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1 Recruitment Outsourcing: Look Before You Leap The Benefits & Pitfalls of Recruitment Process Outsourcing (RPO)

2 Introduction The outsourcing of administratively intensive HR functions is not new, and for some areas such as payroll and benefits management it is the norm rather than the exception. The outsourcing of recruitment is now following this trend, with more and more organisations seriously considering whether they should work with a professional recruitment service provider. It s not an easy decision however, to handover recruitment to another organisation, and not all recruitment outsourcing contracts result in the success anticipated when the project was started. Recruitment is changing. Driven by the allure of cheaper web based recruitment, many organisations have tasked their HR departments to advertise roles on the plethora of job boards available. This has led to them being inundated with large numbers of candidate CV s which they have to sift through to find the small number of suitable candidates. For a number of years now, recruitment agencies have had to become experts in using the job boards in order to get the good candidates first. But the use of job boards directly by organisations is a threat to them resulting in more aggressive sales techniques by some. HR departments are becoming inundated withcandidate CV s and agency cold sales calls. In addition to this, business managers are looking for the best candidates at the lowest salary, i.e. new employees who can do more for less so the sourcing of quality candidates is still a massive imperative. On some occasions an organisation may decide to beef-up its in-house recruitment team. However the thought of large fixed costs for a team which has to be trained, managed, and paid for (even during a recruitment freeze) puts many off. An increasingly popular option is to work with a Recruitment Process Outsourcer. Preferably the service provider should be able to provide high quality, end-to-end, flexible and scaleable recruitment. They may well have their own preferred recruitment management system which their clients work with. Ideally they should have no affiliation with any recruitment agency as this will compromise their independence when it comes to sourcing. One thing that should be realised is that the outsourcing of recruitment activities is not new. Organisations have been outsourcing the sourcing of candidates to agencies for years. Many recruitment agencies are trying to jump on the RPO bandwagon and claim to provide end-to-end recruitment support. However most of them just provide cheaper access to their shared pool of candidates they are not generating a bank of candidates exclusively for you. They do not manage the complete recruitment process, cannot or will not manage referral schemes or internal recruitment and do not work to ensure compliance with diversity regulations. They are doing the same as they have always done but calling it something different! In addition, many software organisations, testing organisations, and job posting sites inappropriately describe themselves as RPO providers, which confuse the market further. So, organisations looking to outsource their recruitment must consider carefully the scope of services they want to have managed by an RPO provider and make sure that the organisations they approach can deliver this. There are four major elements to consider when an organisation looks to improve their recruitment by outsourcing: Is there strategic and operational buy-in to change the way recruitment is done through outsourcing? Are the current core challenges with recruitment understood?

3 Does the organisation know what it wants to achieve from outsourcing recruitment and what it won t achieve? What are the critical factors that ensure the success of an RPO project? In the rest of this document we look at some of these key questions and discuss why an organisation must address them when considering whether to outsource ts recruitment. Does the organisation know what it wants to achieve from outsourcing recruitment and what it won t achieve? In many instances HR starts an investigation into whether outsourcing recruitment should be considered because there is a gut feeling that recruitment could and needs to be done in a better way. They sense disillusionment from the business in terms of the cost, time and quality of new hires. In some cases candidates will be feeding back that they have had a bad recruitment experience this is really serious. Quite often there will be pressure from finance and/or procurement departments to reduce costs. And finally, senior management may be stating that strategic objectives can t be met because they can t get the right people to deliver them. Gut feeling is not enough to mobilise an organisation to change and improve the way they do recruitment. In many organisations, recruitment is still the domain of the individual hiring managers. It is they who have the relationship with the agencies, who work with advertising agencies, who sift CV s, and who shortlist, interview, and select the eventual successful candidate. Surprisingly, the ability to wrest these time consuming activities from an overstretched business executive can sometimes be the difference between a successful and an unsuccessful RPO implementation. Many of them love the contact with agencies they may after all get them their next job; they may see the creative aspect of working with an advertising agency as a welcome break from their day to day role; they may like the power and influence that the selection of the successful candidate gives them. In organisations where HR currently manages the recruitment process, reducing the administrative burden of recruitment can be a great reason to look at RPO. However HR departments can also be protective of their administrative responsibilities and putting it bluntly - turkeys don t generally vote for Christmas. So even though the benefits of RPO are intuitively obvious, getting the business and/or HR stakeholder community to buy-in is not a given. Equally necessary is the active sponsorship of senior executives to the change. In many cases key executives will have driven the RPO project from the beginning. It will have been them that have expressed concerns with regards to the quality, cost and time to hire normally at a strategic level. In some cases approval by senior executives is the final part of the decision making process to move forward. Without buy-in from all stakeholders, the ability to get an RPO project approved is limited. Even worse, if it is approved and an RPO vendor is selected, their ability to quickly and effectively transition your recruitment into their service infrastructure will be severely hampered and constrained. There are plenty of examples where RPO projects have failed and recruitment has gone back in-house because of RPO providers who have not been able to work effectively with hiring managers, HR and agencies and where executive sponsorship has been weak. Invariably the reason for this is the lack of buy-in of the service at the start by hiring managers, HR and the Board.

