What is Recruitment Process Outsourcing? A definition of RPO
Since the early 2000s, when Recruitment Process Outsourcing (RPO) started developing as a business discipline, it never stopped evolving to meet the needs of the ever-changing recruitment market.
In its early days, only a few companies with large hiring volumes were courageous enough to try a new concept for their recruitment function. Most HR leaders were not comfortable with the idea of outsourcing their recruiting, but this has changed over the last years.
Over time RPO providers were evolving and developing deeper know-how, new tools, and better metrics to increase their delivery abilities. At the same time, the difference between RPO providers and staffing agencies became more distinct, with RPO providers becoming the advocates of their clients through finding talent in all possible channels. So they could increasingly reduce the cost of hire for their clients.
Now, 20 years later RPO has become a solid multi-billion service industry helping big and mid-size companies to leverage solutions, technology, and delivery to find and recruit the best talent around the globe. Time to look deeper behind the scenes of RPO.
According to the Recruitment Process Outsourcing Association (RPOA), Recruitment Process Outsourcing (RPO) is a form of Business Process Outsourcing (BPO) where an employer transfers all or part of its recruitment processes to an external service provider.
The RPO provider is responsible for closing the open positions of a company in a timely and quality-driven manner. Many providers combine offsite service centers with onsite recruitment experts and use talent analytics, recruitment technologies, and innovative sourcing to win the right talent at the right time.
The purpose of RPO is to increase scalability, quality, and access to talent while reducing cost. With the right scope and set-up, an experienced RPO provider can increase talent funnels by 50%, reduce time to hire by 40%, and deliver cost savings between 35 to 50%.
The difference between RPO providers and traditional staffing agencies or headhunters is that RPOs take over the full process responsibility for all positions within the defined scope, while agencies or headhunters work on call to supply candidates for single positions.
The RPO market has seen in the past years the so-called “pure-play” RPO providers growing significantly. “Pure-play” in this context means that the RPO provider is completely independent and not a business line of a bigger staffing or headhunting organization. Pure-play RPOs can take on full advocacy for their clients without facing any internal conflict of interest (i.e. needing to feed the agency business with positions).
How does RPO work?
An RPO provider delivers the necessary experts, technology, and methodology to fulfill a client’s recruitment needs. Professional RPO providers work nowadays with a two-fold delivery model.
On one side, they operate centralized service centers, where they aggregate knowledge and technology to find and attract candidates for their clients and - also - bundle the administrative support.
On the other side, they embed dedicated recruiters into a client’s organization. They work from the client’s location and align with the hiring managers and HR.
This two-fold approach results in significantly better results in the talent acquisition function:
The centralized candidates sourcing allows a powerful use of technology and knowledge to provide more and better candidates
The embedded recruiters guarantee the link into the client’s business, culture, and environment
The offsite administration brings cost advantages and higher service quality.
What kind of RPO models are there?
In an end-to-end RPO the provider has the responsibility for the whole recruitment process: from the opening of a position, over candidates sourcing, interviewing, offer management, and closing of a position. End-to-end RPO solutions can vary by their geographic scope - a single country, region, or the whole globe. Or the RPO focuses on a specific business department, a function (e.g. IT), or covers all hirings across the organization. With around 75% of all RPO solutions, end-to-end models are the most popular because they have the biggest impact on scalability, access to talent, and reducing cost.
The RPO provider focuses on the talent pipelining by delivering a shortlist of the best-fit candidates for each position. The talent selection, however, stays with the client’s HR department. This model is chosen by organizations that have a fully blended HR Business Partner setup where the HRBP is also in charge of recruitment. The Shortlisting Modell allows an organization to benefit from the full expertise in candidate sourcing and talent mapping by the RPO provider while keeping the competence in advising and consulting the business through their HRBPs.
This solution allows an organization to engage a team of talent acquisition professionals for a limited period of time to handle a specific need for recruitment. This could be for launching a project or product, meeting an unexpected hiring demand, or solving a recruitment back-log.
What are the benefits of RPO?
The RPO can provide the knowledge and technologies to source candidates by using crawling tools, artificial intelligence, and best practices in approaching and attracting the best candidates in every corner of the globe. Normally individual organizations do not have the volume and bandwidth to build a sourcing function on their own.
The RPO provider assures that the specific needs and culture of the client are understood by embedding recruiters into the client’s organization. While the sourcing consultants are dedicated to the talent pipelining and candidate screening tasks, the onsite recruiters focus on selecting, advising, and contracting the best candidates for the client’s positions. This results in better hires and lower attrition.
RPO works with a full set of Key Performance Indicators (KPIs) to manage and adjust recruitment performance on a daily, weekly, and monthly basis. By continually measuring the KPIs, such as the speed of the process, quality of the candidate pipeline, cost per hire, satisfaction of both client and candidates, the RPO provider maintains high performance in delivery. Clients can control this through Service Levels and will receive transparency through the relevant reporting schedule.
Well-rounded RPO pricing models should be based on volume and success. We at Serendi call this transactional pricing. There should be no fixed fees or monthly retainers – the RPO fees should follow only two factors: the number of positions managed (volume) and the channels used for closing a position (success). Instead of having high fixed costs for in-house teams in the P&L, clients will benefit from a flexible cost structure that follows their true recruitment needs.
To summarize, RPO is the right tool for companies that have:
a continuous hiring need
want to hire the best available talent (and not just fill a position)
expect high quality in the recruitment process
need to control costs.
The Future of RPO
RPO is a growing industry. Traditionally, big companies used RPO services only to reduce their recruitment costs. Today, as the shortage of talent is becoming imminent, companies understand that if they cannot keep up with the competitive pace of talent acquisition, they might stay without the talent they need for their economic future.
Everest Group’s annual RPO report states that RPO is the fastest-growing HRO market with a 20% growth rate (2018). BusinessWire’s Global RPO Market Research states that the global RPO market is estimated to grow by annually 14% on average, between 2017 to 2025.
The future world of RPO will be driven by three main developments:
Technology for identifying, attracting, and selecting the best talent
Providers bundling more and more expertise, as we can see in the current trend towards pure-play RPOs
Flexible pricing with the elimination of fixed costs