Middle Market RPO poised for rapid growth in 2010-2012

I attended the Everest Webinar: Recruitment Process Outsourcing (RPO) – Moving Beyond the Pioneer Stage yesterday on February 23, 2010.  It was pretty much a state of the union address for RPO and I thought it was well done. Actually, it rocked! They have it recorded, although I don’t think it’s up on their website yet. 

It is one hour well spent for prospective RPO buyers, suppliers and consultants.  The Everest presenters, Katrina Menzigian and Rajesh Ranjan, did a very good job capturing the state, defining it and help to synthesize a lot of the noise that goes on in RPO industry.

The main theme and focus of the webinar is the future of comprehensive (really transformational) RPO. Everest Group believes the industry is entering a rapid growth phase for this type of RPO.  Their basis for the future growth is global, recent M&A and partnership activities and the suppliers building out focused capabilities around specific verticals or target markets. 

A standard RPO definition( Wikipedia’s is excellent)  has been a little elusive in the pioneer phase–customers and prospects will continue to define and re-define RPO in the years to come. They will challenge the definition and ask suppliers to match a cost effective and quality service delivery with new business issues and requirements. 

Some large corporations utilize all three types of RPO in parallel as described and defined by Everest:

1.  Out-tasking- a specialized project-based (finite) recruiting project with a start and end date.
2. Componentized- supplier handles all hiring to a specific division or job type.
3. Comprehensive- supplier runs the entire hiring process end to end bringing people, process, technology and trusted partners to the overall solution.

I agree to some extent with Everest projections, but not for the large Fortune 1000 corporations and multi-nationals.  Most large corporates will continue to buy componentized and out-tasking RPO solutions for primarily three reasons:

1. Loss of control of recruiting functions
2. Utilize many specialized RPO suppliers to help diversify risk
3. Unwilling to change hiring process or technology

In this recovering economy, I do believe HR executives will require a lean and effective recruiting function.  Having talked to several talent acquisition executives about their future states, their paradigms about RPO is shifting now as we turn toward an bumpy recovery.  The traditional contract recruiter approach of hiring and then laying off them off to handle the spikes or gaps is becoming a less relevant type of out-tasking RPO.   The approach is typically reactive, not strategic and the ROI is marginal.   

HR executives now are rethinking their broader talent acquisition strategy for 2010 on how to best serve internal clients to meet shifting and uncertain full-time hiring needs. Rather than re-build their recruiting infrastructure, leaders are closely looking at recruitment process outsourcing (RPO) partners to fill the need and keep that knowledge with a partner. HR executives are asking:

“How is my recruitment function performing compared to industry benchmarks?”

“How can we use this opportunity to improve recruitment operational performance?”

 “What value proposition or ROI will an RPO solution deliver to my company?

I believe the comprehensive RPO type will gain rapid adoption in the lower, mid-market defined (by me) as 1000- 3000 employees for primarily four reasons:

1.  Don’t want to rebuild recruiting department with uncertain hiring demand
2. Willingness to buy a standardized( best practices) RPO offering
3. All-in variable pricing model is very attractive to CFO
4. Ability to fiercely compete for talent with large corporations

Katrina stated it well in the webinar about dividing the value proposition into two buckets:  Operational versus strategic value propositions.  I project that lower mid markets will leave toward the strategic value proposition.

Advertisement