Regular readers will be well aware of what we think of Recruitment Process Outsourcing - the process by which a company looking to hire (generally a large number of) people enslist the elp of one “master agency” to manage the work of several other agencies supplying the staff.
To summarize our argument, we believe that RPO actually damages a company’s recruitment strategy and makes it harder for them to hire the best staff in their market, primarily because it demotivates the staffing companies who are “on the ground” - sourcing the candidates, and adds too much distance between the hiring company’s recruitment brand and the candidate audience.
But the story about the collapse of Axium raises another question we’re interested in - and that’s why on earth do recruitment companies want to work with RPO companies anyway?
In Axium’s case, the company went bust - whilst still owing significant amounts of money to staffing vendors they were working with. Whilst this is no doubt a relative one-off, it does raise yet more questions.
Recruiters are tempted to work with RPO companies primarily because it’s easy business. Most RPO companies struggle to keep good recruiters motivated (through a combination of poor margins, poor communication, too many recruiters going after too little business), but with companies like Axium experiencing this level of trouble, it should add yet more things to think about. We thought we’d run through some of the reasons for not working with RPO companies - hopefully to the advantage of any newcomers to the industry….
1) Margins
You know you’re going to get poor margins don’t you? Yes, it’s often volume business. Yes, it’s easy to win. But if you’re approaching the recruitment process in the right way - i.e. spending time with your candidates, using innovative sourcing channels and delivering great people, you know you’ll get better margins elsewhere, don’t you?
2) Process, Process, Process
Most likely, you’ll be banned from speaking to anyone who actually works for the company you’re hiring for. Most likely, all your communication will have to go through the “master vendor”. Goodness only knows why - but them’s the rules and you’ll have to play by them. This means that you won’t be able to speak to the hiring manager - the person actually wanting to hire someone. You won’t be able to to ask questions. You’ll get generic job specifications which are normally miles away from what is actually wanted. Filling vacancies becomes pot luck.
3) Lots of suppliers
You won the business easily, right? Well, so did everyone else. And we mean EVERYONE. Which means that competition becomes fierce. It leads inevitably to a “numbers game”, where the “fastest finger first” rules the roost. This means most of your competitors probably won’t bother calling candidates - after all, what’s the point? Just send the CV, then call them. Any candidates you speak to who “hasn’t been spoken to by any recruiters, honest”, is probably being genuine. They just don’t know their details have been sent to Company X. So all that time you spend selling the role and the company and qualifying the candidate will be wasted - because the rules are of course and “he or she who sends the CV first shall be thy representative”. Whatever.
4) Feedback
Expect some feedback on candidates? Don’t. The RPO company is offering a cheap solution to Company X. They won’t have the time or the inclination to feed back on rejected candidates. This makes you look like a mug when candidates ask for feedback, and you can’t provide it.
5) Speed
If all communications go from candidate-you-RPO-line manager-RPO-you-candidate, how quick do you think the process is going to be. In the face of competition from companies with agile recruitment processes, your chances of placing a candidate with Company X are going to much reduced.
In an ideal world, we’d like to see the back of RPO. We’d like companies to understand that RPO is cheaper than most solutions, but cheaper isn’t better.
On another note - any company out there reading this and thinking of installing an RPO vendor, ask yourself: do you really think that a top-notch recruitment firm will put their best and most talented consultants in an RPO relationship or one where they’re able to consult with the client directly?
Good luck!
Like this? Then why not subscribe to receive all future posts by e-mail?
9 responses so far ↓
1 Greg Moran // Feb 29, 2008 at 12:26 pm
Being a veteran of the staffing business (and now the founder of an RPO called Better People), your characterizations of this type of vendor relationship is accurate and well received. However, I would argue a bit of difference regarding the definition of an RPO. The relationship that you are describing in your piece is more akin to a VOP (vendor on premise) or sole vendor relationship and yes, they are a disaster for all parties. The client never receives the value they anticipated, the vendor can almost never meet the demand and the staffing firms who are actually doing the work get nailed from every angle … margins, communication, etc.
A true RPO generally handles most of the actual recruitment themselves and the need for outside agencies (except in highly specialized positions) is low. In the instances where other specialized firms are required, they are providing a high value service and are treated accordingly.
In general, the RPO will be handling the actual recruitment whereas a VOP or sole vendor is really just aggregating the spend and thus generally ending up in a bottleneck capacity.
Hope this helps. Great article though.
2 idealpeople // Feb 29, 2008 at 12:50 pm
To be fair, Greg’s quite right: We tend to use the term “RPO” very generally.
For instance, RPO also refers to companies (often offshore) who are hired by recruitment companies to generate CVs and/or leads. Again, this is different to our use of “RPO”.
When we refer to RPO companies, we’re talking “Managed Service Providers (MSPs) really.
3 Rushit sha // Feb 29, 2008 at 2:10 pm
why would they mind?
they get same money.
they get more exposer
they start self branding
thanks
http://www.rushitshah.com
4 Christopher // Mar 1, 2008 at 4:54 am
I believe that your definition of RPO is way off the mark. True RPO does all the hiring for an organization. They begin with a consulting piece that finds inefficencies in talent aquisition and builds a team to find the highest quality talent. Sure, economies of scale do come into play, therefore it tends to be more cost effective as well.
What most RPOs find is that organizations are being bombarded by agencies that just throw CV’s at the wall and hope something sticks. It’s why the RPO business model has grown tremendously over the past decade.
Of course, anyone doing vendor management like Greg pointed out is in another business altogether and should not be lumped into RPO.
