RPO (Recruitment Process Outsourcing) - The Future of Recruitment

 
I was thinking of writing about RPO (Recruitment Process Outsourcing) model for sometime.While doing some research I came across this interview of Sanjay Shelvankar(vice president -Talent Acquisition at MindTree Consulting) published in Businessline in March 2009, just after MindTree won five out of seven awards in Annual Recruitment and Staffing Best in Class (RASBIC) Awards ceremony. I knew I had to share it with you all.

Just to inform, Mindtree has implemented RPO model for it's hiring needs in India quite successfully.

Here Sanjay explains in details about RPO , it's advantages and associated risks. A must read article.


Please explain how an RPO vendor is different from other recruitment partners (non-RPO vendor model)?
The difference is actually that between the sky and earth. A recruitment partner is usually one of many resume sourcers (contingency hiring organisations) and in some cases may also supply contract recruiters to the client. The recruitment partner usually works in conjunction with the client’s existing recruitment teams and other sourcing vendors. Most often, the planning, processing and almost all the strategic areas of recruitment are retained by the client-side recruiter team. In this model, accountability is not passed on fully to the recruitment partner and the commercial model followed will at best be a fixed retainer fee that may or may not have a variable bonus component.
RPO is the complete ‘process’ outsourcing of recruitment. This means that the RPO vendor holds complete accountability for transforming the client’s processes and is ultimately responsible for all areas — tactical and strategic. The commercial model is a full-risk switchover to outcomes/value-based pricing, a clear departure from the traditional no-risk retainer fee model.

How is the effectiveness of the RPO vendor measured?
When we defined RPO, we realised that it would be relevant to an organisation only if it links its payments to value created and/or outcomes achieved. The challenge was to quantify the value/outcomes in detail so both parties were satisfied that they were getting a fair deal. At MindTree, it was relatively easy to get here as we had begun measuring our recruitment effectiveness internally before we implemented the RPO model. We have identified eight critical-to-quality (CTQ) items that we will monitor in the RPO engagement, namely, the fulfilment index, source mix, no-shows, offer to joining conversion rate, turnaround time, screening to interview selects, cost per hire and effort per hire.

How does RPO help in reducing the cost per hire, effort per hire and the overall candidate-job fit? Can you talk about the MindTree experience?
Since the RPO vendor takes responsibility for the entire recruitment team and its activities, the recruitment team’s direct (salary) costs are first transferred to them. Apart from this, there are at least six different cost items such as sign-on bonus, employee referral payouts, walk-in events, travel and logistics costs, etc, that are transferred to the RPO vendor.
Besides the cost-transfers, the RPO team structure ensures optimal usage of resources and there are incentives to increase productivity and minimise effort-loss. Since the RPO is accountable for the entire process, there is an incentive to continually innovate and realise process improvements rather than being content playing the paper-pushers.
The RPO vendor handles all hiring requisitions and passes them on to a preferred sourcing vendor. This ensures that there is a deep discount on the industry average of 8.33 per cent consultant payout on each joinee, ensuring that the cost per hire is significantly lower than before.
Candidate-job fit which is the ultimate deliverable is the most difficult to achieve as requisitions from our internal customers are not as clear and unambiguous as we want them to be.

Does RPO help in bringing in a JIT (just-in-time) hiring system?
RPO definitely enables JIT hiring. Our average processing time from receiving a resume to rolling out an offer is 5.6 days. This period includes tasks such as screening, arranging the interview logistics, taking the candidate through three levels of interviews and rolling out the offer letter. So, technically, we have the candidate ready to join us in a week’s time. But the JIT does not work this way as the candidates have to serve their notice periods with their previous employers; this is usually 45-60 days.

What are the drawbacks/risks associated with the RPO model?
While there are many upsides to RPO, like everything else, it also has its share of risks. Some indicative risks are: If the RPO vendor is a wrong choice it translates into a serious single point of failure; the RPO vendor in theory should have high process awareness and maturity to enter the corporate as a change agent. As it stands, there is a lack of this key ability. Like in the IT offshoring business, many first-time outsourcing organisations think that they don’t need to stay engaged once the process is outsourced. The client must watch for complacency, especially when the RPO vendor gets into the annuity business frame-of-mind. Then, getting profiles of passive job-seekers is an issue. Besides, there’s the issue of inadequate training: Since the team is predominantly on-site, RPO vendors might not invest in their team’s training.

