Recruitment process outsourcing

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Recruitment Process Outsourcing is a form of business process outsourcing (BPO) where an employer outsources or transfers all or part of its recruitment activities to an external service provider.

The Recruitment Process Outsourcing Association defines RPO as follows: "when a provider acts as a company's internal recruitment function for a portion or all of its jobs. RPO providers manage the entire recruiting/hiring process from job profiling through the onboarding of the new hire, including staff, technology, method and reporting. A properly managed RPO will improve a company's time to hire, increase the quality of the candidate pool, provide verifiable metrics, reduce cost and improve governmental compliance."^[1]

The RPO Alliance, a group of the Human Resources Outsourcing Association (HROA), approved this definition in February 2009: "Recruitment Process Outsourcing (RPO) is a form of business process outsourcing (BPO) where an employer transfers all or part of its recruitment processes to an external service provider. An RPO provider can provide its own or may assume the company's staff, technology, methodologies and reporting. In all cases, RPO differs greatly from providers such as staffing companies and contingent/retained search providers in that it assumes ownership of the design and management of the recruitment process and the responsibility of results."^[2]

Occasional recruitment support, for example temporary, contingency and executive search services, is more analogous to out-tasking, co-sourcing or just sourcing. In this model, the service provider is just a source for certain types of recruitment activity.^[3] The distinction between RPO and other types of staffing is that in RPO, the service provider assumes control of the process.

History

While temporary, contingency and executive search firms have operated for many decades, the outsourcing of part or all of a company's recruiting process was first realized on a consistent basis in the 1970s. In Silicon Valley's highly competitive high-tech labor market, fast-growing high-tech companies were hard-pressed to locate and hire the technical specialists they required, and so found themselves required to pay large fees to specialized external recruiters. Over time, companies began to examine how they might reduce the growing expenses of recruitment fees while still hiring hard-to-find technical specialists, and began to examine the steps in the recruiting process with an eye toward outsourcing only those portions that they had the greatest difficulty with and that added the greatest value to them. Initial RPO programs typically consisted of companies purchasing lists of potential candidates from RPO vendors. This "search/research" function, as it was called, generated names of competitors' employees for a company and served to augment the pool of potential candidates from which that company could hire.

Over time, as business in general embraced the concept of outsourcing, RPO gained favor among human resource management, to reduce overhead costs from their budgets, and improve the company's competitive advantage in the labor market. As labor markets became more competitive, RPO became more of an acceptable option. Furthermore, through the advent in the 1980s and 1990s of human resources outsourcing (HRO) companies that began taking on the processes associated with benefits, taxes and payroll, companies began recognizing that recruiting should also be considered for outsourcing. In the early 2000s, more^{[citation needed]} companies increasing considered the outsourcing of recruitment for major portions of their recruiting need.

Fundamental changes in the US labor market also serve to reinforce the use of RPO: The labor market has become increasingly dynamic: workers today change employers more often than in previous generations. De-regulated labor markets have also created a shift towards contract and part-time labor and shorter work tenures. These trends increase recruitment activity and may encourage the use of RPO.^{[citation needed]}

Everest Group estimates the current size of the RPO market at US$1.4billion in annualized spend with a growth rate of over 25% in 2010-11.^[4] The process has moved beyond a nascent stage to 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).

Benefits

RPO providers claim the method has lower costs because the economies of scale enables them to offer recruitment processes at lower cost while economies of scope allow them to operate as high-quality specialists. Those economies of scale and scope arise from a larger staff of recruiters, databases of candidate resumes, and investment in recruitment tools and networks. RPO solutions are also claimed to change fixed investment costs into variable costs that flex with fluctuation in recruitment activity. Companies may pay by transaction rather than by staff member, thus avoiding under-utilization or forcing costly layoffs of recruitment staff when activity is low.

They also claim higher quality, because the commercial relationship between an RPO provider and a client is likely to be based on specific performance targets. With remuneration dependent on the attainment of such targets, an RPO provider will concentrate their resources in the most effective way - at times to the exclusion of non-core activity. Traditional internal recruitment teams are less likely to have such clearly defined performance targets.

Risks

RPO can only succeed together with a well-defined corporate staffing strategy. A company must manage its RPO activities, providing initial direction and continued monitoring to assure good results. An RPO solution may not work if the company's existing recruitment processes are performing poorly, or if the service provider lacks the necessary recruitment processes or procedures to work with the client. In these situations, it is better for the company to undergo a recruitment optimisation programme.

Cost and quality can be issues, The cost of engaging an RPO provider may be more than with internal recruiting staff, as the outside provider is likely to have higher business overhead. Poorly implemented RPO could reduce the effectiveness of recruitment, if the provider does not understand the business situation. Service providers may fail to provide the quality or volume of staff required , especially in industry sectors where there are staff shortages. RPO providers do not necessarily act as custodians of their clients' employer brand in the way that a strongly aligned retained search firm or internal recruiting resource would. Many RPO organisations perform their staffing functions and service offsite or offshore, disconnecting the provider from the client company's growth and recruiting strategy, and some of the momentum and energy associated with the rapid upscaling of a workforce through recruitment may dissipate. Additionally, placing all recruitment in the hands of a single outside provider may discourage the competition that would arise if multiple recruitment providers were used.

References