4 Are the current core challenges with recruitment understood? To get the right level of buy-in to RPO and then select and build a successful outsourcing relationship, it is important to have a clear understanding from the start about the current organisation issues related to recruiting. Once issues are clarified, this sets the stage for the selection and management of an RPO provider, in addition to setting internal human resources, hiring manager, and executive management expectations. It will already have been deduced that the current recruitment infrastructure, including staff, cannot adequately support the recruitment function with issues related to quality, speed and/or cost, otherwise the organisation would not be exploring RPO. The key is to derive the specific issues and list them explicitly in priority order. Examples include: Agencies are being relied on too heavily to fill vacancies. Recruitment spending is seen to be too high. Too much time is being spent on recruitment administration. It s becoming increasingly difficult to find good quality candidates. Current internal resource can t deal with the peaks and troughs of resource demands. There is no visibility of recruitment performance. Developing this list with key stakeholders is a critical step to being able to understand the focus of the RPO project. It will encourage discussions to promote buy-in, and provide the basis for setting measurable objectives in the business and with the RPO provider. Does the organisation know what it wants to achieve from outsourcing recruitment and what it won t achieve? Understanding what is required from RPO is a critical activity to ensure its success. There is no one-size-fits all RPO solution. Each organisation should select its RPO partner carefully, and work with them to design the most appropriate solution to meet their own requirements. RPO is not a commodity and the development of the ideal solution requires a consultative approach. Here are examples of how an RPO solution can be affected by emphasis on a different recruitment performance indicator: If the focus is on cost, then the solution is likely to exploit the lowest cost sources for candidates possible e.g. exclusively use direct web based recruitment and stop using agencies, and not consider time to hire to be important. If the focus is time to hire, then the solution may focus on going out to as many sources as soon as possible, and have an automated process (using a robust technology) in place supported by a well staffed steam. If the focus is on quality of hires, then the solution will have a well formulated assessment and selection process that the RPO may be instrumental in managing, but the process may take longer than recruiting managers would like. In reality, an organisation will need the RPO solution to provide benefits in all of the areas above. But understanding the relative priority of each of them will influence important details of the solution. Typically RPO vendors are told that cost is the major issue, most commonly because it is the most easily measurable and visible of recruitment performance indicators. Ultimately hiring the best performing candidates will have the most significant affect on an organisation s performance.

5 What are the critical factors that ensure the success of an RPO project? To successfully implement an RPO strategy into an organisation there are a number of factors that need to be considered... Understand and agree with stakeholders what needs to be achieved. Outsourcing recruitment touches every part of an organisation. Getting buy-in from top executives, HR, finance and the hiring managers, i.e. the key stakeholders in recruitment, is essential to success. In particular a top executive who doesn t want the project to work can disrupt the whole thing. Stakeholders should understand that there is no silver bullet to resolving recruitment issues however when going down the RPO route this is quite often how it is seen. Work with hiring managers, HR and key executives to carefully set expectations about what can be achieved and what can t. It may be a good idea to develop a list with your stakeholders of the major areas of recruitment pain and the extent to which you believe RPO will be able to address them. Get them to understand that the organisation will have to change its behaviour as part of the implementation of RPO. Allocate a single executive responsible for the management of the delivery of the RPO service and relationship with the RPO. Inevitably the transition of recruitment from an internally driven activity to one where an external provider manages the process will bring up plenty of issues that need addressing. It is therefore important that a single senior executive in the organisation has responsibility for the management and success of the RPO service. Communicate clearly why you are looking to outsource RPO give the potential rpo vendors as much information as possible. If you will want a comprehensive and relevant proposal from RPO vendors as to how they can meet your needs then you will need to provide them with as much information as possible. In general terms the content can be divided into 4 areas: 1. Firstly, give them as much information on the way recruitment is currently done. Explain current responsibilities and processes. Share any branding activities and cultural aspects that need to be understood. 2. Secondly, provide as much detailed historic recruitment information as possible such as recruitment spend, sources used, numbers of hires etc. 3. Thirdly, describe the performance of current recruitment, highlighting those issues that are causing the pain. Don t just focus on cost or time to hire issues. Illustrate how this affects business performance, and what the perspective of top management is. 4. Lastly, outline the organisation s reasons for RPO, its vision for recruitment and what the RPO project is expected to achieve. Important note: The four points above are a necessary prerequisite to launching a credible RPO project. Without addressing the above, it is likely that: The project will be delayed or terminated prematurely as elements of the above are addressed. The transition phase of the project will encounter issues that weren t expected which again may lead to delay or termination.