Please tell us how bringing in an effective RPO system helped you get the recognition at RASBIC?
Out of the seven categories that are part of the RASBIC awards, MindTree won awards in five categories. These were in the areas of innovation in recruitment and staffing, technology adoption, paradigm shift in thinking, strategy and vision. Apart from this, we also got the overall best recruitment and staffing organisation of the year award.
RPO is a like an organ transplant. If it is not planned and executed properly, it has the potential to push back talent acquisition capability in the client organisation. To ensure that the RPO succeeds, we had to implement more than a dozen processes and quickly bring them to maturity.
Today, more than 95 per cent of all talent acquisition activities at MindTree are automated — this includes getting all our stakeholders onto a common platform where they can access on-demand, real-time information. We had highlighted all these in our award entry and I guess the industry saw that we had done something out-of-the-ordinary and felt that we ought to be recognised.

Article Courtesy: Businessline 

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Different Types of Recruitment Models

Different companies have different hiring needs. So depending on level of engagement, exclusivity, long term prospects and other factors many different recruitment models are followed in the market.Here I will try to explain them.

Different recruitment models:

• Contigency Hiring
• Retained Search
• Exclusice Requirements:
• Recruitment Process Outsourcing(RPO)
• Outplacement
• Executive Search

Contingency Hiring: In contingency hiring whenever a company comes across any requirement it gives it to many consultants at the same time and asks all of them to send resumes.Only  the consultant whose candidate is offered gets money from the company. Here recruiters don't get any assured and fixed salary. Their revenue depends entirely on whether they can make offers or not.As risk factor is high here, consultants charge more percentage for such type of recruitment. generally company pays in terms of a specific percentage of CTC of the candidate. This is the most prevalent way of recruitment.

Retained Search: Here a recruitment consultant works exclusively for a specific requirement and payment is divided into two parts.He  is paid a fixed amount by the company for search activity. It is called retainer fee. Other than that if he makes offer he gets more money. For recruitment of senior executives like CEO,Sales head very focused approach is required , so this method is preferred.

Exclusive Requirements: Sometimes companies give some requirements exclusively to recruiters. Here recruiter assures the client to close the position within specific date. if he cant close the position by that time he needs to either  close the position with lesser commission or bear some other penalty.All the conditions are clearly decided before the contract. Here percentage of commission is less than contingency hiring because there is no competition.

Recruitment Process Outsourcing(RPO): RPO model is gaining lot of popularity recently. Here a company outsources whole recruitment process to another consultant. Some people from the consultant side seat in the company itself and manage the whole process by themselves. The sourcers can either sit in the client place or in their own office. Here RPO partner is responsible for closing all the requirements. They take care of the whole recruitment process right from sourcing,scheduling, interviews, offer to joinings.The benefit for the company is that- they don't have to manage their own recruitment team which reduces costs. But on the other hand risk is high, because if consultants don't understand the company culture and hiring plans properly it can get disastrous also. So companies should be careful while choosing recruitment partners.Because we are talking about high scale and longer duration engagement here.

Outplacement: Outplacement came into picture during  recession period. Here If a company wants to lay off some people employees to cut costs, they can hire a consultant to place those employees in other companies. The recruitment cost is borne by the current employer.Outplacement is not very popular till now.

Executive Search: Executive search teams only focus on senior level ie: CEO, CTO, Sales head and similar kind of requirements. Method of sourcing for such positions are quite different from junior level requirements. Here number of potential candidates are less and they don't prefer to show their resume on the portals. So head-hunting, searching in networking sites and personal networks help a lot. For such requirements commission is much higher. Executive search teams do retained search activity also.

 Other than the above models recruitment can be divided in other two types.

• Permanent recruitment
• Contract or Temporary staffing:

Permanent staffing: Here after recruitment the candidate stays in the company payroll as a permanemt employee.

Temp staffing: In case of temporary staffing/ contract staffing the candidate remains in the payroll of the consultant and works with the company for a  limited time period. Companies generaly prefer this model if the project is small or uncertain. Again it reduces their long term costs also. So this model is gaining good popularity now a days.

Both permanent and temporary staffing can be applied to all the above recruitment models.

I have tried to explain different recruitment models followed in the market. Please mention you suggestion and feedback in the comment sections.

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