Global Trends in RPO & Talent Recruitment pam berklich

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1 Global Trends in RPO & Talent Recruitment 2014 pam berklich

2 The Recruiting Challenge Map Far from simply filling existing gaps as quickly and economically as possible, recruiting has become a high-stakes competition to foresee economic conditions and business projections, estimate critical talent gaps as early as possible, and source the highest-quality talent available. /02 anticipated future growth in hiring Reasons for difficulties recruiting staff 87% shortage of skilled recruiting staff 49% salary uncompetitive How companies intend to use an outsourced recruitment firm 30% location undesirable 19% current recruitment process More than half (61%) of organizations experience difficulty recruiting staff. 73% plan to increase internal full-time hires in the next 12 months 57% plan to increase contingent hires in the next 12 months Given the competitive landscape for attracting quality talent, we expect more companies to outsource recruitment; however it s evident that many organizations still do not have a strong understanding of the outsourcing models available. 86% sourcing, screening, testing 45% applicant and recruitment performance tracking 43% reference checking 17% vendor management 16% on-boarding Only 26% currently outsource recruitment Only 46% are familiar with RPO More than half (58%) plan to increase the use of recruitment firms for new hires in the next 12 months

3 preface /03 Global Trends in RPO & Talent Recruitment 2014 was prepared by Kelly Outsourcing and Consulting Group (KellyOCG ) in partnership with the Human Resource Outsourcing Association (HROA), HR.com, the Shared Services & Outsourcing Network (SSON) and the International Association of Outsourcing Professionals (IAOP) to provide a comprehensive overview of the latest trends and insights from the global business community in regard to jobs, skills development and recruitment. Pam Berklich The report is based on the views of senior hiring managers from small, medium and large organizations from the Americas, Europe, Middle East and Africa (EMEA), and the Asia Pacific (APAC) region. It provides a rare glimpse into the key decisions that will impact businesses, particularly focusing on their workforce needs and the challenges they face in attracting and retaining talent in an uncertain economic environment. It also shines a light on the latest developments in the area of recruitment process outsourcing (RPO) and reveals where businesses are headed in adopting innovative solutions to the growing challenge of skills shortages.

4 the recruiting challenge /04 Meeting the Recruiting Challenge: Even in the face of economic recovery in many global markets, recruiting top talent remains a major concern; in particular, a shortage of skilled labor continues to vex hiring managers.

5 the recruiting challenge /05 Accessing quality talent remains a top concern As many recent studies confirm, among the biggest challenges HR professionals face is recruiting quality talent. The 2013 PwC CEO Survey reported more than half of US CEOs say a shortage of skills is a potential threat to growth this year. Respondents to our RPO survey report similar frustration. Sixty-one percent say they experience difficulty recruiting staff, and of those 87 percent blame a shortage of skilled recruiting staff in the roles required. Other critical challenges include being unable to offer a competitive salary (49 percent) and offering an undesirable work location (30 percent) both of which only sustain the all-important challenge of attracting and retaining top talent.

6 100 the recruiting challenge /06 Figure 1: Figure 2: Experiencing difficulties recruiting staff? (% Yes) Reasons for difficulties recruiting staff (multiple responses allowed) 100% 80% 61% 60% 40% 20% 87% Shortage of skilled recruiting staff 49% Salary uncompetitive 30% Location 19% Current recruitment process 0%

7 the recruiting challenge /07 Serious headwinds for recruiting professionals A shortage of high quality talent is a serious problem for over two-thirds of companies. Sixtyeight percent report talent shortages slow or stall the hiring process. Among other top factors slowing the hiring process: hiring manager satisfaction (37 percent), time-to-hire (36 percent), cost-to-hire (25 percent) and quality of recruiters (23 percent). Not surprisingly more than a third (37 percent) report their organization s average time-to-hire is over 45 days, a statistic signaling that despite reports of high unemployment, a number of roles are still very difficult to fill. (Time-to-hire is a difficult statistic to benchmark given variation by type of hire, industry, company size, and outsourced vs. in-house recruiting. As a point of comparison, however, the Society for Human Resources Management reports the average timeto-hire for large organizations those with more than 1,000 employees is 43 days. Time to hire for small organizations defined as having fewer than 1,000 employees is 29 days.)

