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RPO Wars: Episode I — C3RPO & RFP2D2

by Mar 21, 2012, 5:05 am ET

A time right about now,

In a galaxy not far, far away,

A world exists where recruiting labor swirls

Within corporate hiring needs,

Melding with sourcing and branding,

Colliding with hiring process and adoption,

A war has erupted in the expanse of options in how to best recruit to fill corporate talent voids: Outsource vs. In Source; RPO vs. RPWhat; RPWho vs. RPHuh?

I am not a Star Wars geek but a fan of the movie series (as a child of the 1980s). When I sat down to write about recruitment process outsourcing services and the necessity of developing a comprehensive Request for Proposal process when selecting a supplier, I realized the story was much bigger. The title popped in my head as I looked at the evolution of RPO. But as I continued to write, I realized that RPO is a world into itself fighting for relevance as it continues to be defined.

I opted to tell the story from a corporate staffing leader’s perspective, taking it from the initial decision point of whether or not to outsource recruiting labor.

I could think of no better characters to choose than C3PO and R2D2 to use as metaphor. For those not familiar with the Star Wars movie series, C3PO and R2D2 are droids and sub-characters who play pivotal parts in the stories.

Relevant to this article, they each stand alone in parts of the story but are more effective when they are together. They form a team often helping the heroes escape danger or provide insights into the action. Now for the transition: provide me some latitude to support the title. Like C3PO and R2D2, an RPO service provider can be selected without running through an RFP process. But it is best practice to not do one without the other. The proposal and subsequent information gathered from the RFP process allow an organization to better outline their requirements in evaluating and comparing RPO providers. The results will offer a clearer picture in selecting the right RPO provider while setting performance expectations.

As a corporate staffing leader, I was an early adopter of the RPO model and preferred to outsource recruiting labor versus building a large internal team. The strategy was to shift the employment burden to an external partner and control recruiting labor costs as a cost of doing business versus head count. Another goal was to be flexible with resources to meet cyclical demands. I maintained an internal recruiting team to handle critical roles and outsourced all others. The results were successful, and like any recruiting team, it was necessary to manage performance closely. I did not have droids to calculate and formulate a strategy, it was a bit like piloting an X-Wing Fighter by feel, but it started with a plan.

Mistakes in Selecting RPO

Over the years, I have fielded inquiries from colleagues regarding RPO services and lagging performance. I found a common theme in that some organizations select and implement RPO services without conducting proper due diligence to outline business requirements, understand cultural acceptance, establish objectives, and pilot prior to full-scale implementation. The word “recruiting” is a broad term often associated with staffing agencies, and I learned that most of these colleagues selected their RPO provider similarly in how they select staffing agencies, with little due diligence. I strongly caution against this approach. The services are vastly different. Selecting an RPO provider is a decision that will impact the business (and often HR’s reputation) and it is requires the same effort in selecting an RPO as an organization puts forth in selecting an applicant tracking system. Arguably, the performance of an RPO can have more influence on business leader perception of HR than an ATS.

Importance of Project Management

Proper due diligence requires identifying a project leader, unlike Palpatine (the authoritarian) and more like Obi Wan (the collaborator), to formulate a project plan to help you methodically work through the project phases. If you have a project management organization, partner with them to help drive the project. If not, assign someone to take on the project management duties to help drive the project to completion. In support of the project leader, build a cross-functional project team that will include a handful of HR colleagues and business users of the RPO services. I have learned in my career that change management starts early in the process, and the sooner you engage business managers, the better the result during implementation. The project team will be the primary resource to answer questions and validate requirements. The scope of your initiative will predicate the amount of time it will take to develop and execute against a project plan. But use the “Force” of project management to guide you.

In its basic form, the project plan should have four phases:

  • Discovery
  • Development
  • Implementation
  • Ongoing ROI

For this article as Episode I, we will focus exclusively on parts of the Discovery Phase, as it has the most depth and variables depending on your objectives. Not to send you into the deepest reaches of project management space, I will not belabor all the steps associated with conducting proper Discovery as it can be done quickly depending on the scope and resources available to you. But I do intend to hit the basic steps to assure a baseline is established.

