Why choose RPO?
There are many reasons to adopt an RPO model.
Some organisations want to ensure the methodologies, tools and processes they adopt represent best practice in order to reach the very best hiring decisions while achieving legal compliance.
Others use RPO as part of a wider strategy, allowing them to focus their resources on core activities while outsourcing peripheral ones such as IT, legal or HR support.
Organisations recruiting across a range of sectors often use RPO to tap into specific talent.
Equally, it can be used to make a business case for improved productivity through outsourcing.
Economies of scale are a key feature of RPO arrangements, meaning cost reduction and quality enhancements – often enabled by technology – are key reasons to seek RPO solutions.
Of course, some decisions are made for less strategic reasons, such as scarce resources to support recruitment activity. This is particularly common in start-up or ‘green field’ situations.
Most organisations choose RPO due to a combination of these benefits.
It is worth noting RPO on its own will not solve problems such as a poor employee brand, uncompetitive reward packages or poor line management.
It does not work if an organisation is simply looking to outsource a problem without offering the provider flexibility to implement positive change. A good provider will share strategies to allow organisations to transform recruitment.
If your organisation is looking at RPO it is vital to make sure everyone understands and buys into the decision to outsource recruitment.
Before going forward, seek stakeholder input, understand the key drivers different parts of the business have, and recognise that for some stakeholders the decision to bring in RPO may not be popular.
For example, employees currently delivering recruitment solutions in-house or those who could be subject to a transfer under TUPE regulations to a new provider.
It is important to consider how to engage these people positively to support a smooth transition and ensure talent in your recruitment team is retained.
Do your homework
Taking time to write down your requirements before going to market will make sure you get the very best RPO solution.
The better the specification you can provide, the better result you will get.
Providing detailed background information, a strategic overview, key data and clear objectives will help a good RPO provider get you the best possible outcome.
Consider what information bidders are likely to need, such as:
Volumes and types of hire
Overview of processes, including success and failure ratios
Details of your competency framework
Geography of hires
Past recruitment successes and challenges
It is also vital to factor in any changes in your wider business, such as site closures or new HR initiatives.
Ensure critical areas of your business are considered and you have a good road map on how they would combine with RPO.
For example, do you need a stand-alone applicant tracking system or use of the recruitment module of an existing enterprise-wide application?
Consider whether TUPE applies and be prepared to provide employee details in an anonymous format to providers to help inform cost proposals.
There is nothing to be gained by not sharing information. If bidders are left to fill in the gaps, they will make assumptions and price risk accordingly in their proposals. Avoiding this means avoiding the potential for contract renegotiation.
The contract will need to protect your interests and define the service, but what should you specifically consider?
Contract length: The implementation and transition phase of a contract can be costly
You must balance the requirement, often driven by procurement, for shorter contract lengths or break clauses with those of the supplier – who will be looking for longer periods against which to recover upfront investment.
Contract length should be sufficient to create an environment where objectives can be achieved.
If those objectives include a step change in recruitment activity or outputs, your contract must allow the provider enough time to deliver change.
A robust change control process: This is a necessity due to the nature of the services being delivered
Risk and reward incentives: Consider how the contract provides for incentives rather than punitive measures
Be wary of arrangements that effectively create a ‘glass ceiling’ on supplier performance rather than incentivising exceptional performance or innovation.
Implementation, transition and exit: Make sure you have an end game
The commercial model
RPO services can be delivered through a variety of commercial models, each with different risk profiles for suppliers and clients, for example:
Transactional time and materials - preferred by supplier, offers no shared risk element to client organisation
Multiple transactional price - some shared risk and reward
Fee on success - often preferred by client, offers no shared risk and reward element to supplier
Management fee / fixed fee - risk is all with the supplier
In reality, hybrid models are most commonly used, helping both supplier and client reach specific objectives and challenges.
You may also have to consider how ‘sunk’ costs, such as technology and implementation, are funded.
Implementation costs can be a barrier to change when considering moving from an incumbent to a new RPO provider.
It can be useful to separate this cost to negotiate better headline fees, or simply ask for it to be made explicit so that even if you choose to recover it through a transactional method over the lifetime of the contract, you can make like for like comparisons.
If you have an incumbent supplier and receive a proposal that is significantly more expensive than potential new suppliers, be sure to ask what they know that the others don't.
Test the assumptions new providers have made to ensure critical processes have not been underspecified. A perceived economy in the short term may turn out to be a false one.
It is also worth considering how the pricing model you choose fits your business.
A management fee model may only be appropriate if you have a central cost centre against which it can sit or if your finance team is willing to take responsibility for sharing it out on an equitable basis.
This can be complicated by the concept of usage versus ever-changing numbers of hires. If you are appointing a RPO provider for the first time and cost reduction is one of your key objectives, be sure you fully understand your own costs.
It’s vital to be clear from the start about what success is, and ensure you are measuring and reviewing the right things.
Make sure you know what your supplier can influence. After all, it is no good measuring the time to hire and defining this as when a candidate starts rather than time to offer if onboarding is still completed in-house.
Key Performance Indicators should be agreed that actually tell you about the service. It is worth considering what additional value the data you generate within your business may provide your supplier.
Always consider what resources you may have to apply internally to make RPO work, such as a dedicated contract manager or access to key user groups during implementation.
It is worth getting your provider involved in your wider HR strategy. Any in-house discussion about HR would include recruitment, so why would you exclude your RPO provider?
They will be able to provide a better service if they understand your wider HR objectives.
Even if you decide to outsource relatively high-risk elements such as employee vetting or employer brand be sure to protect your reputation through good contract management processes, robust change control and impact analysis.
Think about how recruitment process participants will perceive your organisation, especially as they may also be your customers.
Are these people I can do business with?
When selecting a RPO provider, always check their credentials. Ideally, arrange to meet with the proposed account team and consider the culture of the provider.
Would you really want someone whose ideals don’t match your own in charge of recruiting your staff?
You should consider if the processes and delivery channels proposed align with your own. For example, will parts of your process be offshored and how will candidates feel about this?
Use their expertise
Finally, whatever you do, don’t appoint an expert and ask them to leave their expertise at the door.
An RPO provider can only make a difference if you let them. If you do, they can change management practices, and evolve, or even revolutionise, your recruitment function.
If you only allow them to do what you've always done, whether by using use the same assessments, the same job boards or shying away from social media, you will never truly achieve what you can from the relationship.
For more information on how Reed Talent Solutions can help tailor an RPO to suit your business’ needs, get in touch today.