Monday, June 22, 2009

Emerging Trends in HR: RPO

A new addition in the series of BPO, KPO, and LPO is RPO i.e. Recruitment Process Outsourcing. In coming years India is going to face a talent crunch of half a million people. That increases the demand of RPOs.

What is an RPO?

RPO stands for Recruitment Process Outsourcing. It also stands for Research Process Outsourcing but here we are dealing with the former.

If there is one problem that is seen as the biggest hurdle to the growth of organisations across the world and across sectors, it is talent scarcity. As part of the HR function, recruiting is the most crucial and time consuming function of any HR department. This leads to a complete transformation in the way the recruitment function is perceived by organisations around the globe. This emanates from the simple logic that when companies across worldwide are trying to focus on their core functions and outsource all non-core functions, why shouldn’t recruitment be outsourced to the experts too? Having said that, it isn’t difficult to understand why Recruitment Process Outsourcing (RPO) as a concept has gained such popularity in a span of a few years. Initially companies expressed reservations, since recruiting the right individual is so crucial to an organisation’s success. Companies soon realised that with talent crunch becoming a perennial problem, its time to bring in the experts. The RPO segment is today the fastest growing global segment for HRO firms. IT companies are among the early adopters of this trend. In fact, the high level of activity seen in this space leads several analysts to believe that the time for multi-million dollar deals in the global RPO space has come.

Around 70% of the main HR activities (Training, staffing needs, ensuring performance) suffer due to the constantly increasing pressure on the HR department to fill in the vacancies. Majority of organizations spend a lot of time (around 60%) in sorting resumes and finding candidates from job portals and other sources. This is where RPOs come into play. Recruitments are outsourced these days so that the organization can concentrate on its core competency areas to save time and increase productivity level. RPOs bridge gaps between demand and supply of talented people. The RPO services include searching candidates from internal database and job portals, resume screening, response handling, corporate intelligence research, database maintenance, skills testing, and analyze market trends and recruiting market, etc.

While RPO is new to India, it is already a big industry globally and some estimates suggest it is worth $30 billion. The RPO wave is catching up fast in India. As the Indian labor markets become more and more competitive, RPO is fast becoming more of a common solution. It is claimed that a greater impetus for RPO is provided by the shortage of skilled labor. Although there is abundant pool of labor (3 million/year) in India, only 10% immediately hirable - lack of language skills, lack of practical experience, lack of cultural/interpersonal fit, mobility are some of the factors because of which shortage of skilled labor is faced by organizations and RPO is utilized by some to fill this gap. The Indian labor market too has become increasingly dynamic: workers today change employers more often than in previous generations. De-regulated labor markets have also created a shift towards contract and part-time labor and shorter work tenures. These trends increase recruitment activity and encourage the use of RPO model.

RPO Models:

1. Pure sourcing: It includes providing support services to on-shore based recruiters.

2. Full cycle recruiting: It includes all the activities that come under Recruitment Process like sourcing, screening, etc for both temporary contract as well as permanent positions.

  • Reduces process variations

  • Increases sourcing timeliness and expertise

  • Improves quality of resumes

  • Decreases time to fill

  • Gives better leverage of technology

  • Improves candidate nurturance

  • Improves applicant tracking

  • Enables meaningful reports


For any managed services model to work there are some critical requirements or must haves like :
  1. Executive sponsorship of the project. Any business model innovation requires the executive to champion internal resistance into acceptance.

  2. Clear Partnership Definition - A detailed and clear scope of work to be defined before agreeing on to the terms. The managed services agreement will have the scope of work documented & agreed upon.

  3. Clarity on the role & the deliverables from the onsite resource & the same to be documented & mutually agreed upon.

  4. Mutually agreed expectations to be jotted in the agreement. Prepare a project plan with defined recruitment process & get a consensus on the same.

  5. Historical data to be made available so as to help prepare a project plan blocking all possible loop holes and deciding on the key deliverables.

  6. Its imperative for the success of this arrangement that we have a buy in from each person involved in the project from Clients side and everyone understand that the intention is to meet the numbers and nothing else.

One of the major tenets behind RPO is that there should be the ability to create a significant candidate pool to draw on for their clients. By doing so, the RPO vendor is able to turn around job requisitions more quickly and efficiently than a single employer. At the same time true RPO players need to invest time in follow-up surveys, compiling benchmark data, gauging hiring manager and employee satisfaction post hire and determination of quality of hires. By examining data relating to employee satisfaction, retention rates, and others, RPO providers can improve the recruitment process.

Over the past few years, RPO services have been chiefly employed by IT, retail, finance and insurance and engineering sectors. The trend seems to be gaining ground not only among big organisations but also the small to mid-sized companies. Since RPO affects an organisation’s business growth and success, the organisation should have a detailed understanding of the concept and also of the expenditure for the recruitment process. This helps to identify the processes that should be outsourced, and which RPO is best suited to the unique requirement of the company. Industry studies in the USA show that within two years, 58 percent of the Fortune 2000 companies will rely on this model. This further strengthens the point that RPO is indeed the answer to the recruitment woes of organisations globally.

Advantage India

Research firm IDC forecasts staffing and recruitment spending to reach $92 billion globally by 2009 (Source: ERE media study) and RPO services stand a good chance of garnering a large portion of this spending. India, with its huge talent pool and its rich experience in the outsourcing industry, can indeed ride this wave of recruitment process outsourcing. Although the Indian domestic RPO market is still in its nascent stage, global RPO providers are seriously evaluating the option of offshoring their RPO needs to destinations such as India. RPO providers which were early-adopters of an India-based model are now reaping the rewards.

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