The Business Case for RPO

This post we have a go at looking at reasons to outsource recruitment. Called RPO (Recruitment Process Outsourcing) its close to being the norm in some markets, whereas its seen little take-up in others. This is our perspective on the business case drivers behind RPO.
Ok we had better off start by saying we do have a very vested interest in this. The vast majority of systems we deliver are supplied through RPO partners to employers. We also however have direct clients, so we get to see a bit of both worlds. This post is about comparing recruiting through an RPO, versus doing it internally with your own in-house recruiters. So the audience for this post is really for employers not our RPO partners.

We are going to keep it fairly generic and keep to what we think is reasonably typical for employers (if there is such a thing). There are of course lots of exceptions, some RPO providers excel in some markets and aspects of provision and others do so in others. Likewise the quality of in-house recruiters also varies enormously; some are really on the ball, well resourced and well supported. There are also some who just seem to muddle through (not our clients of course...). We are certainly not trying to offend anyone and hope you find this discussion more food for thought than presenting things in a black or white manner.

So to RPO or not to RPO? That is the question...


We first got involved in selling outsourced services in the 1990’s and we have noticed one thing in particular. It's certainly not what the ‘books’ say and it may seem very contrary. However we think it is very important to this discussion, and its this:

With RPO - it's not all about the hard business case...


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Yes, you do need a hard quantified business case to sell outsourcing, to get it approved, as well as measure against once you have it up and running. We are not suggesting you don’t. However in our experience, you can skew a business case all over the place - especially if you are the client. What you include, what you exclude, your assumptions, ROI hurdles, hard versus soft revenue and costs - they all make a big difference when you are working the spreadsheet. In particular we have found and observed that at the most senior business levels within a client, what you might call the ‘soft business case’ comes more into play. What we mean here is some of the more subtle; assumptions, preconceptions, views etc that come to the fore. We have found them at this senior level very powerful motivational triggers.

It's not that they replace the business case, its more that they shape it. This is particularly true for a service like RPO where we are dealing with people and lots of intangibles. As an example, we intuitively know that if we recruit higher calibre people, we are likely to have better outcomes and performance from our staff and hence in the business a whole. However that's a difficult thing to prove. This where the assumptions, preconceptions and views of management come in. A “view” that the perhaps whole recruitment process is (a) taking too long, or (b) that for some reason we are not getting the candidate quality we should, or (c) HR is not doing enough of the work... Yes, sometimes this “view” and the blame attached is very unfair. However we certainly have seen it form the paradigm by which the business case will be viewed - fair or not.

Here is another way of putting it. Employers with good quality, motivated internal recruiters and who are well resourced and who keep up with trends and technology - don’t tend to have senior management looking to outsource recruitment. There we have said it. It's the elephant in the room. A really well-run and resourced in-house recruiting function is almost always well perceived by senior management and considered well worth keeping.

However - and here is the problem - it is very difficult for an in-house team to keep this edge. Recruitment is an evolving function/business and to be effective you need to adapt and take on new; tools, techniques and practises to stay sharp. This is not easy, and we would contend that more in-house teams than not, have a tendency to stagnate and stick with the current way of doing things unless they get a periodic shot in the arm. In this, the RPO provider has the edge. By virtue of their greater scale of operation and focus on just this one area, they are much more likely to have established models and practices which deliver the goods. They are also well motivated to keep trying to improve on them. It's self interest - the RPO will need a business case to get an approval from the client. To do this it needs to evidence, and to prove, it can deliver the goods. It also needs to be able to show a history of performance. An in-house team is very unlikely to have this comparable level of scrutiny, or displaine that has shaped - what should be - finely honed business practices and models.

Q. So should you RPO all your recruitment? A. Not necessarily


It's not quite that simple. There are a few other aspects that come into play. It's not all plain sailing and that RPO will always be the answer.

Size
If you are a big employer you may find that you have the scale in ‘hard’ business-case terms to rival a RPO in strict cost economics of operation. At the end of the day there are 3 things that underpin a recruiting service: People, Process and Technology. If you have: good HR and recruiting leadership; you have invested well in good systems; keep evolving your techniques and practices and you have size. You can certainly run an operation to compete with an RPO - on cost. However at the end of the day it is very rarely just about cost alone.

Scalability
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This is a key advantage most RPO operations can draw on; the ability to scale recruitment up and/or down by flexing resources i.e. recruiters. Effective in-house recruitment teams will really struggle to be led or managed well when they themselves are subject to redundancies when flexing down, or suddenly absorbing new recruiters when flexing up. This is why we see some in-house teams supplement their own recruitment activities with an RPO provider who handles those roles that form the peaks and troughs. An example of the blended model - outlined below.

Nature of roles, culture
Most people within the RPO industry we know would subscribe to this one. Namely, that RPO’s tend to perform better with high volume, sometimes called high churn roles where they can run their proven techniques, processes and resource and provide the most value for the service. Whereas, internal recruiting teams tend to operate better with the more senior level / complex roles. Roles where mapping to internal culture is more vital to shapingAgencies are by no means the same as RPO. But is an example of outsourcing just a small part of the recruitment activity and tasks.

Blended Models


We are going to look at mixed or “blended” models to finish this post off. You don’t have to think of outsourcing recruitment as either an all-in, or all-out. Also as an in-house recruiting team you don’t have to see the RPO as being the thin end of the wedge, or the enemy. Some of the most effective recruitment operations we have seen are where an in-house HR/recruitment function is supported by outsourced RPO provision. This is the ‘blended’ approach and by this, we don’t mean it's a compromise or third way or in any way, an inferior solution etc. It where a smart organisation uses the RPO for where its best. For managing the volume and churn roles . Perhaps providing supporting services and technology for an in-house team who handle the more delicate/complex roles. HR and in-house recruitment functions don’t need to fear the RPO. It's just horses for courses and we think the two working together will be an increasing feature of well run recruitment operations.