8 the recruiting challenge /08 Figure 3: Figure 4: Average time-to-hire Conditions that slow or stall the hiring process 80% 70% 30% 30 days or less 34% days 29% days 8% Over 90 days 60% 50% 40% 30% 20% 10% 68% Quality of hires 37% Hiring manager satisfaction 36% Time to hire 25% Cost to hire 23% Quality of recruiters 18% Poor processes 16% Technology effectiveness 14% Performance monitoring 0%

9 the recruiting challenge /09 Outsourcing HR functions still not practiced by most Despite the growing complexity of HR functions, most companies still do not outsource HR functions. Only 36 percent say they outsource part or all of the HR function. Among companies that do outsource HR services, the categories most likely to be outsourced include payroll (56 percent), recruitment (49 percent) and benefits (40 percent). (This relatively low level of outsourcing may be attributed to the composition of our respondents, who are more heavily weighted to small and mid-size companies.)

10 the recruiting challenge /10 Figure 5: Figure 6: Outsource part or all of the HR function (% Yes) HR functions currently outsourced 60% 50% 40% 36% 30% 20% 10% 56% Payroll 49% Recruitment 40% Benefits 20% Training 19% Compensation 16% HRIS 9% Performance Management 0%

11 hiring intentions /11 Global Hiring Intentions: Hiring appears robust for the coming year, both for internal full-time labor as well as contingent hires.

12 hiring intentions /12 Global hiring intentions Nearly three quarters (73 percent) of companies surveyed plan to increase the number of internal full-time hires in next 12 months, and 57 percent plan to increase the number of contingent hires. These numbers show robust hiring growth will continue across the globe in the coming year despite reported high levels of unemployment. This contradiction is something we at KellyOCG have written about at length. In the industrialized world, 40 million workers are unemployed according to the International Labour Organization yet more than ever, companies are suffering critical shortages of key talent across the globe. A 2012 study from Oxford Economics shows the imbalance of talent supply and demand across the globe will deteriorate over the next ten years due to shortages in particular disciplines (e.g. so-called STEM jobs), as well as regional imbalances of labor supply and demand. In particular regions, severe talent shortages will define the next decade. For example, in the developed Asian economies the demand for talent in the business services sector will increase by over 50 percent, while the demand for talent in life sciences within

13 hiring intentions /13 the same region will rise by only 8.2 percent. In North America, the energy sector will require a 22.7 percent bigger workforce, while the demand for talent in financial services will drop eight percent. Even in the face of relatively high levels of unemployment, recruiting professionals are still vying to capture top talent a heated competition that will not abate anytime soon.

14 hiring intentions /14 Figure 7: Figure 8: Plan to increase number of internal full-time hires in the next 12 months? Plan to increase number of contingent hires in the next 12 months? 73% 57%

15 understanding HR outsourcing /15 Understanding HR Outsourcing: As complexity of the talent management function grows, companies rely on outsourcing to fill gaps particularly recruiting high-value professionals.

16 understanding HR outsourcing /16 Outsourcing HR and recruitment We asked companies whether they outsource HR activities. Specifically, we wanted to understand to what extent companies outsource parts and portions of recruiting to multiple vendors (e.g. screening, sourcing, assessments, interviewing), as well as whether companies are using end-to-end recruitment process outsourcing (i.e. outsourcing the entire recruiting process to a single vendor). The complexity of the HR function as well as the pressure to attract and retain high-value workers continues to stretch the resources and technology of in-house HR departments. Not surprisingly, well over half (58 percent) plan to use third-party recruiting firms to engage hires in next 12 months. Of those using recruitment firms to augment recruiting needs, the most common applications include sourcing, screening and testing (86 percent), applicant and recruitment performance tracking (45 percent) and reference checking (43 percent).

17 100 understanding HR outsourcing /17 Figure 9: Figure 10: Plan to increase use of outside recruitment firms to recruit anticipated hires in next 12 months? 0 How will you use an outsourced recruiting firm for hiring in next 12 months? 100% 80% 58% 60% 40% 20% 86% Sourcing, screening, testing 45% Applicant and recruitment performance tracking 43% Reference checking 17% Vendor management 16% On-boarding 0%

18 understanding HR outsourcing /18 In this case, third-party recruiting is a carved-out function, a tactic applied to parts and portions of the recruiting function. Almost 70 percent use outsourced recruiting for less than a quarter of their hiring meaning outside assistance is likely only used for particularly challenging hires. The majority of recruiting is still conducted within country borders. More than half of respondents (56 percent) say less than 10 percent of vacancies are filled cross-borders.

