Recruitment Process Outsourcing. This phrase burst onto the recruiting scene in the past 10-15 years or so, but the concept of it has been around for much longer. It was consistently used in the 1970’s during Silicon Valley’s very competitive market for high tech labor – it was very hard to find good, qualified, and available talent. RPO was still dramatically different back then from what it is today. RPO in the 1970’s was basically companies buying lists of potential candidates from a recruiting firm – like a sourcing list.

In the 1980’s and 1990’s, Human Resources Outsourcing (HRO) became popular by companies outsourcing part of their processes like benefits or payroll to a third party company. This would be companies like ADP, Paychex, Ceridian, Gevity, etc.

Then right around the early 2000’s is when companies seriously started considering outsourcing their recruiting efforts because it was such a significant cost for companies to run internally. The earlier movements with companies beginning to outsource various smaller parts of their business made them more comfortable with outsourcing a larger and very expensive piece of their business as well.

RPO today is when a company will outsource all, or part, of their recruitment needs to another company who specializes in locating, qualifying, and delivering candidates to the hiring company to consider.

Why has RPO received so much attention in the past few years? Why do people see the benefits of it now? Well, the labor markets are just different today than they were in the past:

  • People are more likely to make a job change now than they were in the past. My father worked for GE for 20+ years before starting his own business. My mother worked for Sears for about the same amount of time. They came up during the time where if you had a job - you kept your job – even if it meant not climbing the ladder as quickly as they might hope.
  • We have more contract workers and temporary workers now than in the past. Some companies only seek to hire contractors or temp-to-hire workers now as they use the “try before you buy” approach to finding good staff.
  • With unemployment rates high, you simply have more candidates now than you may have experienced in the past – which means that it takes more time, more money, more people, and more resources to work your way through potential candidates to find the perfect fit. 7-8 years ago, you could post a job and get 50 candidates. Today you could post the same job and have 300-400 or even more apply.
  • RPO has a history of reducing recruitment costs significantly when compared to paying repeated recruitment fees.

As someone who has managed RPO engagements, sold RPO engagements, led teams to deliver on RPO engagements, and individually recruited on RPO engagements, you might think that I believe RPO is the greatest model that has ever existed. I have seen and experienced the benefits of RPO repeatedly, and I readily admit that RPO isn't for everyone. It's not a one size fits all fix for certain!

As someone who was beginning a new RPO engagement with a new client, one of the most challenging issues that had to be faced was what to do with your current internal corporate recruiters in this new engagement. Almost 100% of the companies that I worked with on a RPO (at whatever level) all presented a challenge when we would begin a "pilot program" with them, and the internal corporate recruiters heard that this outside firm was being brought in to try to do what they have previously been doing. Well, what do you think their first fear is? "Am I about to get fired???" For that reason, those employees were hesitant (sometimes difficult) to work with because they didn't want to see an outside firm be successful.

There were certainly other challenges that are faced too - understanding the culture of the client, dealing with various personalities, the change in process (change of any kind is always difficult for some people), grasping what each individual hiring manager finds acceptable in a candidate, etc. When you put everything together, it wasn't a plug and play type change and it took a lot of change management expertise to pull it off.

So, there has to be a better way - one that provides the benefits of outsourcing with the benefits of having an internal corporate team. I created a new that I believe is far superior to the old school RPO models that exist today. It's called "IRM." An Integrated Recruitment Model is one that, I believe, addresses all of these common issues up front and makes the transition much easier for everyone. Here's briefly how it works.

IRM is based on the strengths that both sides bring to recruitment efforts, having them work together to form a delivery team, and taking the "us vs them" mentality out of the equation.

The corporate recruiter has an advantage in knowing the company culture, knowing the hiring managers and having access to them more readily, and having a deeper understanding of the company and what types of people tend to "stick" there. The outsourced recruiter typically has a wider variety of tools and resources to execute with, operate with a greater sense of urgency (as commissions are riding on their quick placement of candidates), and usually are more creative in their approaches to finding pools of qualified candidates. Of course, there are always some exceptions to these observations - but more times than not, these are "normal."

By designing a hybrid mix of internal and external - with each using their strengths to make the team function at a higher level of productivity - this gives the company the best result. A hybrid team might look something like this:

IRM Team Sample

The lone remaining issue is how to get the team to work together and incentivize them to perform with urgency and accuracy. Traditionally an agency recruiter works off of a commission only or a base + commission model. In the IRM model, you would replace individual commissions with a team bonus so that everyone is rewarded for hitting key targets and performing well. Would every agency recruiter out there be interested in this model? There's no question that this isn't the model for every recruiter, but if you paid them a higher base than normal, and they still had the opportunity to gain a performance bonus - many would be open to this idea. You could even structure your bonus where each team member gets the same bonus amount, or you could weight it based on the difficulty of roles and reward those who invest more time in the effort or have a more difficult role receiving a higher percentage of the bonus amount.

Asking those major RPO providers out there (The Baker's Dozen award winners) to change their models and do this will likely be met with resistance. However, the next tier RPO companies should consider making this an alternative for their clients. The hiring company will still be involved to a greater degree and that could make this an easier transition for them, and the RPO providers can negotiate to set up a custom strategy and process that fits their client need. It's a win-win.

For more info on the IRM model, join my IRM - Integrated Recruitment Model group on LinkedIn, or reach out to me directly and I'd be happy to discuss the model with you at a deeper level. Please note...I do not work for a recruitment firm. I have no financial stake in this at all. However, I can refer you to short list of agencies for you to negotiate with who might be open to this type of structure.

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Comment by Keith D. Halperin on December 16, 2013 at 1:16pm

Thanks, Doug. IMHO, a model involving commissions isn't RPO- it's an agency trying to a new way of getting money. I think that an optimum RPO model starts with determining which recruiting activities aren't worth paying at least $50/hr to do, and then then taking them over for under $10/hr or less. If you have someone who's posting jobs, scraping job boards and LI. and scheduling/coordinating interviews for $60k/yr, then they probably would get fired under this model. On the other hand, someone at $110k/yr who's advising, counseling, and mentoring hiring managers, closing candidates and streamlining hiring processes, then they'll probably need to stick around.




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