A REPORT ON RECRUITMENT PROCESS OUTSOURCING IN SOUTH AFRICA AND THE INTERNATIONALLY RECOGNISED BENEFITS OF THE STAFFING & RECRUITMENT MODEL

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1 A REPORT ON RECRUITMENT PROCESS OUTSOURCING IN SOUTH AFRICA AND THE INTERNATIONALLY RECOGNISED BENEFITS OF THE STAFFING & RECRUITMENT MODEL WHITE PAPER Copyright 2014, Quest Staffing Solutions (Pty) Ltd

2 Page 1 of 17 Contents 1. ABSTRACT/EXECUTIVE SUMMARY INTRODUCTION Recruitment Process Outsourcing defined International landscape South African context FACTORS DRIVING RPO GROWTH VARIOUS RPO OPTIONS Enterprise RPO Project RPO Point of service RPO Branded RPO Blended RPO HOW BUSINESS DECIDES ON THE RIGHT RPO MODEL FOR THEIR REQUIREMENTS Deciding on an RPO model Selecting a RPO provider RPO VS. IN-HOUSE RECRUITING Benefits of RPO Cost of RPO INDUSTRIES EMBRACING THE RPO MODEL MEASURE RPO SUCCESS What does a successful RPO programme look like? SUMMARY CONCLUSION ABOUT QUEST STAFFING SOLUTIONS... 17

3 Page 2 of ABSTRACT/EXECUTIVE SUMMARY With the mind-set of reducing their workload and prioritising efficiency over cost, companies are becoming more strategic in their hiring and recruitment methods and when outsourcing, look for an ideal solution for their unique and evolving needs. In response to the demand for bespoke recruitment solutions, staffing and recruitment organisations across the globe have made their offering more flexible to fit the needs of client organisations and, in turn, have made their services more attractive to an even larger market of potential clients. One such, popular, offering is Recruitment Process Outsourcing (RPO). RPO providers use new technologies to offer clients fresh and unique solutions which enable organisations to outsource part or all of their recruitment process. This allows the client organisation to free up internal resources while professionals in the recruitment field address their staffing needs. The global uptake of this staffing model has increased significantly over recent years, particularly in the manufacturing industry worldwide and the finance and engineering sectors in South Africa specifically. Industry experts continue to forecast further growth in the near future. With numerous proven benefits, when implemented successfully, such as cost efficiency, improved to time to hire and access to a pool of high quality talent (amongst others); it is vital for organisations to properly investigate their staffing requirements before committing to a RPO programme. In addition, it is crucial for organisations to partner with an experienced RPO provider who is a good cultural fit for the business and to keep communication channels open between internal staff and the service provider to ensure the successful running of the RPO programme.

4 Page 3 of INTRODUCTION A businesses most valuable asset is its staff. Recruiting and retaining the most exceptional talent enables an organisation to develop superior products while outproducing, out-delivering and out-selling competitors. However, the challenge for many organisations remains acquiring this talent in the most efficient way. This, combined with the volatile global economic climate, has prompted many companies to establish in-house teams to build their own recruitment infrastructure. Others have opted to engage with professional and reputable RPO suppliers to provide high quality, comprehensive recruiting and staffing solutions with scalable, flexible and cost effective benefits. The 1980 s and 1990 s saw the trend of organisations outsourcing noncore functions pick up speed. During this period, companies began outsourcing HR functions such as payroll, benefits management and employee assistance management. The outsourcing of recruitment functions soon followed as a more effective means of locating, selecting and acquiring internationally-based talent. Since the global economic and financial crisis of 2008 however, RPO providers have recognised the need to adjust their services to better meet the recruitment needs of proactive organisations worldwide. More than ever before, RPO providers use new technologies to offer clients fresh and unique solutions. Uptake of the RPO staffing model has increased significantly over recent years, with industry experts forecasting further growth in the near future. In 2012, the RPO industry grew by more than 12%. This is according to a report issued by Everest Group in February 2013 and comes on the heels of a 2012 Everest report which revealed that the industry had grown by 25% in Industry experts attribute the expansion to the recovering economy, the increasing use of social media and mobile technology, as well as an evolution and maturation of RPO service providers.

