Buyer Beware- How to Protect Yourself from an RPO Ponzi Scheme

The more I read about the Bernard Madoff scandal the sicker I get about it.  We should all try and learn a lesson from this if we can, even in our industry.  At the end of the day, things that seem too good to be true usually are.

There are certain attributes that happened in the Madoff ponzi scheme that could apply to any industry including RPO.  Buyer Beware- Here are some things to look out for when selecting a new RPO provider or when evaluating your current vendor:

• How well do you know this vendor’s history? How long have they been in business and what were they doing before they started this company?  Character and integrity are values worth paying extra for.
• How did you hear about this vendor?  How well does the person referring the vendor know about what goes on behind the smoke and mirrors of big marketing campaigns?
• Implementation fees are fine but do your vendor’s implementation fees feel particularly high?  Be comfortable to have your vendor break down where these fees are being applied especially if you feel like they are too high.  You never know, you may be funding their last new client’s delivery.
• Be careful if the price per hire feels too good.  Yes that’s right, I said it.  There is such a thing as a price point that is too good.  If this is the case I suggest that you dig into how the vendor is able to provide this price point per hire and how long they can do it for.  You want your pricing model to be a win-win for both parties to succeed and sustain.
• Is your vendor going through a large expansion of new clients?  What happens when the high implementation fees from new clients slows down?  Can your price per hire sustain long term delivery?
• How well is your vendor funded?  Are they public or private?  If private, who are their investors?  How transparent is their financial state?  In today’s economy only the companies with the healthiest balance sheets will be able to weather the storm.

I realize that there are a number of other things that you need to consider when selecting an RPO provider but in light of recent events in the economy and on Wall Street, it may be worthwhile to add these to your list.  If you vendor is open to all of these items then you are in good shape.  If not, I would be a little worried.