RPO (Recruitment Process Outsourcing) - what is it & why you need it
Many of our clients are facing shortage of internal capabilities in terms of recruiting talent, while on the other side their compliance and risk management concerns are rising. They are constantly searching for ways to increase their recruiting capability and effectiveness. Depending on given resources they either start by rebuilding their internal recruiting infrastructure, or turn to Recruitment Process Outsourcing (RPO) to help improve mentioned recruiting capability and efficiency more effectively.
The reasons why no one is left surprised is because we have been facing demographic changes over the last decade which lead us to increasing skills shortages, volumes of recruitment are fluctuating (long-term hiring freezes are often followed by extended periods of intensive recruitment – and vice versa) and many HR generalists are cornered with lack of resources to carry out this time-consuming work or they simply do not possess the specific know-how required.
Since business needs are as individual as the company, there is no such thing as a ”one size fits all” approach to recruitment. Due to their flexibility, RPO services can be the perfect solution for well-structured group HR departments as well as for small and medium-sized businesses that do not have dedicated HR and recruitment specialists.
The Definition
Recruitment Process Outsourcing (RPO) describes the partial or complete outsourcing of the processes used for recruiting permanent staff to an outsourcing partner. According to the Recruitment Process Outsourcing Association (RPOA), “A properly managed RPO will improve a company’s time to hire, increase the quality of the candidate pool, provide verifiable metrics, reduce costs, and improve governmental compliance.”
How RPO can deliver company benefits
Clients are firstly drowned by its cost savings as the primary driver for outsourcing, but if you dig a bit deeper it goes way beyond - it can solve an array of recruitment challenges within the company.
In the environment of talent scarcity, much needed organizational agility and scalability it allows you to have an onsite (or remote) recruiter with a sourcing expertise on agency level within the required industry that has the access to needed methodology, technology, drives process efficiency, can implement analytics, improve quality of talent and build and manage the talent pipeline.
Investments in internal capabilities are one way of approaching complex and fast changing labor market, but will that ensure that you remain competitive?
Dedicated RPO recruiter has the ability to work closely with hiring managers, has needed sourcing expedience and better candidate management, possesses in-depth knowledge and experience with ATS platforms, recruitment CRMs and other technologies which delivers great strategic value to overall recruitment process.
RPO concepts enable companies to buy in recruiting expertise and capacities as they are needed, while at the same time providing the highest level of quality recruitment services.
How many clients can raise their hand that their HR practitioners can effectively or efficiently manage all that internally?
RPO types, shapes and sizes
Keep in mind that ‘P’ in RPO is much stronger than ‘R’. That is, it is much a Process as is it Recruitment. Both are coordinated and integrated services with specific outcomes and expected performance measures. RPO can fully replace the need for internal sourcing or recruiting resources or can augment resources already in place. In day-to day business we usually define RPO by few major types/programs.
- Enterprise RPO – covers outsourcing of all sourcing and recruiting processes to an RPO provider where all of the recruiting processes, job postings and sourcing are done by the RPO provider who is working on behalf of the company, using companies’ logo and employment brand identity. The contract period is longest of all three programs and it is usually counted in years of cooperation. It is of great value to the company since it creates cost savings, enhances time to hire, delivers high-quality talent quickly while all metrics easily correlate to revenue and profit impact.
- Project RPO – Solution that should be viewed as a supplement to internal resources when a business initiative requires an increase in recruiting capabilities. The focus and main value it delivers is applicable only to the roles contracted. It does not deal with structural issues as enterprise RPO since it rests mainly on speed. It provides dedicated recruiters, a full scope of technological tools, bases and know-how but since it is done for a specific scope of time and/or positions contracted period is much shorter (possibly as short as six months).
- Point-of-Service RPO – allows companies to outsource specific parts of the recruiting processes to increase quality of candidates, efficiency and/or reduce costs. It can be used for specific roles or business locations and can produce tremendous results. Mostly used by companies who struggle with challenges in a particular area of their recruitment and it is contracted on an ongoing basis which has transformative effect on organization’s recruitment function.
Since there are no two identical companies (nor two identical needs or problems for that matter) most commonly used RPO program by our clients is a “Smart” RPO. Version that is fully custom made for an individual company, project or companies’ specific recruitment need. Consultative approach allows to address and define depth of each issue company is currently dealing with (or insures to see those that await in the future) after which optimal RPO scenario is being defined. It gives companies the freedom to define exactly how much support they want to contract for, length and scope of needed service. It can be Recruiter-on-demand (ROD) based or it can take on forms of a comprehensive RPO that results in partnership that lasts for years.
RPO Cost models
Users of RPO services can all easily agree that one of the key drivers of RPO is always lower recruitment costs. The volume of hiring managed by a service provider is typically many times higher than what an employer can achieve on its own. Depending on the RPO model, costs of RPO are generally defined in several models listed below:
- monthly management fee (based on volume and services contracted fee is payed to the RPO provider for working on an agreed number of positions)
- cost per hire model (based on the number of candidates hired)
- management fee plus cost per hire (combination of the above two, combines constant recruitment effort covered by the management fee with payments for the successful hires).
- cost per slate (based on the number of candidates that are presented for each open position)
- cost per transaction (fee is charged for specific predefined transaction, such as initial screening, interview scheduling or reference checking)
The importance of setting up your goals right!
Cost advantages being defined, most companies can relate that second key point on their list of goals for an RPO program is speed of hire. It is a metric most talent acquisition specialists are struggling to improve and is most commonly expected from the RPO provider after program implementation.
When defining your goals for an RPO program it is important to prioritize and to be aware of those you should not miss. Here is the list of top ten defined as most important in terms of RPO – cost advantages, speed of hire, reduced time to fill, reduced cost per hire and administrative burden, talent quality improvement, investment in technology and talent analytics, flexibility and scalability, improved workforce planning, best practice process improvement and employer branding expertise.
Additional questions one should consider asking…
Here is the list of questions company should take into consideration - What are the costs of bad hires for your organization? Are you losing desired talent to competitors? You do not have HR department (yet) or existing one is overloaded? Want to optimize your recruitment processes or tools? Want to optimize vendor structure and bundle all HR consulting activities under a “master HR partner”? With talent scarcity on the rise, how will your organization rise to this challenge? Will you be able to build the expertise, technology infrastructure and best practices needed to keep you ahead of the competition?
Let us help!
Whether your company is facing extended hiring requests, or your recruitment volumes are modest but would like to make changes in you talent acquisition strategy or you are not quite at the point of larger investment in talent technology and/or talent branding, our RPO service providers can quickly identify possible process or technology gaps and map out optimal solution scenario that will enhance your hiring processes, bring you closer to high-quality talent and keep you competitive on the market.
Let us know how can we help today at contact@smartgroup.hr
