Getting the next level of benefits from RPO

Citation

Cappello, S. (2011), "Getting the next level of benefits from RPO", Strategic HR Review, Vol. 10 No. 1. https://doi.org/10.1108/shr.2011.37210aae.002

Getting the next level of benefits from RPO

Article Type: HR at work From: Strategic HR Review, Volume 10, Issue 1

Short case studies and research papers that demonstrate best practice in HR

A 2010 study recently carried out by Orion Partners has confirmed our suspicion – the recruitment process outsourcing (RPO) market is changing. The drivers for entering into the market, the way the relationship between the RPO provider and the customer is managed and the demands that the customer is putting on the provider have all moved on a long way. Gone are the days of customers being satisfied with simply achieving some cost reduction from their RPO deal.

In this research, RPO is defined as the outsourcing of all or part of the recruitment activity to an external provider. This could include anything from strategy and policy development to employer branding to redundancy management. We focused our research on experienced users and providers of RPO services. We examined contracts that cover end-to-end management of permanent and contingent staff acquisition and case organisations encompassed the UK public sector and major European multi-nationals in the private sector.

Overall, we found that the experienced RPO user is stepping it up a notch and demanding that their provider acts as an innovative and strategic partner. Providers who are just entering the market face real challenges in breaking in. This represents an important shift that reflects the resourcing function’s growing confidence in being a strategic business partner in its own right. These contracts are no longer procurement exercises, designed to manage down agency fees. They are now focused on bringing new capability into the HR function and are designed to support the execution of the people strategy.

More focus on strategic partnerships

So what exactly is meant by acquiring a “strategic” partner in the RPO context? Firstly, we found that RPO services need to be shaped from the start by the needs of the people strategy and organisational context. This could entail focusing on a particular workforce or on growth in a particular market. The trends are showing that organisations are moving away from just slavishly following the RPO providers’ remote or on-site model and are really pushing for a model that fits in with their organisational priorities. In addition, RPO services are being considered as part of the wider talent acquisition process, not just getting a “bum on a seat” because a manager needs “one of what they had before”.

Some examples of the questions that organisations are now asking include:

1. 1.

   Can my supplier support my employment brand and talent mapping/success prediction analysis?

2. 2.

   Can it offer me the technology we need to engage the workforce we are targeting, for example via social media?

3. 3.

   Can it support how HR business partners and the rest of HR make the right sourcing decisions?

Achieving this strategic partnership involves going back to basics. It needs focus on effective account management with a special emphasis on keeping the provider’s organisational knowledge of its client fresh and creating clear hand off-points. Beyond that we can divide our findings into the following four themes.

1. Squeezing more out of what you’ve got while creating a win-win situation

As organisations are battling their way out of a recession, it is no surprise that cost cutting and achieving greater value for money have been at the top of everyone’s agenda. This is especially true in the public sector, which is facing the prospect of extensive budget cuts. The risk here is that the desire to cut costs will overtake the need to maintain the quality of the RPO service. Mature users of RPO services are looking at options to strike this balance. An example of this is that they are changing their service level agreements to not only cover cost per hire but to also cover quality per hire. This can include anything from speed of promotion to longevity of career. Both the RPO provider and the customer need to make the effort for the relationship to work, both from a cost and quality perspective. As one research participant told us: “I now recognise that it is not just my provider that needs to be thinking about making this deal work. We’ve also got the obligation to think about how we as an organisation deal with the provider, how we bring them onsite and work with them as we would with our own employees. We are moving away from a master-slave relationship”.

2. Consolidation of contracts across Europe and beyond

Customers are pushing hard for their providers to offer them an increased global reach. They are looking for a comprehensive solution that covers their entire workforce rather than a segmented solution. If this is done successfully, organisations can reap the benefits of economies of scale, have consistent candidate experience and improved international talent management. However, our research participants were also quick to warn about the challenges of consolidating contracts. One RPO provider pointed out that: “Organisations come to us asking for an international contract when they themselves have not even got their house in order by starting to align the way recruitment is handled across the different geographies and cultures. A little work from them up front would save a lot of cost and mess in the long run”.

Mature providers have also found that very few RPO providers truly operate in a multi-country mindset and still silo their operations. They suggest that the time should be taken up front to choose the right provider, who has a proven track record in your countries of operation. Searching for a comprehensive solution goes beyond multi-country deals – organisations are also looking to achieve connectivity between their interim and permanent hires in a similar way. Organisations are looking to use the same RPO provider to manage both their interim and permanent recruitment in order to get the consistency and economies of scale they require.

3. Innovation leading to improved candidate experience

Standing out from the crowd has never been so important in the recruitment space. Organisations are looking to give their candidates something different and need creative RPO providers to support them. RPO providers are finding that meeting this demand is proving to be far from straightforward. During our research, one RPO provider said that: “One potential customer asked me if I can show them ten case studies of where the ‘innovation’ they were looking for has been done before – this obviously doesn’t exist! You can’t be risk averse and want complete innovation. How do we get them to take that step and leap of faith in order to do something different?”.

Perhaps the balance to strike is to try to innovate selectively in small chunks; for example, use innovation to promote organisational values or to raise the profile of the organisation as a top recruiter. Avoid falling into the trap of innovating for the sake of it.

4. Operational excellence

Even if RPO providers are currently providing their customers with a high level of operational excellence, the pressure is on to be able to constantly improve it. Internal resourcing teams have been investing in their services in the last few years. Their own standards of operational performance have been going up and achieving RPO standards of a few years ago. This means that providers need to really invest in their operations and achieve results that an in-house team could not. As one RPO customer said: “They need to show us that they can provide more than the in-house team can – I am constantly under fire from the rest of the organisation to demonstrate this and I need my provider’s support”.

This brings us back to having an RPO provider that works as a strategic partner – our research has shown us that the best RPO providers are the ones that can offer a service that is shaped by, and supports, the people strategy. Providers have been investing in capabilities that buyers can use to do this. The spotlight then falls back on the resourcing function and addressing the question “Can you see a clear link between your work and the people strategy?”

Stefania Cappello and Simon ConstanceBased at Orion Partners.

About the authors

Stefania Cappello is a Consultant at Orion Partners. She joined Orion Partners having completed her MSc in International Employment Relations and HR Management at the London School of Economics. Since joining Orion, she has worked on a number of HR transformation projects that have spanned both the public and private sector and a number of different geographies. Her professional interests include HR outsourcing, the role of HR in mergers and acquisitions and the development of HR business partners. Stefania Cappello can be contacted at: stefaniacappello@orion-partners.com

Simon Constance is a Partner at Orion Partners and works across all areas of the HR transformation process. Prior to joining Orion, he had senior level HR and operational management roles at the National Offender Management Service, Tate & Lyle Sugars and Transport for London, as well as significant consulting experience in Accenture’s Outsourcing and Human Performance divisions. He has a degree in Economic and Social History from Liverpool University and a Master’s in HR Management, and he is a Graduate Member of the CIPD. He has co-authored several books on HR transformation. Simon Constance can be contacted at: simonconstance@orion-partners.com