An RPO SWOT Analysis
Using a Recruitment Process Outsourcing (RPO) firm to outsource your hiring is something to be seriously considered when stepping up your recruitment efforts. However, it is important to choose the right RPO or the results may not be what was expected going into the deal. RPO providers have strengths, weaknesses, opportunities, and threats like every other aspect of business.
In choosing the right RPO, you will have some major strengths to consider. RPO firms typically lead to large cost savings; for example, Hire Velocity can drive down your recruiting costs by as much as 50%. Not only that, but outsourcing all or some of your recruiting efforts allows your recruiters and hiring managers more time to focus on other important business functions. It also provides your business the ability to scale up or down as needed gaining a flexible recruiting advantage. Another strength of using an RPO firm is the speed and quality of recruiting. An effective RPO can reduce your time-to-hire and fill those open positions faster. But filling open positions faster should not affect the quality of the candidates. Reputable RPO firms will be able to deliver qualified, available, and interested candidates for your open positions. RPO providers are process driven and leverage Service Level Agreements (SLA) to measure, reward and sometimes penalize based on attainment of results. The SLA is such an important part of the RPO process because it details the expectations, objectives, needs, numbers, procedures, and quality of the candidates.
While there are numerous strengths for using an RPO, there can also be weaknesses if the right firm is not chosen. It is important to meet with the RPO and ensure that the partnership is a good fit since it will become an extension of your team. Choosing an RPO that cannot deliver on what you expect can cause it to have a negative impact on your business. It is important to look at the experience that the RPO firm has. For example, Hire Velocity has over 70 years of recruiting leadership on our team and the client list includes Fortune 500 retailers, private to public healthcare companies, Fortune 1000 telecom companies, and Fortune 100 technology companies.
Using an RPO can also have its opportunities. In general, RPO firms have a proven record for high hiring numbers across the industry. Organizations that have previously used a reputable RPO firm can attest to the positive results achieved during the partnership. The partnership created during the RPO experience is another opportunity for an organization. When requiring fast and cost-efficient hiring in the future, the partnership that was created with the RPO in the past will allow for a quick start to the recruiting requirements and ensure successful results based on previous experience with the organization.
As with any other business task, there are threats involved. One of the initial threats is finding that the organization and the RPO do not have a partner relationship. Again, this goes back to meeting with the RPO and making sure there is compatibility before choosing it. Additionally, a well thought-out SLA will provide guidance and avoid one party being unhappy with the partnership.
RPO SWOT
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Threats
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The Importance of RPO Service Level Agreements
Choosing a Recruitment Process Outsourcing (RPO) firm to outsource your hiring needs is a great choice when you’re focused on maximizing financial and operational results. To maximize the benefits of using an RPO, it is important to have a well-formulated Service Level Agreement, or SLA. An SLA is an agreement between the customer and the RPO that specifies expectations, objectives, needs, numbers, procedures, and quality of the candidates. This agreement is developed before the RPO begins working on the recruiting tasks and is the backbone of the partnership that is about to begin.
The SLA guides the success of the partnership between the internal recruiter and RPO. It helps guide the RPO to understand what types of candidates the customer is looking for, the process that will be used and the key metrics for success. By having these specific details outlined, the RPO will be able to work more efficiently and achieve better results.
The SLA can also be used as an incentive for the RPO to meet the outlined goals. By basing the part of the RPO’s compensation on meeting the goals, it will ensure the best results because the compensation is based off of the final result, their performance.
The typical RPO SLA is made of seven sections:
- Objectives and Needs Assessment – Defines exactly what the customer is looking for and what the final result should achieve.
- Scope Statement – Summarizes what process and methods that will be used to source and screen the candidates.
- Pricing and Cost Estimate – Outlines how the pricing works and the cost per resume, cost per qualified submission, or cost per hire.
- Organization Chart – Establishes the roles and responsibilities of each contributing member on each side.