Head over to the Human Resourses Outsourcing Association(an independent website dedicated to providing info on these sorts of topics) and you’ll find some good info about RPO as well. www dot hroassociation dot org
Sorry to rant, but I am always surprised when folks have such a viceral reaction to something they clearly know little about.
5 idealpeople // Mar 2, 2008 at 5:17 pm
Hi Chris, thanks for the comment. Again, yes to an extent we agree - we’re generalising when we talk about RPO. It’s a bit harsh to say we don’t know much about it though - believe me, we’ve worked with a few “genuine” RPO companies, and in our experience they all rely on other agencies.
We also find that most organisations complain about agencies throwing mud until some sticks - but RPO isn’t always the solution here - in fact, working closely with a small number of *quality* agencies and allowing them access to the company’s problems is often a more cost-effective way of ensuring top talent is delivered than implementing the (arguably) simpler solution of RPO.
A company outsourcing their recruitment to one company who aren’t going to rely on any other staffing companies can dent the flow of talent. One company we’d worked very closely with for several years implemented an RPO solution, to be delivered by a major player in the recruitment industry. This particular company went on-site, and initially stopped working with any other third parties. Months later, they tried to approach several of the company’s historically good staffing partners - albeit at massively reduced margins and with a frustrating communication channel.
Around six months later, frustrated line managers are working with us direct (due in large part to the strength of the relationship we’d built up with them).
We do accept that there *are* good RPO solutions out there. We also accept that there *are* rubbish agencies out there. But a company looking at RPO must understand the implications it has on their best suppliers, and how damaging it *can* be to their talent supply.
6 Marcus T // Mar 7, 2008 at 11:24 am
As a Recruitment Agency owner, I have to say it’s bad enough when the clients you supply are slow to pay, or, worse yet, go out of business as debtors for placements you have made/services provided. I think if an RPO/Master Vendor….. Managing Agent, or whatever the heck they want to call themselves went ‘under’ owing me money - I would be outside their offices with a baseball bat to take direct action.
7 SimonC // Mar 13, 2008 at 6:40 am
This is a great debate.
It is very interesting that the debate has become more about definitions. This is one of the key reasons that BPS spent the time gaining an award from the “Plain English Society”, as part of our campaign to de-jargon the world of RPO and related terminology.
What the debate seems to fail to address is the frustration presented. The reason the recruitment industry has such a poor reputation is due to the fact that a majority of recruitment is still conducted by hiring managers responding only to CV’s that interest them. So whose fault is it? The recruitment companies that know this, and as a result play the numbers game or the hiring companies for not having good hiring procedures, and as a result not providing a professional response to all CV’s? I appreciate that this comment is too simplistic to represent all the dynamics at play in the client / agency relationship. And I understand that there are a large number of situations where quality recruitment agencies meet quality companies and as a result magic happens, both in terms of the harmony of the relationship and the results achieved. This is why successful recruitment is relationship based.
BPS helps our client recruit and retain great people. In some way or form we are in the RPO business (depending on your understanding of this term). What is important to understand is that there is a high demand for great people, and not enough of them about. Therefore hiring companies must position themselves ahead of the game in the battle for great people. Once a company has created or been shown the procedures and practices required to achieve this, they can then go to market as an organisation ready to hire. Providing a company is open to change, this is quite easily achieved.
The industry sector, and the type of people required, will dictate the recruitment “channel” that should be consider. For instance going to a recruitment agency to find skills that are plentiful is not normally a good use of money unless the cost model reflects this. The company themselves or a good RPO provider, can do this. Equally, pretending that all technical and professional recruitment can be done by one RPO provider is not realistic, even if the company is a household name. So in this case the hiring company needs to become a great client to quality recruitment agencies. Building this relationship and addressing the good agencies concerns of Margins, Process, Volume of Suppliers, Feedback and Speed are paramount. BPS does not get between the hiring manager and quality agencies, but to the contrary we foster these relationships. What we do though, is ensure that the process remains a highly effective use of everyone’s time and that there is alignment to agreed central procedures and the clients end goals.
As an independent RPO provider we have a track record of facilitating the process of turning our clients into revered hiring organisations and as part of this process have gained immense loyalty from the vast majority of agencies we have engaged with. But it is our experience that the views represented in your article are common place amongst good agencies.
8 Ben Hobbs // Apr 26, 2008 at 3:02 pm
At the end of the day isn’t this simply outsourcing a relatively inexpensive internal function (a well qualified HR position/department) to expensive recruitment agencies, swapping competition for monopoly and inserting an extra hurdle in candidate communication.
Really, I’d suggest that its not that hard to organise a recruitment process, choose some good partners in the form of recruitment agencies and beef up direct applications.
The average school kid could tell you how to block certain people/companies from sending you emails if you are getting spammed by agencies.
Of course those in the RPO industry will be defending it, I have yet to hear exactly why its a good idea. If it’s a business intelligence issue, wouldn’t it be simpler to hire an ex-recruiter to head up hiring, or get someone to come in and consult on how to do it (hire) properly.
9 Goodpeople // Aug 18, 2008 at 12:22 pm
Just as Ben said “wouldn’t it be simpler to hire an ex-recruiter to head up hiring,” This is exactly what companies hiring ‘RPO’ like firms are doing, in an immature country like Japan.
No master vendors, no blocking recruiters (from PSL) from contacting and consulting hiring managers, and tidying up a completely manual or non-existant system.
They outsource the service of internal HR recruitment processing. Clearly the next step is direct sourcing, and in Japan this is also an immature area.
Leave a Comment