RPO Is the Next Generation Of HR Services

With the costs of payrolls and payroll taxes, health-care and other expenses associated with full-time workers shooting up day by day, outsourcing has now become an essential solution for businesses of all sorts. Moreover, access to superior competency typically emerges as a motivator for outsourcing; the external service provider offers a degree of sophistication that in-house specialists cannot match. In a nutshell, outsourcing is resorted to with a view to reducing firm costs and achieving improvement in four key areas – quality, cost, speed and service. How does a company enhance these core areas during the recruitment process? The answer is outsourcing and transferring all or parts of the staffing processes to an external service provider through Recruitment Process Outsourcing (RPO) or Employee Process Outsourcing (EPO). It is a more specific department for HR personnel and a new subset of Business Process Outsourcing (BPO) and emerging as a key outsourcing demand from the clients.

As Pam Berklich, Global SME and thought leader for RPO Kelly Services Inc defines RPO, “In my experience, and in the world of true pure play RPO providers, this practice involves end to end responsibility for the recruitment/hiring process. There are really only two forms of RPO, namely the Enterprise RPO and Project Based RPO.” In the Enterprise RPO, a client organization decides to outsource their entire recruitment/hiring function for all hiring needs including all skill sets and all job families within the organization. Here the RPO partner becomes the seamless extension of the HR function and serves as the recruitment/hiring department. In the second type of RPO, a client organization decides to outsource certain job families and skills to the RPO partner, or it outsource the expansion of a client’s operations into defined geographies.

True RPO is not about outsourcing a piece or pieces of the recruitment process - it is taking full responsibility for the entire function. Therefore, it also becomes significant for an organization to know when and what parts of the recruitment process need to be outsourced. The organization needs to be aware of its requirement vis a vis business growth and expansion plans. As Shailja Puranik, COO, Xansa BPO points out," It is most appropriate to outsource when an organization has achieved stability and maturity of processes and looks to outsource those components that are well-defined, repeatable and reproducible."

Being a viable, strategic and cost effective solution, RPO has turned out to be a growing global trend. “RPO should along with its cost effective feature also be given its due importance for hiring the " right candidate from a wider pool of talent available," adds Rahul Goyal, CEO, Ma Foi, UK. The emergence of RPO solutions is growing at a very steady pace. No matter how you slice the share from the HRO market worldwide, it still remains substantial. The trends in growth vary on the basis of geographical location and the acceptance of outsourcing solutions within country cultures. Era, a recruitment industry body, estimated the size of the RPO industry to be around 6000cr for 2006-2007. However, as per Jacob Samuel, Associate Partner, Elixer Web Solutions, “This figure does not include the market size which gets added through overseas business and other recruitment related expenses.” This year the RPO market is expected to grow at 300% over the last year,” he added. “The predictions are not consistent. From most assessments there is a general agreement that the potential for this market is estimated at $20 billion by the end 2008. Not only this but India is predicted as the one of the fastest growing market trends for RPO (30% or greater annually) in the years ahead,” observed Berklich.

Talking about the market, Sunil Anand, Vice President, Datamatics Ltd, adds, “It would be $25 billion globally. But I cannot comment on the Indian market as it is still in the nascent stage.” Presenting almost the same view Puranik adds, “UK, US, Australia being the mainly English speaking countries will comprise around 10-15% of the outsourcing pie – a good enough size to consider as one of the niche areas of focus for India.” But as per the Goyal of Ma Foi, “Although at present India does not figure out in the global RPO market, the country, with its excellent skill set, developing infrastructure, along with a huge IT and labour pool, is expected to grow at a fast pace within in next three years.”

However, problems like lack of differentiation, labour shortages and competition among the candidates might act as deterrents to the growth of the Indian RPO market. Above all one of the biggest problems that RPO companies face is with the HR Manager and HR hirers from the organization. Most often its is difficult for an RPO vendor to explain and negotiate with the organization about the mechanism of hiring. So “the understanding of the RPO as an industry has to evolve in India," says Goyal. Highlighting the most common problems faced by RPO's, Berklich emphasized on educating the market on the benefits of RPO as well as its pitfalls. Puranik identifies talent management, knowledge enhancement, career progression opportunities as the top three challenges faced by the industry.

Since the demand far outstrips supply in this segment with an alarmingly increasing attrition rate and paucity of skilled candidate this shortage leads to immense poaching of talent in the industry per se. Moreover, RPO being a rather infant industry (less than 10 years), it is difficult to secure the experience and talent required to meet the growth demand of the expanding industry. “This business needs investment in training and upgrading of skills and strong HR activities,” opines Anand

According to a study across the nation, 21000 appointment letters were sent out in a particular month while only 8000 showed up on the joining date. This has turned out to be a tough challenge for the RPO industry as this adversely affects the Client business. The biggest threats to the industry are receptiveness to the concept, shortage of skilled recruiters, high investment business and internal resistance,” reiterates Samuel.

All in all, the most important qualities to look for in a full service RPO provider are flexibility, time to fill / speed and experience / sourcing expertise including the experience track record in hiring large volumes which is very different from the adhoc hiring. Last but not the least, is of course the global reach of the recruitment provider and quality of candidates recruited so far. Today, almost all industry verticals require RPO services and it is even beneficial for companies who operate in the niche segments.

Till date, RPO services have been chiefly employed by retail, pharmaceutical and health care, financial and insurance, manufacturing and aviation industry. The trend seems to get hold of not only big organization but also the small or mid-sized organization. As the trend goes, the managed recruitment services or the recruitment process outsourcing is expected to acquire the centre stage this year. As an RPO largely affects an organization’s business growth and success, the later should have a detailed understanding of the concept and also of the expenditure for the recruitment process. This helps them decide which processes are to be outsourced and which RPO is best suited to the unique requirement of the company.