5 Page 4 of 17 Today, the market is stronger than ever before, bolstered by the widespread adoption by large and medium-sized employers who outsource projects and / or their entire recruitment function particularly in the manufacturing industry. In many instances, organisations treat their RPO partners as an extension of their HR functions, while others turn to RPO when they need to scale-up their workforce quickly or find qualified candidates for hard-to-fill jobs. 2.1 Recruitment Process Outsourcing defined RPO is a modern staffing solution, specifically designed to meet evolving staffing and recruitment demands. The Recruitment Process Outsourcing Association (RPOA) defines RPO as a form of business process outsourcing (BPO) whereby an employer transfers all - or part of - its recruitment process to an external service provider. A sustained and clearly defined process with related expectations for timing and performance, the RPO model provides client organisations with a predictable and customised sourcing and / or recruiting engine. In terms of operations, a RPO provider can provide its own - or may assume the client company s - staff, technology, methodologies and reporting. In addition, a provider is able to manage a client organisation s entire recruitment process from job profiling through to the on-boarding of the new hire, including staff, technology and reporting. Not a one-size-fits-all recruitment model, RPO differs greatly between providers such as staffing companies and contingent / retained search providers in that it assumes at least a portion of the ownership of the design and management of the recruitment process and the responsibility of results. Many RPO engagements include all elements of the recruitment process, from sourcing to the eventual offer for the successful candidate. A properly managed RPO is able to improve a company s time to hire, increase the quality of the candidate pool, provide verifiable metrics, reduce costs and improve governmental compliance.

6 Page 5 of International landscape Internationally, the RPO trend has progressed into a highly competitive environment with multiple service providers and more complex forms of RPO - such as multi-country RPO and blended RPO (managing permanent and temporary hires within the same arrangement) - coming onto the radar. EUROPE AND NORTH AMERICA The Staffing Industry Analysts 2014 Buyers Survey revealed that 42% of European and 34% of North American respondents utilise RPO while a further 33% and 28% respectively noted that they would be likely to explore the staffing model in the next two years. ASIA-PACIFIC After consulting with numerous industry experts, a report by MarketResearchReports.Biz noted that the RPO market in the Asia-Pacific (APAC) region is set to grow at a compound annual growth rate of over 16% in the period 2014 to A key market driver identified in this report is the enhanced efficiency of recruitment and the need for quality hires by organisations operating in the region. INDIA According to recent reports, more than 70% of Indian employers are likely to outsource their recruitment function either partially or completely in an effort to concentrate on their core businesses while enhancing the quality of on-boarded staff and reducing the cost of hiring. The RPO market in India, valued at INR 400 crore ( Indian Rupees), is experiencing rapid growth and is expected to continue on this path, forecast to grow by 40-50% year-on-year. INDONESIA The uptake of RPO is steadily growing in the Indonesian market. This is according to a Transparency Market Research report which notes that this increasing requirement of RPO solutions in the country is galvanised by the massive growth of industrial sectors including healthcare, pharmaceuticals and manufacturing. Another major factor driving

7 Page 6 of 17 the demand for RPO solutions in Indonesia is the growth in IT-enabled services (ITeS) and the IT industry. 2.3 South African context Although still in its early development stages, RPO is fast becoming a popular staffing model in South Africa and, as with any complex society, has to take local considerations into account such as labour laws as outlined in the Labour Relations Act - as well as Broad-based Black Economic Empowerment (BBBEE) requirements as and when communicated by the client organisation. As is the case for international counterparts such as India, the growth of RPO in South Africa is a result of the need for companies to obtain top talent while focusing on their core business practices and generating revenue rather than forming and resourcing an in-house recruitment department. The Quest Salary Survey and Staffing Trends 2014 surveyed business representatives from across the country on their use of RPO services. As identified in the above graph, 43.2% of survey respondents noted that they make use of RPO services while a further 14.1% of respondents highlighted that they were planning to do so in the near future.

8 Page 7 of FACTORS DRIVING RPO GROWTH The Aberdeen Group benchmark report on RPO, Outsourcing Recruitment is Not Evil: RPO builds its business case on flexibility, scalability and outcomes, found that companies using RPO achieved results that were on a par with - if not better than - others. The study looked at almost 200 companies - out of those pursuing RPO solutions, 77% said that they would recommend it to their peers. There are multiple factors driving RPO growth internationally. Although many factors are general - applying to organisations worldwide the societal, environmental and economic circumstances of each region play a large role in the growth of and incentive to adopt - RPO. Among the general drivers for RPO growth is the increased optimism among organisations to on-board new employees and the broad acceptance of the RPO model and its benefits as well as the significant interest by the mid-market and the flexible range of buying options - including project-based, on-demand and the use of pilots. 4. VARIOUS RPO OPTIONS With the aim of meeting the unique requirements of 21 st century organisations, staffing and recruitment organisations have broadened their staffing models. RPO models fall into a number of categories, depending on the nature and extent of services offered by the RPO provider and required by the client organisation. Below is an outline of the most common RPO models adopted by innovative, on-trend staffing and recruitment organisations worldwide. 4.1 Enterprise RPO Enterprise RPO typically entails companywide outsourcing, centralising the recruitment function through a RPO provider. The recruitment process is done by the RPO provider, working on behalf of the client while using the client organisation s brand identity.

