Recruitment Process Outsourcing Vendor: Selecting a Right Business Partner

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1 Recruitment Process Outsourcing Vendor: Selecting a Right Business Partner Ms Sunita Tank Maharaja Agrasen Institute of Management Studies Department of Management Rohini, Delhi sunitasidhwani@yahoo.com Abstract :Two hundred million people are available for hire, while 34% of companies around the world report having difficulty filling jobs (Manpower Group Talent Shortage Survey 2012). The demand for educated, skilled talent vastly exceeds the supply. Such variance is varied on the basis of industries, job role, available candidates in the local labor market, as well as demographic and economic factors. Technical and soft skills gaps in performance, impacts up to a great extent, an organization's ability to meet talent goals and the ability to function appropriately in the work environment, communicate effectively, collaborate with colleagues or adhere to company policies, contributing in the employee week performance areas. In case an organization is under any Recruitment Outsourcing Process Association with a business partner, it looks up to the partner for speedy recovery in such gaps by attaining cost effective quality hires in time. This paper first examines the need of selecting a right RPO partner with global economic recovery increasing pressure on talent markets. Then it proceeds to explore how an organization can select a true strategic RPO partner which can have insider knowledge of market needs, talent flows, new recruiting technologies and new ways of leveraging data to inform decision-making. Keywords: Recruitment, Outsourcing, Talent Gaps, Right RPO Partner I. INTRODUCTION As companies seek to enhance their competitive positions in an increasingly global market place, they are discovering that they can cut costs and maintain quality by relying more on outside service providers for activities viewed as supplementary to their core businesses [1][2] [3][4][5]. Recruitment Process Outsourcing is an activity carried out by organizations to attain talent by delegating to a third party, known as recruitment service provider (RPO Vendor), who partly provides for the organization s recruitment needs [6]. Such Recruitment Process Outsourcing (RPO) provider acts as an internal recruitment function that primarily takes up the role of right identification and hiring of a quality employee against vacant position in an organization. It leverages market knowledge, industry expertise and access to talent to improve quality of hire, speed of delivery and cost containment. By doing so an organization is typically more focused of its core business and key strategic initiatives [7]. Therefore, for smooth functioning of such relationship, selection of a right RPO partner, which can continue to deliver new services to improve their client ability to hire qualified talent and also meet the changing needs of the organization through innovative solutions to address their most complex recruitment needs by improving its recruitment metrics is utmost important [8]. In today's business environment, the best RPO providers are delivering in three main ways. They are: 1) tapping into Big Data, 2) micro-targeting talent, and 3) acting as a test lab for their client recruiting functions [9]. 43

2 II. LITERATURE REVIEW Studies, research reports and surveys during literature review has shown that though RPO is cost effective and helps HR to focus on their strategic initiatives and moves, but selecting a right business partner RPO is even more important to accomplish the organizational goal for which the association. Greer et al. [10] HR outsourcing represents an effort to restructure the HR department, refocus activities, and/or redeploy HR resources so that companies can make more by doing less [11]. It is believed that HR outsourcing is an important value-positive activity that can enhance a firm s strategic capabilities and performance. Cooke FL, Shen J, McBride A [12] HR outsourcing is an important strategic tool in the human resource management (HRM) toolbox and can have a significant impact on organizational outcomes. Klaas, McClendon, & Gainey [13] stated that a number of firms outsource routine administrative HR activities to release its internal HR team for a more strategic role in an organization. However, a minority of others have opted to outsource the entire package, including the design of HR systems that are likely to have a fundamental impact on organizational culture and performance. The theoretical study on the impact of HR outsourcing by Klass[13] suggests that the awareness of the prospective risks before selecting an outsourcing partner. According to the authors, enterprises (in particular small and medium) are rapidly going for HR Outsourcing. It was also stated that variables like administration fees, staff time costs, HR outcomes and compensation costs etc should be well examined that can be affected by organizations and will vary from organizations to organizations, Therefore, it is important during the planning stage only that an organization while outsourcing its HR functions, should fully research the outsourcing impact on these variables to analysis overall cost benefits that can be obtained in contrast lowering the costs. Development Dimensions International (DDI)[14]conducted an exploratory research to study the impact of outsourcing related on two key HR functions primarily, training & development and recruiting & staffing to evaluate its effectiveness as a strategy for meeting new challenges in HR management, to offer an analysis of its impact on the organization of the future, and to give some practical advice on developing an outsourcing relationship. It was recommended in the study that the key requirement to shape the future of outsourcing is trust. Only when both sides trust each other will client and partner invest in each other s business success. Such trust will be rewarded as partnerships yield significant returns. A joint study conducted by Accenture and The Conference Board, based on the responses of 165 top HR executives in the USA, UK, and Europe discovered that the three most significant drivers in HR outsourcing were: cost reduction, improving the quality of HR services provided to employees and maximizing resource availability. The Work Foundation's survey produced the following responses: 63 per cent of respondents who outsourced one or more function did so 'to harness specialist knowledge, 44 per cent cited a key reason as 'maximizing resource availability'. A survey by IDC (International Data Corporation) in 2003 gave the top three benefits of HR BPO as cost savings, technological expertise, and process expertise. D.Elmuti [15] suggested that Companies that outsource their activities should regularly monitor its vendor activities and establish a continuous flow of communication. The attitudinal results stated in this study supported for the claims of outsourcing proponents that outsourcing allows companies to improve its expertise, service quality, 44

