administration and costs for Virgin Media. Bespoke management information is delivered on a monthly and weekly basis, including a monthly balanced scorecard of the service encompassing manager and temporary worker/contractor satisfaction levels, while weekly recruitment scorecards provide information on the number of starters and leavers per week across all Virgin Media recruitment channels. Back office systems integration ensures the seamless transfer of worker information to Virgin Media's Oracle HR system, allowing IT/system access and security/network management for each new temporary worker upon start date.

Achievements include: a fall in costs; reduction of time to hire by providing 99% of the CVs within the stated timeframes; consistently achieving a scoring of more than or equal to four out of five in the customer satisfaction feedback surveys completed by Virgin Media hiring managers. An 'interview to offer' rate of 86% was achieved in 2010, well above the 60% target. Also last year, over 99% of start dates were in line with those requested - against a 90% target.