9 Page 8 of 17 Although clients may choose to outsource only certain parts of the recruitment process, the common trend in this regard is to completely outsource the function in order to better allocate internal resources. 4.2 Project RPO Project RPO includes the same elements as enterprise RPO. However, in this case outsourcing is only required over a specific period of time and / or for certain positions. For example, an organisation may utilise project RPO to hire for a new location or to staff a team required for a specific time or project. Project RPO is typically used when the number of hires is set or confined for a particular area of the company and when the duration of the particular contract varies (possibly as short as six months), but is not as long-term as enterprise RPO. 4.3 Point of service RPO Point of service RPO involves the outsourcing of only specific parts of the recruitment process in order to increase the quality of candidate, improve efficiency and / or reduce costs. For example, an organisation could partner with a RPO provider to screen candidates and then pass the selected candidates (who successfully passed screening requirements) over to their internal HR team to interview and on-board. Utilising point of service RPO reduces the pressure on internal resources and can provide organisations with only the support they require. 4.4 Branded RPO Branded RPO entails recruiters (from the RPO provider) going into the marketplace on behalf of the client company, as if they are part of the company, in order to identify and recruit top talent. 4.5 Blended RPO Blended RPO combines the services of RPO with that of a Managed Service Provider (MSP). The additional service of a MSP includes the management of the client company s outsourced recruitment processes and providers (end-to-end lifecycle), directing all inner processes in order to secure quality candidates for the organisation.

10 Page 9 of HOW BUSINESS DECIDES ON THE RIGHT RPO MODEL FOR THEIR REQUIREMENTS Business leaders and their HR departments need to ask themselves a number of questions when considering RPO. Identifying what the organisation aims to achieve by utilising RPO and prioritising business goals will assist with the quick and easy selection of the most appropriate RPO model to take a business forward. The most important goals a business would likely seek to achieve include: Reducing hiring times; Reducing management time spent hiring; Improving the quality of new recruits; On-boarding appropriately skilled people to improve productivity; Developing a talent pool; Gathering market data for workforce planning; Reducing attrition; Reducing the time it takes for new hires to be productive; Improving the employer brand; Establishing a social presence; Enabling succession planning; and Decreasing reliance on third party agencies. Having determined and prioritised businesses goals, it is also important that an organisation assesses its readiness to engage with a RPO provider as the use of the model impacts multiple departments within a business such as HR, operations and finance. 5.1 Deciding on an RPO model The 2014 Staffing Buyers Survey by Staffing Industry Analysts reported that in 2013 the most popular form of RPO in North America and Europe was Project RPO. This model was followed by the Enterprise RPO, Branded RPO and Blended RPO respectively. When consulting with a RPO provider, an organisation should not immediately commit to a full scale enterprise-wide RPO model. A project based point of service RPO model

11 Page 10 of 17 would make more sense in most cases such as in peak-season sourcing, rapid recruitment projects, or for hiring in the event of an expansion, for example. When making the decision to start using project based RPO, an organisation should first determine the level of need and priority. This can be done through an in-depth investigation of the organisation s hiring needs over a set period of time and identifying which of these hiring needs should take priority. The next step would be to match needs and resources. Companies need to identify which needs cannot be catered to internally - due to inadequacy of logistics and resources. These needs should be prioritised in terms of outsourcing in order to quickly ramp-up aspects which have been left unattended to. 5.2 Selecting a RPO provider Selecting a RPO partner should not be an overnight decision. A company should evaluate and compare providers and their project-based experience this is essential to ensure partnering with the most reputable and efficient RPO provider which will assist the company in reaching its business goals. A RPO partner is an extension of a business and, as such, due diligence is required in their selection. The selected RPO partner needs to be both competent in its function as well as being a good cultural fit for the unique business environment. In a typical RPO relationship, the RPO provider becomes a seamless extension of the HR function of the client organisation and serves as its recruitment department. The provider must, by definition, be able to execute, manage and measure recruitment activities significantly better than any corresponding internal function as well as being able to provide access to a wider labour market and offer increased innovation and expertise. Given the complexity of general workforce demographics and its impact on hiring, it is also a client s expectation that a RPO provider offer market insights and strategic recommendations to help navigate through this maze. The introduction of new systems and tools to enhance both supplier and process management is another expectation of

