How Do We Assess the Advantages and Drawbacks of Outsourcing HR?

Dear Weighing Pros and Cons:  

Your question is a very strategic one that warrants careful consideration. There are no standard advantages or disadvantages for recruitment process outsourcing, or RPO. This is because most situations and needs are somewhat unique. Here are three considerations to help determine whether RPO is right for your organization:

1. Clearly understand the business case/how you will measure RPO effectiveness.

This sounds obvious but there are important nuances here that need to be considered. Many companies view RPO as a means to simply cut costs and lower their cost per hire. The cost-per-hire metric most commonly cited by vendors needs to be carefully examined to ensure you are comparing apples to apples when deciding which vendor to use. With respect to assessing a vendor’s cost-per-hire performance, make sure you consider the following:

• Which components of the recruitment process will the vendor manage versus the internal HR team? If you outsource the entire process this metric becomes easier to compare and manage.
• Even a fully outsourced staffing process needs to be managed well internally, so don’t assume all internal costs will be eliminated.

Just as you wouldn’t drive a car only by looking at its speedometer, neither should you make vendor selections based solely on the cost-per-hire metric. Metrics such as new-hire quality, retention, and time to fill positions also are important to consider. Also, vendors typically have different technologies and tools to automate and track the operational and financial impact of the process and relationship.

Make sure to carefully vet each provider’s capabilities in this area and whether their technologies integrate seamlessly with tools you use. If your organization is advanced at measuring recruitment effectiveness, then you will be well-positioned to compare your process with that of vendors. If measurement is somewhat haphazard in your organization, select a vendor that is strong in this area and can add value by shoring up your metrics.

2. Select a real partner.

An effective relationship should start at the contracting phase. Quality vendors will partner with you to define success measures jointly and will demonstrate flexibility to meet your needs. Clearly define roles, accountabilities, expectations, and the governance process for managing the relationship. Avoid RPO vendors that are not willing to partner with you, seem inflexible, or are a poor cultural match with your corporate values.

3. Avoid autopilot.

Like any relationship, ongoing assessment, adjustment, and recalibration are critical to longevity and success. Don’t expect perfection out of the starting blocks, but plan and schedule reviews and performance discussions with the vendor. Remember, outsourcing recruitment doesn’t mean you are outsourcing HR’s responsibility for ensuring recruitment effectiveness.

In summary, get clear about the business case and how you will measure the impact, select the right partner, and manage the relationship proactively to maximize the advantages and avoid the common pitfalls of RPO.

SOURCE: Garrett J. Sheridan, partner, Axiom Consulting Partners, Chicago, Sept. 26, 2014.