- Measurements and Metrics – Discusses how performance will be measured and monitored.
- Work Schedules and Communication – Describes the expected hours of operation and how the two parties will communicate.
- Response and Escalation – Creates a communication plan for issues
Resources:
Anapol, Stan. “Recruiting Process Outsourcing: Using a Well-defined SLA and KPI to Engage the Right Vendor and Set Correct Expectations..” HR Management n. pag. Web. 9 Nov 2010. <http://www.hrmreport.com/article/Recruiting-Process-Outsourcing–Using-a-well-defined-SLA-and-KPI-to-engage-the-right-vendor-and-set-correct-expectations/>.
Cost Per Hire
While calculating cost per hire (CPH) is not an exact science, it can be a valuable instrument that gives insight into the cost of the hiring process for various positions and do some comparisons. Cost per hire can also allow companies to evaluate how effective they are with various sourcing strategies in the hiring process. However to be most effective, a company should look at all of the factors that contribute to the cost per hire.
Many contributing factors have to be considered when calculating the cost per hire of an internal recruiting team. The first factor is the recruiter who is a fixed cost since he or she is an employee of the company. Then hardware related costs have to be added in such as the computers and the telephones. Expenses to get the word out about open positions like job fairs, job boards, referral bonuses, and the applicant tracking system will also need to be added into the cost per hire calculation. Finally add in training, on-boarding, and turnover costs. Once all those costs are added up, the total cost per hire can be determined. This total cost per hire is essentially the same whether a company is hiring an inexpensive person or an expensive person because it is the same person doing the recruiting. When recruiting internally, it is also important to remember that the recruiter is a fixed capacity so he or she cannot handle any surges in hiring.
The alternative to recruiting internally is using a recruiting agency for hiring needs. The cost per hire with a recruiting agency should encompass most of the items that are calculated into the cost per hire of using an internal recruiter
One option is using a contingency firm, who gets paid only when someone is placed into a position. Contingency firms typically charge 15- 30% of salary. This means if a company is hiring an employee who will be paid $50,000 a year, the contingency firm will charge between $7,500 and $15,000 per hire. This can be a very hefty fee. The other option is to utilize a recruitment process outsourcing (RPO) firm. An RPO allows companies to outsource a part of the recruitment process or the entire recruiting function. RPO’s typically result in a cost per hire of 5 – 10% of salary compared to the 15 – 30% that a contingency firm charges. Using the same $50,000 salary as before, an RPO would typically result in a cost per hire of $2,500 to $5,000. Even by comparing the lowest CPH for a contingency firm with the highest price for an RPO, there is a minimum savings of $2,500 over a contingency firm.
When a company is faced with any level of volume hiring, the savings to the firm with an RPO exponentially increase. This is one of the areas where real value is delivered. Think of the cost savings of using an RPO versus a contingency firm to hire, for example, five sales personnel with $50,000 salary. This could be a savings of $7,500 to $50,000!
Utilizing an RPO such as Hire Velocity, a company can achieve a more cost effective cost per hire while delivering flexibility and scalability in meeting hiring needs…especially in this market when many internal recruiting teams are at their smallest size. Additionally, the RPO helps the company avoid any of the fixed cost elements of the Cost per Hire calculation.
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Filed under: Recruiting, Recruiting Tools, RPO's
Recruitment Process Outsourcing, also known as RPO, involves a company turning all or some of its hiring duties over to an external company. The external company, an RPO, has the task of finding a specific number of employees using a list of specific needs and a timeframe set by the company. For example, Hire Velocity was tasked with hiring over 900 assistant store managers and bi-lingual sales consultants over the period of 12 months for a major telecommunications company. Hire Velocity saved this telecommunication company about $260 per hire made, saving the company a total of about $236,340.