19 understanding HR outsourcing /19 Figure 11: Figure 12: Portion of vacancies filled through a third-party provider Portion of vacancies filled through cross-border recruitment activities 36% Less than 10% 33% 10% 25% 12% 26% 50% 12% 51% 75% 7% 76% 100% 56% Less than 10% 24% 10% 25% 10% 26% 50% 6% 51% 75% 3% 76% 100%

20 understanding HR outsourcing /20 One step beyond external recruiting support is recruitment process outsourcing (RPO), which was first introduced nearly 20 years ago. An RPO typically a third-party vendor manages the end-to-end recruiting process, including on-boarding of new hires. It differs from traditional staffing and recruitment outsourcing because (a) it assumes full ownership of the recruitment process, including strategy, systems, methodology, and technology and (b) unlike traditional outsourcing, the full continuum of recruiting activities (for all or a select group of skill sets) is handled by a single vendor, which is solely responsible for delivering results. In the hunt for high-value talent and in particular so-called knowledge workers who work in fields like engineering, technology and the sciences companies are turning to RPO providers to outmaneuver the competition. RPOs offer dedicated infrastructure and expertise to find and secure scarce talent, and in many cases operate across multiple employment markets. Familiarity with RPOs is still not the norm. Fifty-four percent say they are only somewhat familiar or not at all familiar with RPOs. And only 26 percent fully outsource their recruiting/hiring process using an RPO model.

21 understanding HR outsourcing /21 Overwhelmingly companies that outsource recruiting services hire vendors on a stand-alone contract, separate from other HR outsourcing services (68 percent use a separate provider). Companies are most likely to use a third-party recruiting firm to hire professional staff (50 percent), though third-party recruiting is also common in hiring temporary or contingent labor (36 percent).

22 understanding HR outsourcing /22 Figure 13: Figure 14: Figure 15: Figure 16: Figure 17: How familiar are you with Recruitment Process Outsourcing (RPO)? Currently outsource recruiting/hiring process (% Yes) Is recruitment outsourced as part of an HR outsourcing contract, or do you use a separate provider? Do you outsource recruiting company-wide? (% Yes) Do you outsource recruiting of professional talent? (% Yes) 26% 40% 50% 14% Not at all 40% Somewhat familiar 25% Familiar/ knowledgeable 21% Very familiar 32% Part of an HR outsourcing contract 68% Separate provider of recruitment outsourcing

23 Growth of recruitment outsourcing /23 Growth of recruitment outsourcing Of those respondents who do not currently outsource a whole or part of the recruiting function, 40 percent indicate they would like to do so in the future. Areas of particular interest for outsourcing include professional recruiting (48 percent), contingent or temporary labor (38 percent) and outsourcing all recruiting responsibilities (34 percent). Overwhelmingly respondents cite faster time-to-hire as the key benefit of a third-party recruiter partnership, followed by integrating multiple sourcing channels (58 percent) and lower cost to recruit (51 percent). These findings support a more general, growing interest among global companies to adopt a talent supply chain management mindset. As the name suggests, talent supply chain management (TSCM) is much like traditional supply chain management: directing a network of suppliers and resources to ensure the optimal mix of price, access and risk. The high level of interest in recruitment process outsourcing including professional recruiting as well as contingent and temporary labor staffing demonstrates a greater degree of sophistication about balancing the cost of recruitment against other critical variables, particularly access.

24 Growth of recruitment outsourcing /24 Whereas a decade ago outsourcing was usually a cost-savings tactic, in the future talent-related outsourcing is as likely to be related to accessing top-flight talent or improving time-to-hire ratios. In fact, in a 2013 Talent Supply Chain study sponsored by Kelly Services, companies defined as best-in-class were three times more likely to strongly agree they take greater risks to secure the talent they need, and two times more likely to strongly agree accessing high quality talent when needed is more important than cost.

25 Growth of recruitment outsourcing Would consider outsourcing part or all of recruitment process in future (% Yes) Figure 18: Figure 19: Figure 20: 0 Are there particular areas of the recruitment process you would outsource? If yes, what would you expect a vendor/partner to help you achieve? /25 50% 100% 40% 40% 30% 20% 80% 60% 40% 10% 20% 48% Professional 38% Contingent/ temporary 34% Company-wide 0% 88% Faster time to hire 58% Integrate multiple sourcing channels 51% Lower cost of recruitment 32% Manage or limit number of third party providers 27% Gain access to technology 0% Responses only by those who may outsource recruiting in future. Responses only by those who may outsource recruiting in future.