3 and staff reduction, process streamlining, reducing the incurred costs and the administrative burden and ultimately leading to better time management. Outsourcing is beneficial to organizational performance [2] [17]. One of the important additions from this study is the revelation that organizations generally considered themselves successful at outsourcing and the organizations are thought to improve quality and performance. Tim Nelson and Brett Gerard [16] stated that RPO models which concentrate primarily on cost-reduction and process have failed to achieve talent acquisition and management with the strategic imperatives for talent demanded by the organization to achieve its goals. Though cost and process efficiencies are priority but organizations should emphasis on the fact that creating and maintaining a talent edge over its competitors is a bigger goal to achieve. Organizations, which are under RPO association for its recruitment functions with an external provider must be more outwardly oriented i.e., in closely managing and evaluating the performance and delivery of its human capital vendors and partners with whom they have to closely work and with the help of innovative strategies and tactics that reduce cost and create better results effectively. William G.Stopper [17] in his study on Outsourcing effect on HR leadership Development had some explicit and important findings. He says once HR become more strategic the cost automatically gets reduced to the satisfaction level of an organization without comprising the quality of the process and the delivery of results. Transactional work if shared with the outsourcing firms, will allow HR to pay more attention and time to the priorities which holds greater and long-term impact on business goals and plans. Since HR outsourcing has lot of positive impact it s even more important for a company to negotiate well before moving into an agreement with an external recruitment partner. This further gives better understanding of mission and vision to the internal HR of the organization for its core business. Internal HR also gets better clarity with the actual and true cost of the services been offered by a vendor and also it will help HR to decide and assign the activities as per their priority to the vendor. Once under contract, there is much more emphasis on measuring results and on doing work that needs to be done rightly versus work that is nice to do. Within the outsourcing firm, functional areas of HR become revenue and profit-producing activities rather than overhead costs. It was stated that those who have transferred to outsourcing firms report their satisfaction with having responsibility for client relationships, with the fast pace, with being paid on results. One of the most critical findings was that the organizations are more willing to put their HR activities in the hands of a single outsourcing firm rather than spread them around to separate niche players in compensation, staffing, payroll, 401(k), etc. Having to contract and interact with one partner (vendor) is preferable to dealing with many. Donald L. Caruth, et. al. [18][19][20] in their model for outsourcing human resource activities had a classification of human resource activities along with the advantages and disadvantages of every part of classification. It was stated that Outsourcing is a potentially useful approach for handling many human resource management activities better, cheaper, and faster than they can be handled in-house. But it depends to a great extent on taking a long term view of the relationship between the organization and the RPO partner. Outsourcing must be viewed as a long-term business-level strategy not as a short-term solution to human resource management problems which requires commitment from both parties, proper nurturing of the relationship, and development of a high degree of trust. According to Manpower Group's [9] Talent Shortage Survey, the three top challenges employers face in filling open positions are a lack of technical competencies or hard skills, a lack of workplace competencies or soft skills, and a lack of available candidates. Selection of a right provider can overcome these difficulties by analyzing workforce data and demographics to determine which locations can offer the needed talent with the right qualifications, skills and experience 45

