Embracing the World of Recruitment Process Outsourcing (RPO)

Interestingly, as I was reading the media - I noticed that several US and UK firms are expanding their recruitment and staffing footprint in India. The market for RPO in India is expected to grow with leaps and bounds.  Here is a recent article in Economic Times that shares the story 

Embracing the World of Recruitment Process Outsourcing (RPO)

Corporate HR departments are increasingly using Recruitment Process Outsourcing (RPO) services to transfer all or part of their recruitment activities to an external service provider. RPOs are focused on recruiting activities with-in Human Resources Outsourcing (HRO) space which covers broad areas like, benefits management, compensation, payroll, training, contingent workforce, performance management etc..

RPO providers bring forward deep recruiting capabilities that include well-qualified recruiters, processes, sourcing networks, technology and social media. They operate as a virtual extension to the clients recruitment function. Specialized RPO firms will not only assume ownership of design and management of recruitment process but also take accountability for outcomes under pre-defined SLAs and drive automation and year on year productivity improvements.

Drivers and Benefits of RPO

Clients typically launch a RPO initiative to improve service, address fluctuating demand, improve time to hire, increase quality of candidate pool, provide verifiable metrics, reduce cost and improve governmental compliance. The benefits for clients can be enormous:

·         Low Cost: RPOs are generally run at lower cost as they are able to optimize costs associated with large staff of recruiters, resume databases, tools and social media networks.

·         Improved Flexibility: As with any other form of outsourcing, RPO solutions change fixed investment costs into variable costs that flex with fluctuating demand.

·         Better Utilization of Capacity: Companies may pay by transaction than by resource; ensuring better utilization of capacity and avoiding expensive layoffs when activity is low.

·        Higher Quality: RPO should also improve quality because RPO provider is paid for delivering specific performance targets and outcomes. As a result the RPO provider will concentrate their resources on core tasks that excluding any non-core activity.

The RPO Journey

For buyers interested in RPO solutions it is important to define your strategy upfront and answer some critical questions:

·         How will an RPO solution benefit your organization?

·         What are the areas that need improvement in the current recruitment processes?

·         Do we outsource specific tasks or end to end recruiting processes?

·         How will we redeploy the freed up capacity if we outsource?

·         How will be measure success if we embark on the RPO journey?

An assessment of recruiting processes will be essential to clearly understand the drivers that are specific to your organization. The recommendations from such assessments will provide insights into maturity of your process, people and technology and identify areas your firm should seek expertise and is willing to outsource. As an outcome of this phase, all key stakeholders need to be brought into the arrangement and must work together to accomplish the organization’s recruitment goals.

Once scope is clearly understood and agreed, preparing the design of your unique RPO solution in consultation with potential vendors, employees and external consultants will be the next logical step. A governance group can be formed consisting of HR, Legal, Sourcing, Procurement and other stakeholder representations to drive this forward. This will also clearly establish executive sponsorship for the initiative. Vendor selection can also be initiated at this stage. Traditionally organizations used to do RFI / RFP (Request for Information / Proposal) but we recommend a more collaborative approach with few firms that allows you to build the future state and service improvement plans in closely working with them. This approach will balance mutual expectations and provide critical insights to determine the best RPO partner for your firm.

Transition of core recruiting processes in alignment with the RPO strategy lays out the foundation of the future success of the RPO. This phase must be therefore managed well. Clients will need to work closely with the selected partner and transfer knowledge and capabilities.

The RPO initiative moves into steady state, once the provider has completed knowledge transfer (KT) and gained control of the process to the extent that it can run that without any client intervention. The steady state provides operational control to the provider to start looking into maturing the RPO so that it can be run more efficiently.

Once the engagement is in steady state, focus must shift towards enhancing value of the RPO. This calls for dedicated focus on optimizing the RPO processes and practices. Most providers at this stage will measure volume of demand, fluctuations, optimize capacity, implement SLA framework and continuous improvement mechanisms. They might also clearly identify client dependencies that need to be addressed so that optimization can be successful. Keeping transparency of operations at each stage of the recruiting cycle will be critical to showcase and measure value to the client. Providers should therefore publish reporting and metrics that provides insights into the health of recruiting process. Clients must provide strong governance over RPO activities, providing initial direction and continued monitoring to assure good results.

Your RPO initiative will be unique to your organization. Successful RPO strategy will require clients to share their recruiting strategy and business knowledge with the RPO provider. This will not only help them represent your brand successfully but also meet and exceed your expectations with the RPO initiative.

Copyright Material - DO NOT publish without permission. Copyright: Sanjay Chadha

So Much of Noise around Domestic Outsourcing - Is the Trend Real?

Globalisation requires companies to compete globally, and offer better products and services that are appealing to customers. In several industries, global outsourcing today enables the business value chain, providing a mechanism for corporations to achieve their globalisation objectives while keeping their costs manageable.

Y2K served as the growth engine for the offshore outsourcing industry. Demand was largely driven by a need to access flexible capacity at a lower cost. The trend has been significant over the last decade as offshore providers introduced new services, improved quality, provisioned flexible capacity and continued to offer labour arbitrage benefits.