12 Page 11 of 17 a good RPO provider with the aim of enhancing the client organisation s competitiveness. A stepped approach is vital in the selection and management of an RPO partner. Internally, an organisation needs to map-out its processes, compliance needs, in-house resources and stakeholders. This helps the RPO partner in developing a more accurate assessment or potential bid as well as an understanding of where and how to start the change management process. A deep understanding of the motivations and reasons for choosing an RPO solution should also be made clear to all stakeholders and shared with the potential partner. An invitation to potential partners to review an element/s of the current processes provides an opportunity for the client to assess competency and determine whether the provider is an organisation they want to work - and partner - with. Coupled with this, the potential RPO provider should be asked very specific, tactical questions regarding how they will reach and achieve the organisation s business goals. 6. RPO VS. IN-HOUSE RECRUITING According to a survey respondents of an Aberdeen group survey in 2008, companies have been able to identify a number of business pressures driving them to adopt RPO. See the top drivers highlighted in this survey below. Adapted from the Aberdeen group (2008)

13 Page 12 of Benefits of RPO In instances where RPO has been successfully implemented in organisations, various benefits have been seen to occur. These include but are not limited to: Cost of efficiency Utilising a RPO provider typically reduces costs for the end-user as the service provider can leverage economies of scale with regards to processing applicants, conducting verifications and referencing. Improved time to hire A RPO provider s day-to-day focus is recruitment, with a fully trained team of support staff who are committed to only this function this is in comparison with businesses who have multiple focuses and priorities and whose HR departments deal not only with recruitment but also - for example - internal disputes, facilitating training and reviewing employee progress. A RPO provider s level of experience in the recruitment field, combined with their database of potential candidates and daily routine of sourcing, screening and interviewing candidates, enables the provider to quickly fill the position. From identifying a candidate, through to on-boarding, a RPO provider should be able to complete the recruitment process far quicker than an internal department or individual. Candidate quality Many candidates - particularly those with high-demand skill sets - take the speed, efficiency and professionalism of the recruitment process into account when considering their career opportunities. In many cases, talented job-seekers may also approach a RPO provider first (before an organisation itself) when seeking new opportunities. Partnering with a reputable RPO may therefore positively influence top industry talent in joining a particular company. These benefits have the knock-on advantage of leaving the client time to focus on their core business, improvements in customer service and revenue as well as improved brand image.

14 Page 13 of Cost of RPO Organisations which have not yet adopted RPO often question how the costs of RPO compare to traditional in-house recruiting. Depending on the RPO services offered, there are a number of different ways a provider can charge for the service. RPO costs generally fit into one of five categories: RPO CATEGORY CHARACTERISTICS Management fee model A fee (typically monthly) paid to the RPO provider for working on an agreed-upon number of positions. The fee may change depending on the agreement or may have escalation factors if the number of hires increases over a period of time. Cost per hire model A fee paid for each candidate who is successfully on-boarded through RPO. Management fee plus cost per hire This is a combination of the above two cost models combining the consistent recruiting effort under the management fee with payments for successful hires. Cost per slate The RPO provider charges a fee for a set number of sourced, screened and qualified candidates for each open position. Once the RPO provider has completed these functions, the candidates are handed over to internal recruiters for the remainder of the recruiting and hiring process. Cost per transaction The RPO provider charges a fee for a specific process to be completed, such as initial screening or reference checks. Due to the degree of change and resources involved, RPO contracts for enterprise services run for approximately two to three years. For project-based service, the term of

15 Page 14 of 17 the contract will correspond to the requirements - for example, a six-month hiring drive in a specific area or a one-year ramp up for a new facility. 7. INDUSTRIES EMBRACING THE RPO MODEL Internationally, manufacturing companies are the biggest users of RPO. However, the increasing recognition of the benefits of the recruitment programme has seen rapid uptake in the professional services, hospitality and education sectors. The broad uptake of RPO across all industries is expected to continue on this growth path. According to HR experts in New Delhi, Indian businesses are expected to ramp-up hiring activities, with a large number of companies expected to outsource their recruitment process work, especially by IT & ITeS industry, in the short-term future. In the South African context specifically, Quest Staffing Solutions has noted the significant uptake of RPO in the finance, engineering, manufacturing and logistics industries. 8. MEASURE RPO SUCCESS Despite good intentions RPO programmes may - at times fail. This programme failure is often due to a lack of communication, consistency and commitment. A lack of communication by a RPO provider to a client organisation s internal team may result in little - if any - internal cooperation, while in some instances, a client organisation may not be completely committed to the programme and may therefore set unrealistic expectations which are difficult to meet, resulting in the failure of the programme. In order to succeed, the client organisation needs to remain focused on the overarching goals of the business and avoid redirecting its RPO partner to different projects and new metrics such inconsistency will almost always lead to RPO failure.