4 and at what costs. A right RPO partner can also employ the latest best practices on how to engage with those candidates and ensure they are interested in working for the organization. III. RESEARCH OBJECTIVES AND METHODOLOGY With the evolution of recruitment process outsourcing, many companies are taking advantage of the RPO process to reduce cost and time, and improve the quality of hires. However, like everything else, RPO can sometimes come with risks. By being aware of the risks, the companies can avoid and overcome the consequences of it. It is essential to have a critical view on the need of selecting a right recruitment partner by an organization as hiring the right kind of people is of utmost importance for an organization s long term success and hence, choosing the right RPO vendor to handle talent acquisition and talent management is more complicated than choosing a vendor for any other outsourcing needs. Indulging in a RPO association is an expensive undertaking; therefore it is crucial to consider some important factors before selecting a right recruitment partner by an organization for success of the whole process. In order to understand the aspect in detail following two objectives are broadly undertaken to conduct the study. To study the important criteria before selecting a right RPO partner? To study the weightage given to each criteria during the selection process? A. Important Criteria for selecting a RPO Partner Archival data was collected from the newspaper articles, website information, annual reports of various RPO organizations and their yearly surveys; to understand the concept in detail and to cover all the aspects related to RPO vendor selection process before collecting any primary data from the respondents relevant for the said process. Following area of concerns were taken into consideration. How well a vendor can incorporate employer branding and culture into the search process with its potential candidates. What is the service pricing pattern (SPP) to its clients: Is the pricing genuine or over rated and also is it different on client on client basis for the same set of services. Vendors - Client retention ratio. Will an organization be successful in achieving its aim of reducing costs (competitive needs), re-focus core resources (customer needs), and improve services to employees (internal user needs). What is the recruitment metrics and performance commitment ratio of RPO partner. How well the RPO vendor will be able to handle fear of loss of jobs, within the organization by top level management. What types of applicant tracking systems and other technologies is used by the RPO vendor and do these technologies integrate well into an organization s current system. Is the RPO vendor using validated assessment tools to ensure the quality for each and every hire. On the basis of above secondary information, in order to identify the key criteria before selecting a right RPO partner, an exploratory study was conducted by interviewing ten HR managers involved in RPO association, on behalf of their organization. Semi- structured interview technique was used to collect the data for this process. Apart from other minor parameters, following key parameters were majorly derived from this first phase of exploratory analysis. 46

5 Understanding client needs and culture Solution delivery Value for fees Latest technology usage and integration with the existing system Client Retention Ratio Global Reach Capability Scalability during economic crises B. Weightage given to each key criteria A questionnaire was made out of the exploratory analysis and was sent to the more than one hundred HR managers across industries using RPO services stating the above eight criteria s. Sixty five questionnaires were received and thirty eight questionnaires were complete and were used for the said study. The respondents were asked to select the criteria most important for their organization before going in for a RPO partnership with a vendor. Managers were supposed to respond as per their priority of service required, understanding and working experience with the RPO partners. Part second had five open ended questions to know the level of satisfaction with the RPO deal, the overall services by the partner, challenges while working with the vendors, any other criteria important apart from the mentioned criteria s and finally the effectiveness of the services of the vendors in comparison to internal recruiters of the organization. The RPO-vendor clients that responded represent more than 15 different industries. Below is the tabular presentation of the primary data collected with the help of questionnaire and by using Microsoft Excel software weightage was calculated for each key parameter for a clear distinction. TABLE 1 WEIGHTAGE TO EACH PARAMETERS FOR CHOOSING A RPO PARTNER S.no Parameters No of Respondent (Weightage in %) 1 Understanding client needs and culture 8 22% 2 Solution delivery 7 19% 3 Value for fees 6 17% 4 Latest technology usage and integration with the existing system 6 14% 5 Client Retention Ratio 5 12% 6 Global Reach Capability 3 08% 7 Scalability during economic crises 2 05% 8 Handling job loss fear of internal recruiters of an organization 1 03% 47

6 Fig1. Bar diagram to show the weightage of parameters as per respondents priority Understanding client needs and culture (22% weightage): RPO provider's ability to understand and fit with the organizational culture and environment has been given the highest priority during the selection process of a RPO partner for a deal. Even the choice of technology also depends on how well it fits with a company's recruiting culture, which seeks to inform, engage and educate online before involving candidates offline. Solution delivery (19% weightage): Business intelligence through data analytics- targeting talent sources requires stronger analytics and assessment. Big Data, the applicant volume needs to be managed effectively. Although that's important, but the most successful business partner will have to find ways to make use of massive amounts of digital (e.g., social and mobile) and tracking data to source, attract, hire and retain the very best talent to deliver quality service. The right provider will have the capacity to deploy Big Data insights across the entire recruitment process that may otherwise remain hidden. By using the new recruiting solutions like video interviews and various sourcing and sales tools for micro-targeting talent, and developing comprehensive databases, organization can be assured they have access to the most effective recruiting solutions and delivery, without having to make the investments and conduct trials themselves. Value for fees (17% weightage): RPO should not be a short term gain; rather it should be long term effective investment. The best provider enables collaboration and improves recruiting metrics efficiently and effectively, with a willingness to take business risks and by holding itself accountable to ongoing improvement and innovation. It can successfully meet agreed-upon recruitment numbers and employee retention targets, every time, thereby justifying the money invested in the deal. Latest technology usage and integration with the client s internal system (14% weightage): Usage of the latest tools and technologies when merged with the organization s internal technology provides significant costs savings and a competitive advantage required for effective results. As organizations look to leverage their RPO providers' ability to 48

