Why RPO is the new buzzword
By Aaron Green, 7/16/2007
You've probably heard of "RPO" and wondered what, exactly, is it?
RPO stands for "Recruitment Process Outsourcing," meaning that an employer transfers all or part of its recruitment activities to an external vendor. Those recruiting activities can include sourcing, screening, testing, interviewing, background checks, coordinating offer letters, and orientation. The RPO provider is an outsourced recruiting department equipped with a package of skills, tools, technologies and activities.
Why companies need RPO
Here are two examples of companies that would benefit from RPO. One company hires 100 new customer service representatives per quarter and puts them through training classes. Another company has decentralized hiring with each division following different hiring processes. Both companies would benefit from the resources of an RPO vendor. More on this below.
What RPO offers
- Cost savings - RPO is cost-efficient, saving up to 50% when compared with contingency search fees. In addition, RPO vendors are held accountable for filling positions whereas contingency searches are not guaranteed. Cost savings over internal recruiting options can result if it is a situation where the RPO vendor has economies of scale, the right database of candidates and access to more candidates, and the right processes.
- Extra resources - Some corporate human resources departments don't have the internal resources to devote to recruiting large numbers of employees at one time. When hiring needs outpace recruiting capacity, RPO can make sense for a company.
- Focus - Many companies opt to outsource the recruiting of non-critical staff while continuing to recruit for managerial and higher level staff members. This allows the company's managers and human resources staff to focus their efforts on the company's core business while also ensuring a supply of high-quality staff members for all positions.
- Access to industry best practices - RPO firms are in the business of recruiting. Accordingly, they have certain tools and processes that many companies may not have. Until they engage an RPO firm, many organizations don't realize how high their hiring costs are and don't measure metrics like time-to-fill, cost-per-hire, quality of hire, etc. These metrics tend to get scrutinized closely with RPO firms and are typically part of a contract that you'd sign with an RPO vendor.
- Diverse candidates - An ancillary benefit of RPO is that it aids in accomplishing diversity objectives. An RPO vendor can be held accountable for hiring a diverse group of candidates across multiple positions. This accountability may be more difficult for companies to achieve on their own since many companies end their search after meeting the first qualified candidate for a particular job opening.
Two companies that used RPO
Here is how the two companies above benefited from RPO:
The 100-hires company - While the cycle of hiring 100 employees per quarter works well for the company operationally, it creates havoc for the human resources department. While they are focused on filling the training classes, all their other work is neglected, which ends up costing the company lost opportunities and hefty search fees. RPO was a good solution. Since the training classes were staffed with candidates with similar profiles, these positions were easy and inexpensive to outsource. In the end the company saved money while improving the quality of hires.
The decentralized and disorganized company - Each division at this company was following different hiring processes, many without much success. The company did not have any information on hiring statistics or costs and didn't make any progress toward diversity targets. Again, RPO was a good solution. Since the RPO vendor had overall accountability for this objective, appropriate processes were recommended and implemented by the RPO vendor, costs were measured and contained, and diversity targets were achieved company-wide.
When RPO is not effective
- Cost savings are not a given. You need to analyze your situation carefully. RPO can work well when you are looking to hire for large numbers of like positions and where your company's culture and process is conducive to outsourcing. But you need to look at your actual costs and situation to make the decision.
- Like lots of good ideas, poor implementation eliminates many of the benefits of RPO. Make sure your organization is truly ready for this change before adopting RPO.
- If you derive benefits from using multiple recruiting firms, RPO might discourage or eliminate competition and you will lose those benefits.
- If your company has trouble hiring people because it has a reputation as a terrible place to work, don't expect RPO to dramatically change your hiring patterns. You need to fix the root problems. On the other hand, if your company is viewed as the employer of choice and you have no trouble attracting new employees, then you might get only negligible benefits from RPO.
Used in the right situation, RPO can be an efficient and cost-effective tool for growing your business.