Like any other business function, HR departments are under pressure to cut costs and add value to the enterprise. Recruitment Process Outsourcing (RPO) is touted as a way of achieving both.
In the constant quest for value in the enterprise, outsourcing has been a key tool in driving out inefficiencies in business operations. The basic philosophy being that company’s should concentrate on what they do best – the core competencies that are key to attracting and retaining customers. Everything else – from the accounts to the cleaners – is a non core competency, and should be procured for the best value, whether that means employing someone in house, or engaging a third-party vendor who can supply the service for less.
In the constant quest for value in the enterprise, outsourcing has been a key tool in driving out inefficiencies in business operations. The basic philosophy being that company’s should concentrate on what they do best – the core competencies that are key to attracting and retaining customers. Everything else – from the accounts to the cleaners – is a non core competency, and should be procured for the best value, whether that means employing someone in house, or engaging a third-party vendor who can supply the service for less.
There’s nothing particularly new in outsourcing. It’s fair to say that there are few companies who don’t use contract cleaning services for example, and management consultant and analyst firms have long and distinguished histories. But in recent years the number of business functions seems to have multiplied. From off-shoring call-centers, to business process outsourcing, it seems these days the default position is to outsource.
HR has by no means been above this outsourcing fray. Traditionally functions like payroll and benefits enrolment have been often been provided by third parties. More and more though, as HR positions itself as a value center rather than a cost center, all manner of the HR function is being looked at. In this context it is no surprise that the recruitment function has come under the microscope recently, and that recruitment process outsourcing (RPO) has become such a hot topic.
Ownership of the process:
The first thing to be said in any discussion of RPO, is that it is not just a question of employing a recruitment agency or headhunter to assemble a short-list of candidates for you. RPO goes way beyond this – the key concept being the RPO provider assumes ownership of the entire process for the business.
A key area of benefit is of course cost. As in any other outsourcing deployment, the RPO provider by definition should be a specialist that is solely focused on recruitment processes. Ideally working with a number of clients, the economies of scale that can be bought to bear by the RPO partner mean that its operations should be cheaper to run than the in house equivalent. More so it should be quicker, and this shortening of the recruitment process saves money. The combination of these factors mean that by going down the RPO route, a reasonably sized business should be able to reduce its cost per hire, sometimes significantly.
The other benefit on the cost side is the potential to fundamentally change the recruitment cost structure. For example, if hiring patterns are seasonable or cyclical, the fixed cost of maintaining a recruitment function in house during the quiet times, so that it is ready to go when needed, essentially becomes a sunk cost for the business. By establishing a variable cost structure with the provider, RPO gives the opportunity to establish better value for money, as your recruitment costs are truly paying towards your recruitment outcomes.
Business benefits:
However, that said, it seems that cost imperatives are not the driving factor behind company’s decisions to go down the RPO route. This is in part due to the fact that in house recruitment costs can be opaque at the best of times, so they’re not necessarily the obvious place to start cutting costs. More importantly though, the non-cost related benefits of RPO can be pretty attractive in themselves.
However, that said, it seems that cost imperatives are not the driving factor behind company’s decisions to go down the RPO route. This is in part due to the fact that in house recruitment costs can be opaque at the best of times, so they’re not necessarily the obvious place to start cutting costs. More importantly though, the non-cost related benefits of RPO can be pretty attractive in themselves.
The specialism in recruitment that an RPO provider brings should mean that the recruitment process is quicker, the pool of candidates is smaller, better quality, and well suited to the company, and the recruitment process means less administrative burden on the HR department and hiring department, leaving the business free to concentrate on what’s important – deciding who to hire. And if its true that the quality of your talent can make or break your business, then employing a specialist to ensure you get the best recruits may give you an important competitive advantage over your rivals.
Getting partnerships right :
However, like in any other area of business, outsourcing the recruitment function is unlikely to be a ‘magic bullet’, and indeed there are several pitfalls that can be encountered along the way. And given the importance of recruitment to most businesses, this is not an area that you want to get wrong.
However, like in any other area of business, outsourcing the recruitment function is unlikely to be a ‘magic bullet’, and indeed there are several pitfalls that can be encountered along the way. And given the importance of recruitment to most businesses, this is not an area that you want to get wrong.
The first issue is of course the quality of your RPO partner. Since this sector started gaining traction in the late nineties, the industry has mushroomed, with more and more vendors competing in the space. But this is still a relatively new industry, and obviously not all vendors are created equal. Many observers are expecting to see the industry continue, with merger and consolidation activity among vendors, with weaker vendors falling by the way side.
The future of RPO:
Ultimately there is no correct answer as to whether RPO is the right path for a business to go down, the answer will depend on particular business circumstances, and the attitude of individual HR departments towards the value they can bring themselves to the process. It seems sure though that RPO is here to stay in the HR executive’s playbook. The key selling point for most vendors in this space is expertise. And as the oft-predicted talent shortage begins to bite, any company that doesn’t have sufficient expertise in house is likely to look to a third party for answers.
Ultimately there is no correct answer as to whether RPO is the right path for a business to go down, the answer will depend on particular business circumstances, and the attitude of individual HR departments towards the value they can bring themselves to the process. It seems sure though that RPO is here to stay in the HR executive’s playbook. The key selling point for most vendors in this space is expertise. And as the oft-predicted talent shortage begins to bite, any company that doesn’t have sufficient expertise in house is likely to look to a third party for answers.