7 Tank, Apeejay - Journal of Management Sciences and Technology 2 (2), Feb provide them with the most effective and cutting edge systems and tools, they will achieve better alignment between RPO delivery and system functionality, as well as a reduction in system costs. The best providers are those that have an extensive research and development function to test the latest tools and techniques. Client Retention Ratio (12% weightage): Retaining the current deals is always more crucial than getting new deals. An RPO partner can retain its clients up to a great extent by analyzing true competencies required for a position, the right screening and finally, assessments to identify the most teachable candidates. The client definitely sees how on technology side, an RPO provider rolls out digital solutions that can transform the recruiting process. Following are various parameters which holds utmost importance during client satisfaction and retention process: Expertise in research strategy and methodology used to explore and cover new job seeking potential employees. Domestic and global working centers. A results driven approach for closing the vacant positions and retaining the talent. Confidentiality and versatility while handling various crucial positions. Comprehensive candidate engagement programmes. Global reach capabilities (08% weightage): An extensive global footprint which can source talent across globe, rapidly from emerging markets of the world is always a look for the current and future expansion plan of an organization. Clients benefit from detailed labor market insights and extensive research excess to the databases. Therefore the best RPO provider must have a capacity for a global search, as per the organizational recruitment plans and the requirement. Scalability during economic crises (05% weightage): A successful RPO model needs to have a capacity to scale up and down in line as per the organizational need. The dynamics changes and has a direct impact on the recruitment need of the organization which requires a change in RPO business partner s recruitment plan as well. In order to remain cost effective timely action and changed plans are required to face such challenges. Handling job loss fear of internal recruiters (03% weightage): The internal recruiters are little apprehensive in giving away full control of the process to the external recruitment partners. RPO association is done because the external recruiters are skilled and technical professional and the overall recruitment process is cost effective when the organization looks for expansion plans. This makes an organization dependent on the business partner for its process. These external recruiters have expertise over relationship-driven approach between recruiter and candidates therefore are able to deliver results. VI LIMITATIONS It was extremely difficult to get the primary data from the human resource professionals, using RPO services due to their time constraint and availability. RPO still a very new concept in India, many respondents still do not have the in depth knowledge of the concept. 49

8 Internal HR managers feel that there is no accountability once an external vendor is hired for an important function like recruitment therefore reluctant to comment on the vendor and its services. VII CONCLUSION Performance consistency, cost and a result driven process is an important aspect which companies look exclusively while identifying a right and suitable RPO partner. The expectation goes far beyond the traditional service level agreements of typical recruiting strategies to locate specialized talent, with the global economy increasing recruitment pressure on RPO providers. Forward thinking businesses are looking for long term association with the right partner in talent flows, recruitment strategies and technologies which can integrate new recruiting methods in its solutions. The paradigm for what companies look up, to match up with their complex recruitment needs in a true strategic partner will continue to change. It is mandatory for the partner to keep up and deliver new services to improve quality hires in time. The best technology tools are only effective in the hands of recruiter who know how to use them. What matters is how the recruiters are skilled, creative in delivering the recruiting metrics effectively and how the recruiters work well on employee retention strategies which make a positive difference in the client s environment and brand image. A best partner while going beyond from just supplying talent should act as a consultant to its client by advising how the organization can remain competitive, can attract best of talent and move beyond geographies in the talent search. The above study was an effort in such direction, to choose a right recruitment partner for an organization to fulfill its bigger goal of talent management for the business success and growth. However, further research is crucial and required to understand the challenges faced by RPO partner during their client association and what can be the possible solutions to minimize those challenges. REFERENCES Research Papers [1]Baily, M. N., and Farrell, D. (2004a) Exploding the Myths about Off shoring. McKinsey Global Institute (April). [2] Casale, F.J Introduction to outsourcing, The Outsourcing Institute 1. [3] Donahoe, Daniel N., Pecht, Michael (2003), Are U.S. Jobs Moving to China? [4]Irwin, Douglas A. (2004). Outsourcing is Good for America, Wall Street Journal, January 1. [5] Li, X., & Barnes, I Proactive supply risk management methods for building a robust supply selection process when sourcing from emerging markets. Strategic Outsourcing: An International Journal1 (3): [6] Abdel Moneim Elsaid,2013; The effect of recruitment process outsourcing on creating competitive advantage for organizations operating in Egypt, International Journal of Business Management and Administration Vol. 2(1), pp , January 2013 [7] McClendon, J., Gainey, T. and Klaas, B. S. (2002). HR Outsourcing and the PEO Industry: A Survey of Client Reactions. PEO Insider, 6, [8] Quinn, J. (1999), Strategic outsourcing: leveraging knowledge capabilities, Sloan Management Review, Vol. 40 No. 4, pp [9] ManpowerGroup, "2013 talent Shortage Survey," May [10] Greer, C.R., Youngblood, S.A. & Gray, D.A. (1999) 'Human resource management outsourcing: The make or buy decision'. Academy of Management Executive. Vol. 19, Iss. 3, p [11] Gilley, K. Mathew, Greer, Charles R. and Rasheed, Abdul A. (2004). Human resource outsourcing and organizational performance in 50