26 conclusion /26 Growing the range & depth of the recruiting expertise For many global organizations, recruiting the right talent at the right time is the single most influential factor driving growth and innovation. In the 20th century, capital was the basis of advantage, but in the 21st century, talent will drive global advantage. Far from simply filling existing gaps as quickly and economically as possible, recruiting has become a high-stakes competition to foresee economic conditions and business projections, estimate critical talent gaps as early as possible, and source the highest-quality talent available. All of this is part of a larger trend toward managing talent needs holistically across all categories of work a discipline called talent supply chain management. Outsourcing recruiting is no longer primarily about carving out an existing internal function and giving it to the lowest-cost provider. Rather, outsourcing recruiting allows organizations to access niche expertise that is simply too difficult or too expensive to grow in house. Third-party recruiters and RPOs offer companies expertise in particular disciplines or geographies, import effective processes and procedures, and present regulatory and risk-management expertise. Far from simply filling existing gaps as quickly and economically as possible, recruiting has become a highstakes competition to foresee economic conditions and business projections, estimate critical talent gaps as early as possible, and source the highest-quality talent available. What s more, RPOs allow companies to make intentional decisions about whether to prioritize cost savings, access to talent or risk-control (or some optimized mix of the three) depending on the category of work and area of expertise.

27 conclusion /27 Companies we surveyed are optimistic about the benefits of outsourced recruiting. Eightyeight percent believe outsourced recruiting offers faster time-to-hire, 58 percent say outside providers integrate multiple sourcing channels, and 51 percent cite lower cost of recruitment using a third-party provider. Despite the opportunity, it s evident from the survey that many organizations still do not have a strong understanding of the outsourcing models available, nor the opportunities therein. Only 26 percent are currently outsourcing the recruiting/hiring process using something like an RPO model, and 54 percent report being only somewhat familiar or not at all familiar with RPOs. Given apparently strong growth in hiring (73 percent to increase number of internal, full-time hires and 57 percent to increase contingent hires in the coming 12 months), and the competitive landscape for attracting quality talent, we expect organizations may increasingly look to external recruiting partners to augment their own capabilities or fully outsource the recruiting function in the years ahead.

28 methodology /28 RESPONDENT PROFILE A total of 385 individuals responded to the 2013 Global RPO survey. Respondents hailed from a broad range of industry sectors across the Americas (60 percent), Europe, Middle East and Africa 60 (EMEA) (17 percent), and Asia 25Pacific (30 percent). Participants also represent a broad 50 cross-section of industry sectors, including 20 professional services, information technology, 40 financial services, retail, manufacturing 15 and life sciences The largest share of respondents (63 percent) had fewer than 500 employees within their 10 organizations, while 16 percent had from 1,000 to 5,000, and 14 percent had more than 5, The Americas EMEA Asia-Pacific Automotive Business Chemical/Petrochemicals Services Education Energy, Financial Oil Food High & Gas Services Tech & Beverage Manufacturing IT&T Life Sciences Other/Non-specified Retail 1: Respondents regions of responsibility 2: Industry sectors 3: Size of organization 60% 40% 20% 25% 20% 15% 10% 5% Less than ,000 1,000 5,000 More than 5,000 The Americas EMEA Asia-Pacific 0 Automotive Business Services Chemical/ Petrochemicals Education Energy, Oil & Gas Financial Services Food & Beverage High-tech IT&T Life Sciences Retail Other/ Non-specified 0% Respondents could select more than one region so totals exceed 100% Based on number of full-time employees

29 For more thought leadership go to talentproject.com About the Author PAM BERKLICH is the Senior Vice President, Direct Hire Practices, KellyOCG. Pam leads the Direct Hire Practices which includes Recruitment Process Outsourcing (RPO), Executive Search services, and Talent Sourcing services and Direct Hire for Kelly s clients globally. About KellyOCG KellyOCG is the Outsourcing and Consulting Group of workforce solutions provider Kelly Services, Inc. KellyOCG is a global leader in innovative talent management solutions in the areas of Recruitment Process Outsourcing (RPO), Business Process Outsourcing (BPO), Contingent Workforce Outsourcing (CWO), including Independent Contractor Solutions, Human Resources Consulting, Career Transition and Executive Coaching, and Executive Search. KellyOCG was named in the International Association of Outsourcing Professionals 2013 Global Outsourcing 100 list, an annual ranking of the world s best outsourcing service providers and advisors. Further information about KellyOCG may be found at kellyocg.com. EXIT

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