The Discovery Phase has four primary stages:

  • Requirements
  • Evaluation
  • Selection
  • Negotiation

Building the Business Case for Why

Under the Requirements stage, build a business case to garner support from the business for RPO, like a representative in front of the Galactic Senate, which starts with a hypothesis to explain “why” this should be considered. Examples might include:

  • Metrics show that 80% of recruiting resources are allocated to low-strategic value hiring initiatives.
  • A business unit might be located in a unique area where recruiting resources are not situated, and not deemed strategic enough to allocate internal recruiting resources.
  • The organization does not have an internal recruiting function but would like to establish dedicated recruiting resources for the business.

Once the “why” is established, next steps would be to expand upon the findings to articulate “what” the RPO will solve or improve.

Defining “What” RPO Will Solve

To get to the “what” will entail a bit more research. A few examples might be:

  • Review of all hiring workflows and recruiting labor-load analysis categorized by type of hiring (e.g. executive, professional, non-exempt) by region and/or business unit.
  • More simply, hiring demand divided by resources for proper allocation (e.g. X requisitions per recruiter).

In the least, the research should show an opportunity to improve hiring with additional or redeployment of resources such as efficiencies in time to fill or volume of hires within a period of time. To support the “what,” know the cost of current operations which will establish budget perimeters. Cost reduction is always attractive to add to the business case, but RPO is not about cost reduction rather investment. Unless the RPO is replacing heavy staffing agency or exec search usage and their fees, an RPO will not lower the cost of an internal recruiting function. It is a deferral of cost and an investment to improve hiring to allow the organization to be more competitive. The improvements should be more about quality and speed of hire versus cost.

Now that the business case is developed and project management team is set, we will follow C3RPO & RFP2D2 out of the Requirements sector deeper into the Evaluation stage into the world of “Demo-gobah.” A wild place where plans go awry, surprises occur, and relationships are made or ruined during the review of RFPs and demonstration of services. How do you develop an RFP? How do you select a final supplier? How do you negotiate pricing? What metrics should be measured? In my best Yoda voice: seek these answers you will in the next article of RPO Wars: Episode II — A New Decision.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  • http://www.sevensteprpo.com James Holt

    First off, great article Brenan, I’ll be camped out for Episode 2 for sure!

    As a provider, I can tell you the best RFP’s are the ones that clearly lay out the goals of the engagement – the what and the why you talked about near the end of the article. This allows the providers to go beyond the standard answers and explain what intricacies of their corporate culture and delivery model will allow them to truly stand out from their peers!

  • Mike Mayeux

    WOW – what Wit and Wisdom. After 10 years in the RPO industry I have read just about everything ever written on the subject. This might be the best thing I have read so far.

    Brenan nailed it.

    Mike Mayeux, CEO – Novotu

  • http://www.rocket-hire.com charles handler

    Great article brennan
    There is a parallell here with selecting an assessment vendor.
    So little attention to upfront work.

    In our cases, trusting the force is not enough.
    Yoda would say, due dilligegence u will. Business case u will make. Hero u will be

    Charles

  • Daniel Enthoven

    Love the theme.

    I think you’re right that the objective of RPO should be on quality of hire.

    All RPO vendors have a convincing story on cost and time to hire. But if they’re meeting these targets by bringing in low quality candidates, you’re risking your own company’s success.

    When it comes to cost and time over quality, I can’t help but think of the the Trade Federation and their low cost droid army. When it came time to invade Naboo, they got crushed by the Jedi Knights, who of course, had very high hiring standards, and invested more in recruiting.

    Poor Viceroy Nute Gunray paid heavily for his inept HR strategy. Don’t be a Nute Gunray!

    -Dan

  • Keith Halperin

    @ Brenan: Thank you.
    “Unless the RPO is replacing heavy staffing agency or exec search usage and their fees, an RPO will not lower the cost of an internal recruiting function.”
    With respect, I disagree. If you replace $50,000-$60,000/yr low-level, board-scraping, LinkedIn looking jr. sourcers with $6.25/hr virtual sourcers, and $40,000/yr onsite scheduler coordinators with $5.00/hr virtual ones, you certainly should save, and substantially. ISTM there isn’t all that much value in getting rid of your onsite low-level folks with some other companies onshore low-level folks for about the same money- go offshore and get a higher ROI. Remember the rule of thumb: if you’re not prepared to pay your own staff $50+/hr to do something, then no-source, through-source, or out-source it for $6.25/hr or less.

    Cheers,

    Keith “Learning About and Doing RPO Since 2003″ Halperin

  • Ryan Stockwell

    Brenan – fantastic article! Hands-down one of the best written posts I’ve seen on RPO. Having been entrenched in RPO for the last 5 years I thought we had it summed up. The way in which you articulate the value, process, and underpinnings of RPO is humbling. There are so many ways to sum it up and I’ll certainly refer back to this post often. Thank you for sharing!

