Recruitment Outsourcing Serves Up Options

Companies can get a perfect fit and save money by outsourcing portions of their recruiting function.

Payroll outsourcing is often black or white. A company usually either handles payroll in-house or outsources it entirely. Recruit-ment outsourcing is a function of a different color.

With employment process outsourcing (EPO), sometimes called recruitment process outsourcing (RPO), companies have the flexibility to outsource a little—or a lot. Kellogg Co., for example, has chosen Recruitment Enhancement Services, a division of Bernard Hodes Group, to handle all of its recruiting.

Although “still in its infancy,” EPO is the fourth-largest component of HR being outsourced and the fastest growing, according to Allan Schweyer, executive director of the Human Capital Institute (HCI). Schweyer’s research has led HCI to establish a “learning track” on the topic.

InSearch Worldwide Corp. surveyed 300 HR executives about professional-level EPO and found that more than 30 percent are doing at least some recruitment outsourcing.

“With recruitment most people outsource a specific business unit or specific function. People are testing it and in general finding that it works for them,” says Steven Landberg, InSearch’s senior vice president and managing director. It is working so well, he notes, that 60 percent of the surveyed users plan to increase their recruitment outsourcing.

“Recruiting has more personal touches; it’s more cultural- and relationship-oriented. There are more options than in some transactional-oriented disciplines,” says Jane Paradiso, national workforce planning director for Watson Wyatt Worldwide. Watson Wyatt does not offer EPO but counsels clients about outsourcing choices.

“It’s not a black and white thing,” Paradiso says.

It has taken a little time to learn that. Five years ago, “when you talked about outsourcing, the recruitment piece was always left off,” says Bruce Ferguson, who is responsible for talent acquisition solutions for Hewitt Associates. “People would think, ‘That’s too critical to our needs.’ ”

In the past two years, “that has switched and in almost every deal recruitment outsourcing has been one of the primary things clients want to talk about. They realize there is a way to operationalize recruitment that helps them meet their goals of getting the right people for less,” says Ferguson, who was with Exult before it merged with Hewitt last October.

Those are key reasons for the increased interest in EPO: the need to keep costs down and the need to keep the talent pipeline full.

“For the past few years, the focus was on cost of hire. But demand is rising, and fewer good people are looking,” Landberg says. He believes that while many recruitment outsourcers sell their services primarily on their ability to cut costs, “people are actually using outsourcing to get better results in terms of talent.”

Still, those cost savings are no small matter. As companies’ recruiting needs ebb and flow, sometimes “they have staff with nothing to do. We flatten out those peaks and valleys,” Ferguson says. “We can measure [cycle time, quality and customer satisfaction], and we can do it for less money. We can take the strength of our network and leverage it so they can significantly reduce the cost of recruitment. … We typically will give them a guaranteed cost savings.”

Kellogg Co. has seen a 60 percent drop in its cost-per-hire rate as a result of outsourcing, according to Cydney Kilduff, director of recruiting and staffing. And the time it takes to fill a position has been cut almost in half.

Kellogg, in fact, now has only two corporate employees with recruiting responsibilities. Those responsibilities are:

  • Setting strategic priorities and communicating them to the vendor.
  • Developing, managing and monitoring the vendor relationship.
  • Serving as internal champion for the outsourcing model.

Yet another reason for the upswing in interest is technology. “The outsourcer can invest in the technology, keep it current and spread the cost across multiple clients,” says Carl Greenberg, senior vice president of Aon Consulting, which has an EPO component.

Elliot Clark, chief operating officer of Kenexa, agrees that is a big part of the attraction. “We can bring the technology in with us. In some cases customers have legacy systems that we work with, but more and more they’re looking for turnkey solutions.”

The Role of Technology

Technology has changed the recruiter’s job. “Recruiters used to go into this because they wanted to talk to people,” Ferguson says. “Now there’s a demand for faster turnaround, and you can’t do it without technology. You have to be great at networking with technology and the old-fashioned person-to-person way. The good news is, I don’t think needs are going to change.” In-house or outsourced, companies need recruiters who “can find the right people and help guarantee they’ll stay. They have to be able to achieve business objectives.”

