Why Recruitment Process Outsourcing (RPO) makes sense


One of the key challenges confronting the CEO or HR leader in any contemporary organization is the issue of how to strategically manage talent in the organization. Whether a start-up or a mid-cap or a large-cap company, each is confronted with it’s own unique set of issues and challenges-it could be attracting the right talent for a start-up, talent retention for a mid-cap or managing the recruitment budget for a large-cap with fixed recruiting costs saddling the business with huge overheads. In all cases, the pressure to optimize talent supply chain is immense.

Enter Recruitment Process Outsourcing (RPO).

The Recruitment Process Outsourcing Association (RPOA) defines RPO as “a form of business process outsourcing where an employer transfers all or part of its recruitment processes to an external provider. Recruitment Process Outsourcing providers can manage the entire recruiting/hiring process, or can manage one or two aspects of the process, essentially serving as an extension of the company’s human resources department”.

As may be noted from the above, RPO services are not outsourcing in the traditional sense and are much more consultative and customizable than normal recruiting. The RPO service provider may provide its own or may assume the company’s staff, technology, methodologies and reporting.

Today RPO is a multi billion-dollar industry worldwide and is making its presence felt in India too. As a recent article in a leading Indian publication points out, the RPO market is estimated to be around I.Rs.400 crores PA and is expected to show a 50% growth as organizations increasingly farm out all or part of the hiring function to focus on their core businesses.*

Business case for RPO

Given the prevailing VUCA (Volatile, Uncertain, Complex, Ambiguous) environment, greater operational cost efficiencies are an organizational imperative!

Recent recessionary trends have driven a significant change in hiring demand and requirements for most businesses, causing companies to reevaluate their recruitment process and cost structure.

Three ways in which a good RPO partner can help reduce costs while adding business value:

1. Sharing Risks
When a business downturn hits and recruiting needs suddenly drop, so does the organization’s need for recruitment. Conversely, when the business is expanding into another product category or region of the world, recruiting needs may suddenly spike. Outsourcing the recruitment function allows a company to pass along the cost risk of those resources to the business partner. A good RPO can take on the responsibility of efficiently adjusting resource levels when hiring fluctuations happen so the client does not bear the burden of carrying unnecessary staff, or conversely, being short when greater resources are required.

2. Faster Time to Hire
Time is money! Hiring new employees takes a lot of both. From sourcing resumes to conducting interviews and negotiating offers, acquiring a new employee taxes your internal resources. Each day a job requisition remains unfilled, your business loses the benefit of that employee’s contribution and wastes recruiting and budgetary resources that could be dedicated to other initiatives. Outsourcing all or part of your internal recruitment function can reduce your time to hire dramatically.

3. Streamlined Recruitment Processes
One of the most common problems with the recruitment lifecycle is that it’s a disjointed and uncoordinated multitude of practices—good and bad—across organizational functions, departments, divisions and regions. Often, this causes overlap in advertising, training and on-boarding procedures, as well as poorer hiring decisions and ultimately higher operational costs.

A good RPO partner will help examine the client organization’s recruitment process workflow(s) to determine overlaps, excessive costs, and inefficient practices that may exist and then create a model to better the status quo.

Checkpoints for an organization to evaluate the RPO

It may be worthwhile to carefully consider the following while engaging with a RPO service provider:

• Will RPO improve business performance?
Cost reduction may be a big driver of pursuing an outsourcing arrangement for a non-core competence in your business, and it’s one important financial measure. At the same time, the organization should establish other performance metrics with the business partner to demonstrate that this arrangement helps better attract the best and brightest to the business, speed time to hire, keep the employer brand consistent and effective, leverage internal mobility, and increase employment engagement and retention.

• Understand and control costs
Outsourcing relationships are commonly struck to reduce cost. However, it is important for the organization to quantify the entire cost structure including the various components to arrive at the total cost per hire.

• Retain/build necessary internal HR skills and expertise
While outsourcing may be the right direction for the recruitment function, there is still a need for the organization to retain/develop internal expertise to coordinate with the RPO provider. The RPO provider should be willing and open to transferring knowledge and turning back over the people and/or processes to the internal team once a best-practice operation is established and running smoothly.

• Manage the financial and performance metrics of the contract
People, processes and technology combine to deliver for a sound RPO engagement. It is essential for the company’s internal leadership to maintain management oversight of any outsourcing initiative. The client organization would be well advised to factor into the contract terms the time and internal resources necessary to effectively manage the relationship and its results.

• Cultural ramifications of outsourcing the recruitment function
Understanding how the managers and broader employee base are going to react to this massive operational change is critical. Once the decision to engage the RPO service provider is taken, it is vital to communicate to all the employees the rationale for the decision, how it would work and the benefits that would accrue to the organization

• Provide for an exit clause for both partners
Business conditions keep changing in todays fast paced and dynamic environment. Make sure you are not locked into a long-term contract with little or no flexibility to alter the scope.

Final reality check-what RPO is not?

RPO shouldn’t be considered a one-time fix or a way to offload the organization’s recruiting problems. If the organization is not committed to improving the recruiting processes and metrics, then RPO may just not be for you!

* (Recruitment outsourcing is the next big thing; expected to grow 50% a year- Sreeradha Basu, ET Bureau July 14, 2015)