16 Page 15 of What does a successful RPO programme look like? Most RPO providers insist on establishing a Service Level Agreement (SLA) which sets realistic expectations and allows for the structuring of processes, teams and reporting in order to meet the client organisation s goals. A RPO programme should track metrics that enable the production and dissemination of comprehensive periodic reports. These reports provide insight into the sourcing and recruitment process. Technology has made such reporting easier through implementation and the use of systems like the Applicant Tracking Systems (ATS) - critical for all tracking and sourcing activities. Significant metrics include: The number of qualified candidates per position; The minimum required candidates per slate; The time to respond with qualified candidates; The time to offer or fill; The time to interview; The time to process; The number of processed per time period; and Hires per time period. Over and above regular metrics reporting, it is important that an organisation - which has engaged with a RPO partner - review its goals at set stages. This will assist an organisation in identifying whether its RPO partner / solution continues to meet its needs. 9. SUMMARY Responding to the evolving staffing demands and requirements of innovative businesses, staffing and recruitment industries - internationally - have reinvestigated their service offerings and solutions. One such solution is RPO which in itself is not a one-size-fits-all model. RPO is offered by numerous providers in multiple forms, customised to fit the unique requirements of large organisations, mid-sized organisations and project based requirements, as well as blended solutions for both permanent and temporary staffing

17 Page 16 of 17 needs. The widespread use of RPO across industries, both worldwide and in South Africa, is forecast to continue growing significantly in the short- and long-term future. While industry experts attribute the expansion to the recovering economy, increasing use of social media and mobile technology, as well as an evolution and maturation of RPO providing organisations, environmental, economic and societal considerations and incentives play a large role in organisations moving toward RPO solutions. Through this research, it has become evident that common shortfalls and requirements which organisations themselves are often not internally resourced to attend to, drive the adoption of RPO. These include factors such as a lack of internal HR resources to perform recruitment, the cost to recruit new employees, developing industries and the need for quality hires. RPO s proven benefits - of cost efficiency, improved to time to hire and access to a pool of high quality talent (amongst others) - in the successful implementation of the recruitment programme and overall business strategy has set reputable, experienced and innovative RPO providers on a undeniable growth path. Large global, on-trend organisations, which prioritise staffing their workforce with top talent have quickly and efficiently adopted RPO and has seen the rest of the market follow suit. 10. CONCLUSION The recruitment industry - and RPO specialists in particular - are increasingly making use of social media and analytics to deliver both efficiency and experience. These two factors are set to be the new go-to mediums for organisations looking for quality talent and strategising to retain such talent. In the present socio-economic environment, the RPO model would be easily adapted beyond the mass hiring sectors such as manufacturing to niche hiring markets such as core, pharmaceuticals and public services.

18 Page 17 of 17 RPO systems, working on a strong technology platform, has the capability to perform job-candidate matchmaking and deliver world class experience to all parties involved while simultaneously managing cost and time efficiencies. A RPO provider is, in essence, a strategic partner. Affording them adequate support and providing them with a consistent message / action plan will therefore ensure the successful implementation of a RPO programme - enabling a business to not only focus primarily on its overarching business goals, but also obtain top talent with little internal management involvement. 11. ABOUT QUEST STAFFING SOLUTIONS Quest Staffing Solutions (Pty) Ltd is South Africa s leader in customised staffing solutions within the white-collar recruitment industry. Established in 1974, Quest has over 40 years experience in the South African staffing industry, specialising in the recruitment and management of white-collar staff. As part of Adcorp Holdings Limited, South Africa s leading provider of staffing, human capital management and business process outsourcing services, Quest has access to financial resources, leading IT and information systems and sound corporate governance. Quest is now a Level 2 BBBEE Contributor with 64.87% black ownership and 30.42% black female ownership and therefore has the leading gender empowerment ownership structure in the staffing industry. Quest has a proud history of firsts in the South African staffing industry. First to offer optimised staffing model, first to set up a specialised call centre staffing solution, first to successfully implement learnership programmes and more. Quest is a Full Circle Staffing Solutions Company (FCS² ) with a service offering that includes; Outsourced Staffing Solutions, Recruitment Process Outsourcing (RPO), Field Marketing, Managed Service Provider (MSP) and Specialised Staffing Projects. Visit for more information. Kay Vittee Chief Executive Officer KC Makhubele Strategic Marketing Executive