Over the past decade we’ve seen an increasing number of large organisations applying the concept of outsourcing to their human resources functions. And perhaps one of the most effective applications of the approach in this area has been in the allocation of the process driven aspects of recruitment to outside specialists.
But are too many employers now entering into such relationships simply because it has become’ accepted practice’ in the HR arena and without a real grasp of what recruitment process outsourcing (RPO) can actually achieve?
Towards the end of 2009 Ochre House conducted a survey of over 100 companies and financial institutions across the EMEA region and found the main reason for outsourcing recruitment functions was to reduce financial costs. On average, organisations had expected to make a saving of 37% but in practice this turned out to be closer to 20%. So does this mean that recruitment process outsourcing cannot actually deliver what it promises?
More detailed examination of the research tends to suggest that the real problem lies, not in a failure to deliver, but in a lack of understanding of the real benefits of RPO. Not a single one of the organisations questioned, that regarded their outsourcing decision as ‘successful’ or very successful,’ had rated cost saving as a highly important criterion. Instead their motivations had included the improvement of employer brand, more efficient sourcing and hiring processes and access to specialist expertise.
According to one respondent, Simon Patton, the then HR director of supermarket chain Somerfield (now part of the Co-operative Group), “Of course price played a part in the final negotiation process but it wasn’t the factor that got us there in the first place. You can make cost savings through outsourcing but it shouldn’t be your major driver, because if you are focused purely on the bottom line you risk being disappointed.
“Efficiency, simplification and added value are the areas where you can make real wins. I don’t say this lightly and it wouldn’t be the right move for everyone, but outsourcing was the best decision I’ve made as an HR director.”
What the research also uncovered, however, was that the organisations which took a wider view of outsourcing were often those that ended up making the most significant financial savings. One of the major reasons for this is that improving processes through more efficient technology, the employment of more effective talent sourcing channels and a move to best market practice can all combine to deliver better value in the mid to long term.
However, perhaps even more importantly, the businesses that take the strategic approach tend to be those which recognise that outsourcing should cover a much wider agenda than has traditionally been the norm. Recruitment is never a ‘stand alone’ function. Instead it is part of a complete talent management process, which needs to be addressed holistically.
After all, what is the point of creating an efficient and effective talent sourcing machinery if you do not subsequently get the best out of your recruits by ensuring that they are fully engaged and their training and development is effective or if a significant proportion of them leave before you can derive the maximum benefit from them?
Significant reductions in labour costs can be made but only if an outsource provider is allowed to work with an organisation on a strategic rather than a purely tactical basis. This means being able to address the whole talent management spectrum from recruitment itself through engagement to training and development and retention.
This could represent the true future of outsourcing in the employment arena, but one that can only come into being if a buyer undertakes the sort of rigorous selection process that will give them enough faith in a supplier to enter into a genuine partnership relationship.
As Ian Ruddy, European People Services Director for telecoms giant, Telefonica O2, puts it, “The day you have to take the contract out of the drawer is the day you don’t have a partnership anymore.”