To RPO or Not to RPO—That Is the Question

To RPO or Not to RPO—That Is the Question

Written by Donna Horowitz, Head of R&D and Quality at Personify

“Tech Bloom to Bust: Recruiters Among Hardest Hit by Coronavirus Layoffs” [ https://bit.ly/3m32xrw ]

News headlines like this are all too familiar in the talent acquisition space right now. So, if you are like most Talent Acquisition leaders, the chances are high that you are entirely re-thinking your approach to talent acquisition in a post-COVID world. And one of the decisions you are probably weighing is whether to outsource talent acquisition to a Recruitment Process Outsourcing company (RPO) for your company in the future: “To RPO or not to RPO.”

Before joining Personify, a nationally recognized RPO provider headquartered in Raleigh, NC, I spent than 20 years as a Human Resource (HR) leader, mostly at large and mid-size companies, and one of my responsibilities was Talent Acquisition (TA). In the article that follows, I share my thoughts on the critical issues you need to weigh if you are considering outsourcing your firm’s talent acquisition needs.

Case Study

I’ll start by telling you about my experience with RPO. About ten years ago, the company I was with had a great new product that just needed “feet on the street” to sell it. We needed lots of medical-device salespeople—fast. As head of HR, I needed a talent acquisition model that could immediately accelerate hiring without creating new infrastructure and avoid costly agency/recruiter fees. As we began to work the problem, we realized we had a “seesaw” issue using our internal TA function. Either we had more TA staff than the business required, or our TA team couldn’t keep up with the demand for talent. And when demand overwhelmed the team, we outsourced the overflow to expensive third-party agencies. We knew there had to be a better, more efficient, and cost-effective approach to resolve this situation.

To solve the problem, we identified three potential options, each with unique benefits and burdens:

  1. Expand and grow our current in-house TA capability
  2. Leverage a hybrid model where overflow requisitions are outsourced
  3. Outsource all our recruitment and talent acquisition services to a third-party provider

Because people were a cornerstone of our company’s business strategy, getting this decision right was critical. The right talent acquisition strategy would save us time, money, and effort, while the wrong one could cost us all three.

We ruled out option one because it only exacerbated our seesaw issue. Additional staff would lower third-party agency fees, but our hiring needs were continually changing. Taking on permanent staff we might not need twelve months down the road—that didn’t make sense. And because we needed to quickly fill the sales requisitions, we couldn’t wait to recruit, hire, onboard, and train new TA members.

Outsourcing was our best option. The question was whether to outsource all our TA activities or just a portion of them. Luckily, at the time, a new recruitment model called RPO was coming of age. After talking to over 30 RPO providers, we learned that not all RPOs were the same. In most cases, RPO providers were recruitment agencies trying to get a high level of guaranteed business without reducing costs or providing long-term value in a partnership. They either had high monthly minimums or high fees per hire, and they did not offer services like talent pool development, data management, advanced analytics, or support creating a superior candidate experience through interview scheduling and onboarding.

Then we discovered Personify—a successful recruitment firm breaking into the RPO space. Personify’s RPO model was the only one that offered a flexible pricing option where fees varied based on volume and value provided by their services. In exchange for a guaranteed share of new requisitions opened, Personify offered a “fee per req” solution. Essentially, we only paid for the recruiting we used. For example, if our recruiting needs dropped to zero, our recruiting costs dropped to nearly zero as well (there was a small monthly management fee). Conversely, Personify offered discounts that increased with requisition volumes. So, as our recruiting needs increased, our cost-per-hire decreased.

And while most other firms wanted to charge the same (high) fee for each placement regardless of source, Personify offered a unique “phased” approach to hiring. Personify offered lower fees for “Phase One” placements—those not directly sourced by Personify, such as applicants or candidates in the talent pool that Personify built over time. But for “Phase Two” placements, candidates Personify directly sourced from the passive market, fees were larger.

This approach was equitable and attractive—lower fees for candidates that took less effort to attract and higher fees for candidates that took more effort to attract and convert because they weren’t actively looking for new opportunities. In the short term, we were happy to agree to this because people were crucial to the sales initiative’s success. We wanted the chance to see and hire the best people in the market—regardless of whether they were active or passive candidates. Over time, as the talent pool grew, more and more of our hires were sourced in “Phase One,” which further lowered our costs and improved our return on investment with Personify.

We realized that since Personify’s model was so favorably flexible, we could outsource our entire TA function.  Next came the most significant challenge we faced—gaining internal acceptance, first at the executive leadership level, then within HR, and finally, with hiring managers. Part of the change included replacing HR team members to bring in different skills. Leaders and managers required a robust change management program to buy into the business case, understand the new process, and see the advantages for themselves. They needed to fully buy into the provider of choice we were selecting.  Personify’s team was exceptional in its ability to demonstrate their expertise, not just in recruitment but also in our business requirements, culture, and employee value proposition.  By the end of the selection process, Personify won over our internal stakeholders at every level across the organization.