  • Mike Mayeux

    Keith – Love your passion and punch.

    Brenan – looking forward to the next chapter on this. Certainly looks like you found a nerve.

    Here is one other thought to consider…. Keith – Yes – you can really drive ROI by offshoring. It’s cheap. Real cheap… It’s common. Real Common. But it is not working. I think we have to be careful using the word ROI when looking ONLY at recruiting cost. Recruiting ROI is measured in the end game by:
    - Cost
    - Time to fill (BIG WIN!)
    - Quality (BIG WIN!)

    Nothing drives ROI more than Speed and Quality because recruiting expenses are pennys compared to the dollars spent on:
    - Cost of vacancy (unfilled chairs make no money)
    - Cost of attrition (turnover – training – poor performance – severance – re-recruiting – extended vacancy and so on)

    I struggle to get my brain around an executive buying into the idea that offshoring to save on a very tiny cost category when such a huge imperative hangs in the balance.

    Modern recruiting organizations performing at high levels are all running about the same cost structure in the end game. The differentiation lies in the results of their work and the impact those results have on the larger business.

    So: Yes – you can save some penny’s offshoring, but the speed and quality is not compelling. We have tried it. Here is an easy test. When is the last time you heard someone say, “We just made a decision to offshore our recruiting because we determined it was the best way to drive quality and speed.” Betting you havent – Betting you won’t…

  • Keith Halperin

    @ Mike. Thank you. “Love your passion and punch.” I may have been misunderstood: I’m not into S&M: it’s too much like many recruiting contracts I’ve had….
    ;)

    At the same time, blanket statements like: “But it (offshoring) is not working” aren’t right. Maybe your experience hasn’t worked, or the experience of others hasn’t. Maybe you or they went into a giant project where a huge recruiting effort was completely outsourced with a firm that had never done anything on that scale before, and it failed miserably. (I’ve heard that story). Maybe they didn’t carefully do a small, conservative, pilot project to work out the bugs, and then gradually expand it. Maybe they expected it to be an effortless change where money would go out (probably less money) and perfect A-player hires would magically occur without any additional effort on the company’s part. (It doesn’t work like that). Maybe they didn’t have an experienced, onsite, on-demand Project Manager to act as a liaison between the onsite and outsourced virtual resources. Maybe it was imposed without much buy-in from the people in the company, and it was sabotaged. Maybe the RPO firm was inefficient or incompetent….

    At any rate, MY RPO has (and is) worked(ing) out well, with a few minor exceptions (which [in the past] were quickly nipped in the bud without much cost/harm). I get very quick and high-quality sourcing results from my board and internet sourcers, and I previously got very good results from my virtual offshore phone sourcer. (I can refer both resources if you wish. I can also show how to do small-scale RPO projects the right way to maximize your ROI.)….

    You have made a definite point: You can’t have all three of quality of hire, speed of hire, and cost of hire, but that refers to the candidates and not the recruiting resources, where with careful planning you CAN sometimes have all three. Fundamentally, there’s a giant price gap: you really shouldn’t have to pay for much sourcing or recruiting work that costs between $6.25 and $50.00/hr. There may be a few things (like an organization that’s interviewing so many people that they need a dedicated onsite person who’s not a recruiter just to make sure everything is on track and to handle the glitches when they occur) in this range, but I can’t think of many. (Folks: tell me if you know of some, and I’ll add them to my exceptions.)
    BOTTOM LINE: If you’re paying your onsite people between minimum wage and $50/hr (depending on your local COL), you’re either paying too much for low-level work, or not enough for high-level work- there’s just isn’t much in between.

    Happy Friday,

    Halbekesan, son of Okefenokee Artichokey
    aka, Keith keithsrj@sbcglobal.net

  • http://www.burning-glass.com Davor Miskulin

    Nice to read things from someone who had lived trough it – not just read about it. Due dilligence is very good point and often forgotten. RFP seems to be necesary though being Best Practice does not mean it is innovative or creative. It is us humans who have problems operating in multidimensional galactical spaces.

    When cost cutting is the goal, RPO typically means having the provider perform the same function just for less money. In contrast, when objective is adding-value RPO can also mean adding new functions that will cost more but can pay themselfs in new revenues via new capabilities or bigger market share.

    I’d say like in a good marriage there has to be some component of “love” in the relationship to work out.

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