A couple of weeks ago I presented a case study about a recruiting director named Ross and the challenges he is facing as he grows the recruiting function in a medium-sized, fast-growing organization. I posed several questions and asked all of you to give me your thoughts and to provide Ross with some advice. To recap, here are the questions that I asked:
- What is the value of internal recruiting versus outsourcing? Is it really cheaper or better?
- What is the role of the “new” recruiting function? What should recruiters be doing?
- What challenges would Ross face in implementing this approach? How would the CEO and hiring managers respond?
- Is talent supply chain management a legitimate role for recruiting? Who “owns” talent?
- Should recruiting be involved in internal as well as external recruiting? If so, how?
More than a dozen readers responded, many with long and extensive answers. Thanks to all of you. I really appreciate the effort you put into this at a time when I know you are all busy. This week I will focus on the pros and cons of outsourcing the recruiting function. This is a question I hear all the time, and most internal recruiters are, understandably, resistant to any significant outsourcing effort. They believe that they can find better people and do it at a more reasonable cost than any outsourcing firm, no matter who they are recruiting or for what positions. For some, this is clearly the case most of the time. For others, though, recruitment process outsourcing (RPO) might be a way to offload high volume recruiting or to free up resources to allow the internal recruiters to focus on filling key positions. Recruiters have to think this through carefully, no matter the organization. In responding to Ross’s situation, most readers responded with a practical approach. Some felt that outsourcing might be only a temporary solution until Ross could build his own team. One respondent said, “Outsource for a short period of time (no longer than two to three months), giving the outsource clear objectives to follow.” But some of you felt that whether Ross outsources recruiting or not depends on several factors, including the strategy and resources that the organization is willing to spend. One reader wrote, “If a firm’s direction is to outsource non-core functions ó such as back office functions, etc. ó then there is a very good probability of increased value and success in RPO…” A third commented that
…it all depends on the management style of the recruitment leader. In a company that needs to grow fast and does not have the current expertise in-house, outsourcing is a great solution. However, if growth is projected to be long term, a company should absolutely consider building and retaining the mindshare of a solid staffing organization.
My own opinion is that we will see non-essential and high volume positions being filled by outsourcing organizations more and more commonly than ever before. There are several reasons for this:
- Recruiting is more challenging in general than it has been for the past 50 years. There are fewer skilled candidates and a slowly increasing number of retirements. Many more people are choosing self-employment over corporate employment, and competition in some areas, such as finance, medical, and computer security people, is fierce. This has put many recruiters in a tough spot. They know they need to focus time on sourcing and building awareness of their organization and brand, but they are struggling to find the time and resources to do that. RPO is a possible solution.
- There is a renewed focus on filling critical jobs. These are jobs that directly generate revenue, touch a customer, or develop new products and services. Other jobs are taking a backseat to these and make good candidates for outsourcing.
- It makes sense to build large communities of people with similar talents and skills. These can then be matched to the organization that their style fits best and where their skills are the closest match. This cannot happen when recruiters are doing just-in-time sourcing. They have no visibility as to what kinds of people are in the general population or larger pool and therefore cannot make the kind of comparative decisions that an outsourcing firm can make.
- Recruitment process outsourcing organizations have developed sophisticated tools and processes to efficiently meet the needs of many organizations. They have talent communities and direct sources for key people, and they can lower time-to-fill and even cost of hire. Most of these RPOs have more sophisticated computer tools and software than corporate recruiters have, and they can use them better.
The second part of my question on outsourcing had to do with cost. I asked whether RPOs were cheaper or better than internal recruiting is today. Many organizations turn to outsourcing as a way of cutting costs, but few realize these savings. I know of organizations where direct recruiting costs increased, but where the amount they were spending on agencies shrunk by two-thirds. Other organizations were happy to move to outsourcing because those costs are absorbed directly by the product group and hiring manager, and were not taken from the recruiting budget. That money could then be spent to improve the website and upgrade internal systems. Many readers again had a practical approach to looking at cost. One reader wrote:
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If the firm has a highly productive, right-sized staff of business-minded recruiters who are meeting the hiring needs for the firm’s business plan, then RPO may not be cheaper. Of course, all but a few fortunate firms fall into this category. If a firm is not in this category, how cheap is cheap when you are not providing the energy (i.e. qualified people) to fuel the firm’s engine? RPO can help you better predict your recruiting budget, period. Nothing shatters a recruiting budget better then panic staffing in HR and paying high contingency agency fees for permanent placements or high market rates for temporary staffing!
I think this response is right on. In the end, cost is not what is most important, ever. I have seen organizations spend excessive amounts to find a single person for a critical job because they are in the panic mode this reader talks about. I have seen internal functions that ran very lean, but also had a very long time-to-fill and a so-so record for candidate quality. RPO will almost always cost more in the beginning, as there is a learning cycle for both internal vendor management and the vendor. There are also the costs of setting up the infrastructure and welding systems together. But once this has been completed, costs run fairly flat and predictably over long periods. Managing the outsourcing vendor is critical. How well or poorly this is done has a lot to do with your overall success and cost. One reader wrote:
You’re swapping one set of challenges for another… Outsourcing recruiting can bring a heightened sense of accountability and greater control over where recruiting time is spent (along with potential cost savings if scope creep is kept under control). Of course, if recruiters come and go in the outsourcing model, you lose the knowledge and ability to sell the company. I believe outsourcing is worth it if there is no recruiting leadership able to cope with the recruiting challenges or the recruiters don’t have the skill set needed to be effective.
I will answer some of the other questions and continue to share our reader’s responses next week. Thanks again to everyone who helped me on this!