9 manufacturing firms. Journal of Business Research, 57, pp [12] Cooke FL, Shen J, McBride A (2005). Outsourcing HR as a competitive strategy? A literature review and an assessment of implications. HRM 44(4): [13] Klaas, B. S., McClendon, J., & Gainy, T.(2001). The Determinants of HR Outsourcing. Human Resource Management, 40, [14] Development Dimensions International,The Outsourcing Question(2002)By William C. Byham. [15] Elmuti, D. (2003), the perceived impact of outsourcing on organizational performance, Mid- American Journal of Business, Vol. 18 No. 2, pp [16] Tim Nelson and Brett Gerard( 2005), Recruitment Process Outsourcing:Transforming End-to-End Talent Acquisition, A futuregroup RPO study. [17] Stopper, William G.October(2005), Outsourcing's Effect on HR Leadership Development, Human Resource Planning;2005, Vol. 28 Issue 4, p11. [18] Donald L. Caruth, Ph.D., SPHR & Gail D. Caruth, MS, SPHR(2010), Outsourcing human resource activities: a proposed model. [19] Lever, S An analysis of managerial motivations behind outsourcing practices in human resources. Human Resource Planning 20(2): [20] Gainey, T.W. & Klaas, B.S. (2003), The outsourcing of training and development: factors impacting client satisfaction, Journal Of Management, april, 29, 2, pp BOOKS Strategic Outsourcing: A Structured Approach to Outsourcing Decisions and Initiatives- Maurice F. Greaver II , page 3-5. The outsourcing process: strategies for evaluation and management- R McIvor pages 6-9 The Black Book of Outsourcing- How to Manage the Changes, Challenges, and Opportunities by Douglas Brown and Scott Wilson REPORTS 2012 Global Outsourcing and In sourcing Survey- by Deloitte. A report on Market Overview Pharmaceuticals by IBEF and Ernst and Young, December 2008 Everest Group PEAK matrix survey for RPO Service Providers- July 2012 Everest Group, "Recruitment Process Outsourcing Annual Report 2013: Dichotomy of Market exuberance and Subdued economy," March HR Transformation in India-A case for Business Driven HR by Deloitte September 2012 Human Resource Outsourcing Survey 2004 conducted by SHRM An outsourcing review of 25 large companies by Deloitte Consulting ( Calling a Change in the Outsourcing Market Report, 2005 Staffing Industry Analysts, "Buyer Survey," May WEBINAR Everest Group: Recruitment Process Outsourcing Market Projected To Grow Up To 30 Percent In 2011 Press Release Everest Group Webinar: Recruitment Process Outsourcing (RPO) trends and service providers to be discussed by analysts Press Release Everest Group Q4 Report: Outsourcing Transactions Reach 36-month High, Mega Deals Boost Market Growth Press Release Everest Group Releases Report on Tier-2 Indian IT Providers Highlighting the Criticality of Differentiation for Survival Press Release Evaluating the Dynamics and Impact of the Global RPO Service Provider Landscape Press Release Recruitment Process Outsourcing Is the Wave of the Present Workforce.com In The News Recruitment Process Outsourcing (RPO) Moving Beyond the Pioneer Stage. 51