By Sarah Fister Gale
Jan. 29, 2015
For years, recruitment process outsourcing was viewed as an efficiency play with big companies tapping outside vendors to hire a lot of low-level people as quickly and cheaply as possible. But times, they are a-changin’. Today’s RPOs are being brought in specifically to unearth the hard-to-find talent that companies need to fill highly specialized and critically important roles.
‘Companies today don’t want to work with a different RPO in every country. They want vendors who can offer a common global process and governance structure.’
—Stacey Cadigan, principal consultant, Information Services Group
“RPOs used to be all about the time and cost of filling positions, but they are moving up the value chain,” said Stacey Cadigan, principal consultant for Information Services Group, a market intelligence firm based in Stamford, Connecticut. “Now it is all about how to attract the right candidates to the organization.”
“Efficiency will always be important,” added Greg Karr, executive vice president of Seven Step RPO in Boston. “But companies today care more about the quality gains they can achieve from a business perspective.”
This shift is coming mostly as the result of internal business pressures. On the heels of the economic crisis, global hiring is rebounding and shortages of key talent are forcing companies to seek help filling strategic roles as they ramp up for a new growth phase. According to the “Global Trends in RPO & Talent Recruitment 2014” report from KellyOCG, nearly 3 out of 4 companies — 73 percent — plan to increase full-time hires this year, but 61 percent say they face difficulties recruiting staff. Ironically, one of the positions they struggle most to fill is recruiter. Shortages of skilled recruiting staff was cited as the top impediment to hiring in the report.
At the same time many industries, including oil and gas extraction and construction, are bracing for the mass exodus of aging baby boomers. Those workers will inevitably need to leave the highly technical senior-level positions they may have held for decades, which will create a substantial talent gap.
This is driving large and midmarket companies to use RPOs more strategically — streamlining their own recruiting process while reducing the burden on HR — and to use vendors’ expertise to build their social media brand and presence to connect with a broader candidate pool.
AGCO’s New Crop of Talent
That’s one of the reasons Eric Haggard, director of human resources and talent management for AGCO Corp., started working with Seven Step RPO in 2013. “There was a lot of profit to be had in our industry at the time, and we needed to get people on board quickly to take advantage of it,” he said.
AGCO is an international global agricultural equipment manufacturer that does 20 percent of its business in the United States. But the company was having trouble recruiting against better-known U.S. brands, like John Deere, for a small pool of highly skilled engineers and other experts. They also found it difficult to persuade those candidates to relocate to the company’s often remote rural offices.
When Haggard joined AGCO in 2012, the company already had an RPO provider, but the vendor wasn’t meeting goals, and there was a growing backlog of positions tofill.
“They didn’t have a big enough, dedicated team to meet our needs,” he said. He later learned that the vendor had pushed for a larger team, but the AGCO manager who hired them pushed back to lower costs, and they relented. It was their downfall. “They shouldn’t have agreed to it,” Haggard said.
Haggard’s experience should be a lesson about the importance of collaboration and partnership. “Your RPO has to be willing to be honest and transparent with you, even if you may not like what they are telling you,” he said. “Sometimes it’s necessary for them to save you from yourself.”
AGCO now works with Seven Step, which is helping the company make better use of its applicant tracking system, rewrite job descriptions to appeal to a broader candidate pool and hone their offering and sales pitches to make relocation more attractive.
One of the biggest advantages Haggard gained is his ability to be flexible around talent acquisition. AGCO’s business is seasonal, and based on crop prices, the company often has to ramp up hiring for a while, and then tamp it back down. “Outsourcing recruiting has given us the best of both worlds,” he said. “I can broaden my capacity to recruit without having to build that expertise in-house.”
RPOs Go Global
The growing demand for hard-to-find skill sets, coupled with the looming talent crisis, has been a boon for RPO industry leaders who were able to transition themselves from being transactional, low-cost providers to strategic HR partners — though it left other RPO providers in the dust. The shift in what customers want from their RPO providers has caused a dramatic change in the industry makeup over the past five years, with former leaders like Adecco and Aon RPO dropping off industry top 10 lists, while new players like Seven Step RPO and Cielo (formerly Pinstripe & Ochre House) have risen to the top.
There have also been several mergers and acquisitions in the past few years, many of which include international pairing in an effort for RPOs to create an instant global footprint. U.S. firm Pinstripe Inc., for example, merged with British company Ochre House in July 2013 to form Cielo, and the U.S.-based Wilson Human Capital Group’s merged with CPH in the U.K. to expand internationally.
Going global is a major trend in the industry as vendors try to align their service offering with customers’ expansion goals. “Companies today don’t want to work with a different RPO in every country,” Information Services Group’s Cadigan said. “They want vendors who can offer a common global process and governance structure.”
Many of the top RPO providers — such as Alexander Mann Solutions, Cielo and Randstad Sourceright — now have a presence or partnerships in regions around the world, giving clients the option to use one vendor for all of their recruiting needs; others are partnering with key clients to open offices in support of their specific expansion goals.
Analytics, the Next Big Thing
Analytics offerings are also tying into RPOs’ desire to position themselves as strategic partners. Like many HR industry segments, they are trying to rapidly ramp up their analytics capabilities to provide customers with demonstrable proof of the value of their service, and to help them perform more strategic workforce planning for the future. “Analytics is an incredible opportunity to change the landscape of what RPO companies are doing today,” Seven Steps’ Karr said.
It is enabling some vendors to tie their recruiting efforts to things like time to productivity, improved retention and the effect on sales, all of which have business implications. “We are definitely starting to see organizations interested in tying talent acquisition to these kinds of measures,” Cadigan said. But as with most analytics trends, it’s still early days. She estimates that only about a third of RPO vendors today have advanced analytic measures tied to business results. The middle third are trying to implement these tools, but they don’t have the capabilities to use them effectively, she said, and the lowest third haven’t yet begun.
Cadigan predicts the vendors that master analytics capabilities early on will have a competitive advantage going forward. “It proves they are willing to be creative and to take a bigger stake in the outcomes of their performance.”
Contingent Labor Is the Future
The one trend that RPO providers have been slow to embrace is the rising tide of contingent labor. Ardent Partners’ 2014 “State of Contingent Workforce Management” report shows that, by 2017, 45 percent of the total workforce will be made up of contingent or contract workers, which is about 13 percentage points higher than today.
This trend presents a clear opportunity for RPOs to expand their service offering, said Chris Dwyer, vice president of operations for Ardent Partners, who is the author of the report. He noted that 80 percent of companies surveyed said that their top talent management priority is optimizing workforce management. A big part of that involves integrating contingent labor data with traditional human capital data to gain a concise view of workforce trends, he said. “If half of all talent is temporary, HR professionals need to figure out how to bridge the gaps between traditional and nontraditional data.”
Today, less than 30 percent of companies link these disparate workforce data sets, but an additional 45 percent of enterprises expect to link this data within the next two years, Dwyer said. While few RPOs offer contingent labor recruiting services today, he anticipates that more will move into the space as companies attempt to gain greater clarity around all of their workforce recruiting and management efforts. “If an RPO has the capacity to integrate a vendor management system with the talent management system, it could give them a real competitive advantage,” he said.
Cadigan also sees contingent labor as a future area for growth, but companies shouldn’t expect their RPO providers to have solutions today. “There are only a few competitors with capabilities on both sides that have taken steps to integrate these systems,” she said. “But the interest is there.” As companies look for ways to manage talent holistically, leading RPOs should be looking for ways to deliver a more comprehensive approach, she added.
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