The results

The results over three years were resoundingly positive.

  • 57% reduction in cost per hire
  • 45% improvement in time to fill
  • 33% improvement in 1st-year retention rates (quality of hire)
  • 40% improvement in applicant hires (from 50% to 70%)
  • Improved compliance with AAP (Affirmative Action Plan) and OFCCP (Office of Federal Contract Compliance Programs) requirements

Given the disruptive nature of filling vacancies, the cost and time to hire and train someone new, and the high price of lost sales revenue from an empty salesperson seat, the retention rate was our most important quality measure.  Your measure of quality and performance will vary based on your situation.

When my peers at other operating companies within the organization found out about our RPO successes, many moved to RPO models. One operating company already had an RPO partner and switched to Personify for a marked improvement.

Beyond reducing costs and improving recruitment performance, Personify offered a partnership that created lasting value, which we wanted. If we were going to make a significant change in our TA strategy, we didn’t want to undo it six months later. Personify committed to building a proprietary talent pool that sustainably reduced cost and cycle time–essentially providing a talent goldmine. They shared their recruitment marketing and analytics expertise, often providing services and insights delivering far more value than they cost. We knew Personify would provide a superior candidate and hiring manager experience with a dedicated client services team. I was struck by the number of new hires who told me that part of their decision to accept our offer was how well Personify treated them during the recruitment process.

Eventually, I made the personal decision that I wanted to be part of helping more companies gain the improvements that Personify provides when RPO is the right talent acquisition strategy, so I joined Personify myself nearly two years ago.

Learnings

Every talent acquisition situation is different, so you must carefully evaluate your specific situation and needs.  RPO was the right talent acquisition strategy for us, and I believe it often is, but not always.  Factors for consideration are your needs, partner choice, and implementation risks.

To assess your needs, consider volume and variance over time with these questions:

  • How much hiring will the organization be doing?  Are the jobs unique/one-off, or are there jobs with high volume hiring (i.e., 30 or more openings per year)?  RPO makes sense when the overall volumes are high enough, especially when there is a high volume of a single job.
  • How much variance will there be in volume over time?  The RPO model is especially useful when there will be highs and lows since it can be a variable cost model.
  • What value will be built over time?

The next question when assessing needs is whether current and potential talent acquisition capability can fulfill your business’ demands:

  • Are Key Performance Indicators–including time to fill, quality of hire, and cost—meeting expected targets?  If not, could it get there with the existing strategy, or is a pivot needed?
  • Recruiting expertise—Do existing recruiters know how to source for hard-to-find positions, how to convince highly qualified passive candidates to consider a move, and how to close the deal with individual candidates?
  • Does the existing recruitment model provide state-of-the-art talent pool management, analytics, employment branding, mobile and social media, and other technology?  Could it?  If not, outsourcing is an excellent way to access state-of-the-art at a reasonable cost quickly.

Experience tells me that choosing the right partner is crucial when moving to an outsourced talent acquisition solution. RPO models are structured in a variety of ways to add value.  Considerations include:

  • Cost model—How much of the fees are fixed versus volume-based?
  • Administrative reduction — What administration is included in the fees?  What administration can be done for an additional fee?  What administration will you be left with?
  • Talent pool construction and access—Will your potential partner build a proprietary talent pool for you over time that will reduce hiring cycle time and cost as it increases in size?  Will they work on building it even when there are not open reqs, and what will that cost?  Who will own the data if the partnership ends?
  • Candidate experience–What is the RPO provider’s track record with candidates?  Does the candidate experience during the recruiting process help get selected candidates to “yes”?
  • Recruitment marketing—What expertise does your potential partner have in recruitment marketing?  How are ongoing campaign cost paid?  Will they proactively recommend unique campaigns when needed, and at what cost?  How is success monitored and action taken to gain improvement on an ongoing basis?
  • Analytics—What reports are provided regularly?  What reviews exist, and how are data used to drive continuous improvement?  Are there examples of insights provided to previous clients that drive better results?

Of course, once you select a provider, there are numerous implementation risks to consider and manage. Before you make a decision as significant as transforming your TA strategy and working with a third party, you must plan how you will assess concerns and make internal stakeholders comfortable with such a decision. 

As a former client and now as an RPO insider, I have a unique and holistic perspective on Personify and what makes it work effectively. I can happily report that Personify is the best RPO firm with whom I have worked. Personify’s commitment to partnering to create value and ensure client success is second to none.  Making a move from internal talent acquisition teams to outsourcing to a third party is a significant decision.  An RPO solution is not the best in every situation. However, if you seek to reduce costs and increase efficiencies in talent acquisition, RPO merits strong consideration. RPO is an excellent way to mitigate the risks of variable hiring needs, especially in an uncertain talent environment fueled by COVID-19.

Please feel free to reach out to me directly about your situation. I am happy to help you think through your future talent acquisition strategy.


#recruiting #rpo #talentaquisitionstrategy

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