Global RPO Report 2007

Recruitment Process Outsourcing (RPO) is one of the fastest growing areas of business outsourcing in which an employer transfers all or part of the staffing process to an external service provider.

There are many forms of outsourcing ranging from the simple use of contracted labour, right through to a complete outsourcing alliance that can encompass most of an     organization’s Human Resource functions, commonly known as HR Outsourcing (HRO).

The emerging model of RPO is one that typically involves the outsourcing of the entire recruiting function, whereby the service provider will serve as the client’s virtual recruiting department.

This end-to-end approach to RPO has the advantage of allowing both parties to develop an approach that fits the client organization’s strategic direction. At its best, it can assess current recruitment practices and engineer a solution that will manage the entire process including sourcing, screening, selecting and placing candidates.

There are many considerations that come to play when an organization is making a decision about outsourcing. Is it core business? Does it have the necessary recruitment expertise? Are there third parties that can do it better? If it’s outsourced, what will be the cost? Is there a risk of losing control over a key part of the business? Changes in the external environment can also have an impact on the decision to outsource what was previously handled within the organization. In regards to labour markets, the global skills shortage has had a powerful impact on the way that recruitment is executed as part of a broader business strategy.

In times of abundant skilled labour, the recruiting function is generally less complex, more routine and poses less of a risk in terms of poor hiring decisions impacting adversely. It’s a different story when skilled labour is in short supply. Furthermore, the major structural changes afoot in the global workplace suggest that these skills shortages will remain for the medium term at least.

The impact of an ageing workforce, buoyant economic conditions, and the emergence of new industrial powers such as China and India have fuelled global demand for skilled technicians and professionals across a wide range of industries. The emergence of these new industrial blocs has seen a substantial volume of manufacturing shift away from the higher-cost developed economies of the West. This development was supposed to provide an abundant new source of labour that would ease some of the pressure for skilled workers across the globe. But that has not eventuated.

Multinational firms operating in China and India are facing a shortage of highly skilled technicians and professionals. Wages are recording double digit growth. Meanwhile in Europe, the US and Asian economies, skills shortages are chronic.

The challenge of dealing with this candidate shortage is one of the foremost issues facing organizations across all industry sectors, both large and small. It raises the question of how the recruitment process can be best adapted to cope with this major structural phenomenon.

Because recruitment is largely a process driven function, it is often well suited to being outsourced from day-to-day operational management. Non-core, transaction duties such as payroll and benefits administration are most frequently outsourced but increasingly,

the entire recruiting function is handed to outside professionals. This allows the internal HR team to focus on core business and organizational strategy, rather than the largely tactical work of the hiring process.

Kelly Services conducted a survey in June 2007 to explore attitudes and practices relating to Recruitment Process Outsourcing (RPO). There were a total of 94 respondents, mainly senior HR managers in large national or multinational companies located in 25 countries with responsibilities covering 89 countries.

This report examines the global uptake of RPO across major markets. It looks at the factors that influence the decision to outsource and the types of industries and sectors that are most active. It examines the recruitment environment to gauge hiring intentions, as well as the challenges in attracting candidates. It also looks at efforts to calculate the actual cost of recruitment.

As HR departments come under increased scrutiny to meet organizational goals and metrics, the cost of the recruitment process itself has become a key determinant of success. The survey found a median cost-per-hire of 3,000 Euros with some HR managers reporting an average cost-per hire of more than 10,000 Euros.

More than half of the respondents currently outsource some or all of the HR function. The vast majority of respondents said that they would definitely consider outsourcing their recruitment in the future. The three priorities for an outsourced provider would be to reduce the time-to hire, lower the cost of recruitment, and rationalize multiple sources of recruitment.

To order a complimentary copy of the Global RPO report or to find out more about Kelly’s RPO solutions, please contact neeru_jetley@kellyservices.co.in