Many companies are left wondering whether it would be best for them to do the hiring internally, through the use of a contract recruiter, or use an RPO to do some or all of its hiring tasks. The company needs to ask itself if it can handle the increased workload of hiring a large amount of employees in a specific time frame. It is important for the company to consider all of the steps in the hiring process. The first step is active sourcing and screening, which is manually going through its applicant tracking system, job boards, and social networks to find potential applicants. Then the company must screen every applicant to ensure that they have the skills, education, and experience that the company is looking for. These two steps alone can often be overwhelming for a company that is looking to hire a lot of qualified candidates in a specific time frame.
This is where an RPO can help relieve the stress of mass hiring from a company. A company can choose to have an RPO do some of the hiring tasks, called RPO On-Demand, or have the RPO take over the whole hiring process, called Enterprise RPO. For example, a major home improvement store company hired Hire Velocity to do diversity sourcing and screening. Hire Velocity used its resources, including over 200 job boards and 5,000 content partners, to source potential candidates using the needs and wants of the company. Hire Velocity then telephone-screened each potential candidate to make sure his or her skills, education, and experience met the needs of the home improvement store company. This process led to 49 bi-lingual store managers and human resources managers being hired.
Recruitment Process Outsourcing can be a great tool for a company to take the stress out of hiring and reduce costs by up to 50%. However, it is up to the company to evaluate its needs and resources to see if it would be beneficial to hire an RPO or do the hiring internally. With an RPO, every task is managed for the company and all tools are supplied. With a contract recruiter, the overall work must still be managed internally as well as all tools needed to do the job. If you’re looking to do volume hiring quickly in an efficient and cost effective manner, the RPO may be just the solution to your current hiring challenges!
Do RPO’s really work?
The Department of Labor Statistics estimate that 24 million people will leave the work force and 19% of all executives, managerial & administrative personnel will retire within five years. So there is a need for fast, efficient, time saving ways of hiring. RPO’s can be the solution for that problem. NelsonHall, a Boston-based research firm specializing in business process outsourcing, has projected a 37% annual growth in the RPO industry. They forecast that the RPO industry will become a $7 billion industry globally in 2010. RPO’s are becoming the new way to solve an organization’s hiring needs, so it’s essential for an organization to understand what an RPO can do.
The first thing an organization considers when making a change from the status quo is the cost. An organization can increase their ROI with efficient employees and services that can save their organization large amounts of money. Most RPO’s offer customized packages that can fit an organization’s hiring process needs.
Most importantly, a company wants to see results; an organization will be able to see an expanded candidate pipeline, increased candidate quality, shortened cycle times, reduced cost-per-hire, and improved measurement of recruitment metrics. Hire Velocity was approached by an organization looking for diverse candidates. In less than a month, more than 500 candidates were screened with over 90% of those screened being selected to move to the next stage. This is the type of results that an RPO can deliver as an extension of your team.
HR departments are limited in their resources, while RPO’s typically have unlimited access to a multitude of paid and free job boards. RPO’s also use alternative ways to capture potential candidates and have recently been taking advantage of Social Media, which is a fairly new aspect in recruiting services. Having these resources available presents your hiring manager with more choices for selecting top performing candidates.
Hiring managers utilize RPO’s because it provides the best fit candidates. It is a cost effective approach to an organization’s hiring needs. RPO’s are essential to acquiring top notch candidates while freeing up internal HR resources/recruiters and their hiring managers to perform other important tasks.
Candidates find the RPO process less stressful and more convenient. As a candidate, you are receiving more specialized attention, and the process is smoother. Some organizations are lacking the appropriate screening process which can leave candidates feeling like a small fish in a big pond.
Recruiters are able to use RPO’s as alternative resources giving them more access to sourcing resources than they would normally have. Because RPO’s cast a wider net and handle all the screening and admin work, recruiters can focus on qualified, available and interested candidates versus weeding through piles of unqualified candidates.
RPO’s can save your organization time, money, and energy in your quest for quality talent. It will free up your staff to stay focused on their goals of increasing profits to your company’s bottom line. It is clear that RPO’s really do work and the results are tangible.
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