Talent crunch and demand for ‘right-fit hires' is creating a gap in the recruitment space. RPO is expected to fill this gap
Organizations that have adopted RPO have reduced hiring time from an average of 30 to 21 days
Recruitment has been outsourced for many years now. With the changing landscape of the industry and growing importance of Human Capital of organizations, recruitment and selection can no longer be considered as just transactional activities. As employers face high rates of attrition and increased demand for skilled and quality work force, a number of recruitment models, both in-house and outsourced have emerged, which promise to be the panacea for hiring woes.
Indian Recruitment Space vis-a-vis Mature Markets
The worldwide recruitment market is estimated to be in excess of $420 billion. Many of the developed economies have a very mature and developed recruitment industry. In the USA alone, there are around 61 companies which are listed on exchange and publicly traded. However, in emerging economies like India, the recruitment industry is very fragmented and it is estimated that India has more than 18,000 small and large staffing firms.
If we take Recruitment Process Outsourcing (RPO) as a subset of the bigger recruitment industry, it is relatively nascent. The size of the worldwide RPO market in 2009 was estimated to be $700 million to $1 Billion, with most of the deals being signed in mature markets like the USA, UK and Australia. Growing markets like India are slowly emerging on the scene. A huge talent crunch and demand for ‘right-fit hires’ in such markets is creating a huge gap in the recruitment space due to the complexity and techniques involved. RPO is expected to fill this gap. The global RPO market is estimated to touch $3.2 billion by 2013, with significant contributions from growing economies.
Three Classic Recruitment Dilemmas for Indian Employers
An employer is faced with three classic dilemmas when it comes to recruitment. They are:
Just in time hiring: Finding the right skill at the right time at the right cost.
Predictability: Even when employers are able to find people who are right for the job, ‘no show’ is a big challenge. Predictability is an important component for a successful hire.
Fitment: A large chunk of employees either leave within 3-6 months or they don’t figure amongst the better performers. Can right fitment be only ensured through better assessment or do we also need to look at something else?
Employers and service providers have been trying to solve this riddle. Even though some improvements have been made in the time to hire, significant progress needs to be made in the other two areas.
The RPO model has been successfully adopted globally. Organizations in India are quickly following this trend. RPO ensures true amalgamation of technology, process, outcome driven approach and Service Level Agreements (SLAs).
The terminology RPO, however, is being used loosely by the recruitment industry even when an RPO provider and a staffing provider are at two ends of the spectrum. Everest Research Institute defines Recruitment Process Outsourcing as “Transfer of ownership of all or part of recruitment processes or activities on an ongoing basis.” The main differentiator is that the RPO provider assumes complete ownership of the design and management of the recruitment process and also takes on responsibility for the results, which other model based providers don’t.
A true RPO is a ‘Talent Supply Chain’ model which has two elements to it:
a) Benchmarked and researched, accurate talent pool
b) Evolved technology and process in the shared services recruitment center
While developing an RPO solution, the service provider has to really put himself into the shoes of the corporate hiring function and get his arms around everything from branding, developing a sourcing strategy to on-boarding and even technology and process. The ‘awesome foursome’ of an ideal RPO are:
• Refined standardized processes: Organization context and measurable hiring process
• Contextual training: Converting an average recruiter to a strong recruiter
• Quality control mechanisms: SLA’s with clients - on time, every time
• Strong Technology for Talent (TFT): Technology for talent to support clients’ specialized needs and extended value chains. It goes well beyond just process automation.
Underdogs of the Recruitment Anatomy: Design, Process and Technology
Design & Process
In the recruitment value chain, about 70% activities are repetitive and transactional. HR departments of organizations end up spending a lot of time into these non-core activities (from database management to assessment process administration, to interview process coordination, feedback collation and post offer transactions) instead of concentrating on their strategic tasks (source generation, relationship management and offer management). The right process can help achieve tremendous amount of automation and efficiency within the recruitment system.
Organizations that have adopted the RPO approach have been able to crash the hiring steps from a 20 to 14 and the hiring time (from requisition to closure of position) from 30 days to 21 days. This is because of integration of multiple sourcing channels, managing and limiting the number of third party providers and usage of technology. Clearly, this results in better hires for the organization and direct and indirect dollar savings.
HR and business leaders are exploring newer ways to source people, reduce no-shows and increase the employees’ stay in the organization. Employees, on the other hand, are keen to know where their career anchors lie. We need to figure the best way to converge on these two needs. Technology for Talent (TFT) will blend the new market reality and service the needs of the employer as well as the employee. TFT (which will tie in market reality of limited pool, hidden passive seekers, et al), Research (which will define the true fit for an organization), Talent Processes (defined by HR experts) and Web 2.0 type technologies, will use SaaS (software as a service) based platforms to integrate the two ends of the value chain - the job seekers and the job givers.
Challenges of the RPO Model
Many a times an outsourcing deal fails because the outsourcing organization does not have a clear strategy in place and the benefits that it wants to draw from the engagement are not clealy identified. RPO, like all other outsourcing models, has its share of Strengths, Weaknesses, Opportunities and Threats. The client must be clear and the vendor must be competent enough to realise the full potential of the partnership.
The buying organization must also understand that all the benefits of RPO are not realized immediately. While some advantages are immediate, some show up in medium or long term.
• Immediate to short term benefits: Reduction in time required to fill, integration of channels, access to technology, improved quality of hire
• Medium to long term benefits: Reduction in total cost, continuous improvement to the process, enhanced brand image of the hiring organization, the client’s focus only on its core business (and not on hiring)
Why RPO Cannot be Denied Any Further?
Variable Cost Structure: After the global economic meltdown, most companies want to keep the cost structure variable so that expenses can be lowered during lean periods. In RPO, the typical pricing model is ‘cost per hire’ and the only variable that defines the total recruitment cost is the total number of hires.
Standardization and Predictability: With the usage of streamlined processes and strong TFT, an RPO provider is able to bring in standardization to the entire talent acquisition function of the organization and at the same time is able build in a high degree of predictability in the system.
Scale: Let’s take an example of a company which employs about 50,000 people. Assuming an attrition rate of 20% and an annual planned increase in manpower to be 10%, the company needs to hire about 25,000 for the particular year. A number of companies have been able to manage a large portion of their recruitments by hiring directly from campuses.
Even if we assume campus hires to be 10,000, another 15,000 have to be lateral hires. Is a contingency staffing model or an in-house model good enough for such hiring numbers?
ROI: Correct implementation of RPO can ensure that there is a better fitment between the candidate and the organization, which leads to overall better retention. This proves to be a much greater ROI for the organization compared to the cost savings that the RPO process brings in.
Clearly, RPO is a compelling solution and a strategic choice. If we may put it, it is a business necessity in today’s economic situation. RPO is like running a very effective sales function. It impacts both revenue as well as growth, however, takes very little time to mature. RPO, in fact, needs a 24x7 mindset!
‘Nobody can stop an idea whose time has come and this is the time for RPO.’
Get your concepts clear: What is RPO?
RPO ensures true amalgamation of technology, process, outcome driven approach and Service Level Agreements (SLAs). Everest Research Institute defines Recruitment Process Outsourcing as ‘Transfer of ownership of all or part of recruitment processes or activities on an ongoing basis’. The main differentiator is that the RPO provider assumes complete ownership of the design and management of the recruitment process and also takes on the responsibility for the results, which other providers don’t.
Pankaj Bansal is the Co-founder and CEO, PeopleStrong HR Services. He can be reached at firstname.lastname@example.org
Sumit Jain is a member of marketing team at PeopleStrong HR Services. He can be reached at email@example.com