In spite of—or perhaps due to—the emergence of technology in recruitment efforts, Greenberg, Clark and Ferguson all see a bright career path for in-house recruiters, who will be able to devote more time to workforce strategy after turning the transactional work over to outsourcers.

RPO “is not abdicating the selection process of who ends up on your doorstep. It’s still the client’s responsibility to set strategy about what kind of people, what kinds of competencies and, ultimately, who is given an offer. It’s not for the outsourcer to decide who will get an offer,” Ferguson says.

Companies have finally come to understand that outsourcing is not about giving up control but about freeing up more time to focus on strategy, Clark says. “They agree that talent is very important; they don’t agree that they should do the tactical sourcing, processing and onboarding. They come to firms like Kenexa [that have] a track record to do that work.”

Aon Consulting does “the sourcing of candidates through their onboarding. We do all of it or any part of it,” Greenberg says. A particular strength, he adds, is that Aon has industrial psychologists who can assess candidates.

“We have a package of different types of tests and different methods of delivery,” he says, including “a lot of job simulation.”

Ferguson sees it as the best of times for all recruiters, not just those in-house concentrating on strategy. Working in the recruiting outsourcing business “makes you the business, not internal overhead. When you work for an outsourcing company, you are a revenue-producing person.” Another upside is that “there’s a variety of clients to work for or with and different management opportunities.”

Better for Large or Small Companies?

EPO experts disagree over whether outsourcing works best for large or small companies.

Companies with more than 1,000 employees are more likely to use EPO, according to Schweyer. Ferguson agrees that it “is largely focused on larger companies, as is BPO [business process outsourcing] in general. As outsourcers become more sophisticated and offerings become more ingrained and accepted, it will move downstream.”

But Watson Wyatt’s Paradiso argues that larger companies are often less likely to outsource because “they want their own direct input” into branding the company and because they need in-house recruiters to handle the higher volume.

Smaller companies, on the other hand, “don’t have the infrastructure, so they want to deal with the recruiter when they need someone.”

There is also a variety of opinions about the types of positions best handled by EPO. Paradiso sees it as easiest to outsource high-volume positions that require specific testing. “As you move up the line, it gets harder to assess cultural fit.”

Sales has become a popular target. Kenexa, for example, recruits for all primary sales positions for pharmaceutical giant Schering-Plough. “They see their core competency as making and selling and marketing high-quality drugs. We can provide them with turnkey operations,” Clark says.

Aon also handles recruiting for pharmaceutical companies, as well as for manufacturing, seasonal retail and call centers. The common denominator, according to Greenberg, is that these companies generally have a small recruiting department that can handle normal attrition but can’t manage the hiring blitzes needed when a pharmaceutical company releases a new drug or a manufacturing company opens a new plant or shift.

EPO vendors naturally believe they offer an advantage over HR BPO generalists.

“It’s better to have a strategic partner than people doing a little of this, a little of that,” says Landberg, who believes it is important to know the recruitment outsourcer’s background—whether it was originally a temporary, technology or retained search firm.

To get retained level quality across the recruiting spectrum, “you need a recruitment partner. You get greater value because you have someone who is more efficient, who becomes much more of a partner vs. a vendor. It’s all about improving the effectiveness while not driving up cost. Everybody’s doing it in their own way,” he says.

Many generalist HR outsourcing firms “have already stubbed their toe because they don’t have the infrastructure sourcing engine” to handle recruitment outsourcing, according to Clark. “Some who say they do RPO are often just sourcing machines; they’re just spitting resumes. There’s more to staffing than just recruitment.

“Recruiting is a different animal,” he says. “It’s less like an HR generalist, more like process management and sales. Staffing people have to have ability to sell the concept” of the position and the company to high-potential hires.

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HR, job, Recruitment