Today, several factors are indicating a growing interest in domestic outsourcing. Domestic outsourcing means having work done in the same country by a different company. Within the USA, for example, development and operational centres in states like Montana, Alabama, Detroit, Wisconsin, Louisiana, and Maine are emerging and seeing increasing investments. Offshore providers are also recognising domestic outsourcing as an opportunity and are investing in centres staffed by US citizens. The “offshore” pitch is changing to the “right shore” pitch as clients look to balance cost with better quality of delivery.

Several factors are contributing towards this trend.

Industry and economic factors 

• Rapid environment changes are prompting demand for agile, adaptable products that solve business problems and have faster time-to-market. Taking a rigorous process-centric view and translating development requirements and architectures to remote teams may significantly slow things down. In several situations, these expectations are best perceived to be met by domestic destinations with well-integrated, highly collaborative, and business-centric teams working on similar goals.
• Innovation becoming mainstream. Offshoring continues to offer strong execution skills. However, generating viable innovation has been slow. In several situations, the “connect” required to innovate may be best when services are being delivered in closer proximity.
• Government incentives and support. Several state and local governments are now offering incentives like reduced tax rates, lower capital requirements, and improved entity structures to encourage corporations to make domestic investments.
• Immigration policies are tougher today that they were ever and are favouring increased usage of the domestic outsourcing model.
• The cash deployment factor. The last four years of recession and an uncertain economic environment focussed corporations towards conserving capital by making investments in improving productivity and generating operational efficiencies. These investments are now reaching the point of diminishing returns. Companies today are flushed with cash and their focus is starting to shift towards increasing their top line. As the economy improves and hiring starts to grow, there is an increased probability that corporations will invest cash to generate more returns. The demand generated as a result of these investments may provide a boost to domestic establishments as several situations may favour domestic over offshore destinations with the current economic environment.
• Matured sourcing. More and more buyers are demanding matured sourcing capabilities to free up their bandwidth and manage providers by results. As a result how providers deliver services is becoming less of a client concern unless there are risk factors involved. Providers are therefore asking for location flexibility that provides them with a balance of cost, quality and timeliness. As a result, the trend towards “right shoring” to sustain high-quality delivery will continue to increase as providers establish domestic outsourcing capabilities.

Offshore factors

• Labour arbitrage benefits are going away. The labour arbitrage benefits associated with offshore locations are starting to disappear when you factor in wage increases, productivity loss, resource turnover, travel costs and other factors. Today, the dollar weakness is helping sustain wage differentials but that cannot be always expected.
• Typical issues with offshoring. Issues like language barriers and time and cultural differences can be some of the reasons to leverage domestic locations for certain types of work. Several customer-facing functions (e.g. call centres) may be best suited for domestic outsourcing for these reasons.
• Perceptions about job losses associated with offshoring. Ironically, media coverage of the loss of US jobs only surfaces when it relates to relates to offshoring. It does not come up for “domestic outsourcing”, even though in many situations it has an equal potential for job losses and displacements within the same country.
• Offshoring risks. The risk tolerance for companies is different when they execute domestically. The risk controls required to manage reputation risks, data security challenges, intellectual property protection, consumer data protection etc for offshore require significant investments. Several risks like cultural respect for IP and the legal responsiveness of destination countries are unique to offshoring.

Determine if outsourcing will add value

Companies should first decide if outsourcing is even a viable option. If the service under consideration is a core competence and significant contributor to business success, it may be a candidate to keep in-house. Similarly, if the maturity level of the in-house organisation delivering the services is at the same or greater level of specialisation than leading providers’; it may not be a good candidate to outsource.

The major motivation for in-house activities is to protect core products and process innovations. Locating core activities deep in-house can avoid encroachment from competitors, with proximity allowing for collaboration, closer monitoring and easy access to specialised resources and infrastructure.

Determine your sourcing options

Once the decision to outsource is taken, careful evaluation of sourcing options and analysing the total cost of ownership (TCO), and skill levels should be conducted. Corporations must focus on carefully determining their business-aligned sourcing strategy and core drivers for sourcing mix (onshore execution v offshoring v domestic outsourcing). The answers will be different for different companies and will depend on closer review of scope with various factors like cost sensitivity, degree of user interaction, business domain, scope clarity, time to market, complexity, size etc.

Enable the best option and task your PMO

If domestic outsourcing is a viable option, enabling providers will require a similar set of competencies and relationship management abilities that organisations implemented for enabling offshoring. The outsourcing programs (PMO) will be best positioned to provide leadership and support for such initiatives. I have shared details on maximising value from implementation of sourcing strategy and associated competencies in my bookTransformational Outsourcing. The complexity associated with enabling domestic outsourcing is actually lower than the complexity associated with enabling offshoring but it requires similar supporting operational and process frameworks.

It is impossible to predict if the domestic outsourcing trend will continue; rather companies are advised to focus on the sourcing mix that provides them with the best value. A lot depends on how domestic destinations build maturity and deliver the promise of higher quality. The other factor that will determine success will be the investments in education and training to build the IT workforce. It is unlikely that industry will see any significant changes immediately. However, all sourcing models will be here to stay and will be preferred over others depending on specific situations.

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