6 The vendor selected will not ultimately deliver the benefits expected, or not fit the requirements of the organisation. In particular it is crucial that at this point senior executives have made a final decision to outsource and do not harbour any latent desires to manage recruitment inhouse. To ensure all of the above are in place it may well be necessary to initiate an RPO commissioning project where a formal case for RPO is developed. Carefully define the scope of the recruitment service required. To meet the objectives of the RPO project, it is very important that an organisation defines the optimum scope for the RPO service so that everyone understands the responsibility of the RPO provider, and the responsibilities of individuals in the organisation. Carefully define a small set of key recruitment performance indicators understand that it is a joint responsibility to achieve these. Key Performance Indicators galvanise both the RPO vendor and the client organisation to behave in a certain way. This is why the development and agreement to KPI s is fundamental to the success of the RPO. If we consider typical KPI s such as time to hire, and cost per hire, it can be seen that neither party has exclusive influence over whether they are achieved or not. For instance if hiring managers consistently fail to give timely interview feedback to the RPO provider then time to hire metrics will be immediately impacted. In addition, candidates are more likely to withdraw or not be available if the feedback they receive is late affecting CV to hire ratios. It also allows the organisation to decide the type of RPO provider it wishes to engage with, for instance does it want the RPO to have its own agency arm, or for it to be truly independent. Here are some example scope questions: Is both temporary and permanent recruitment included? What is the scope of the relationship between the RPO, HR and the business? Who will provide the RPO interface, HR or the business? Should the RPO service include reference checking, offer letters etc.? What involvement will the RPO have in assessment and selection? Do you wish the RPO to have responsibility for internal recruitment and referrals? Do you wish the RPO to provide their software or to use a third party package?

7 Conclusion Organisations increasingly view Recruitment Process Outsourcing as a legitimate strategy to allow them to recruit better people, at less cost, more quickly. By partnering with a professional recruitment service provider, organisations can leverage their expertise, scale and capability. About the authors Robert Leggett is a Founder and Managing Director of Omni. For over 15 years Robert has been working with organisations to improve their recruitment processes. Howard Flint is Director of Consulting and Business Development for Omni. For over 15 years Howard has been working with organisations to transform business performance through selective value-adding outsourcing. However the success of RPO depends fundamentally on the preparation work done during the early stages of the project. In particular organisations should understand that: Senior level business buy-in is critical. The issues to be resolved and benefits to be achieved are well articulated and communicated widely. No two RPO solutions are the same and that time should be spent with RPO providers examining and defining the best solution.

8 Omni is the UK s leading Recruitment Improvement and HR Consultancy. Omni was established over 10 years ago and during that time has helped numerous clients to radically improve employee recruitment, retention and performance. Omni has an in-house Psychometrician, Occupational Psychologist in Training along with Change Management Specialists and experienced HR Business Strategists. All our consultants are regulated members of the BPS and CIPD. Omni is privately owned and independent of any recruitment agency. In 2003 Omni was voted the UK s 46th fastest growing company in Virgin s fast Track 100. Omni is the current holder of the Best Recruitment Managed Service category in the Recruiter Awards (2008). Head Office Charter House, Woodlands Road Altrincham, Cheshire WA14 1HF T: F: London Office 33rd Floor, Euston Tower 286 Euston Road, London NW1 3DP T: Registered Office: 6th Floor, Cardinal House, 20 St. Mary s Parsonage, Manchester M3 2LG. Registered in England No

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