Page 1

Global RPO Report 2007

research sponsored by Kelly HRfirst and HROA Europe


Contents 03

Preface

05

Executive summary

06

Introduction

08

A profile of respondents

09

The outsourcing phenomenon

10

The recruiting challenge

12

The vanishing global workforce

14

Global hiring intentions

16

Internal recruitment functions

18

The decision to outsource

21

Estimating the real cost of recruitment

22

Appendix 1

23

About sponsors

Graphs 08

1. Size of organisations that took part in the survey

09

2. Level of familiarity with RPO (%)

10

3. Main factors causing difficulties in recruiting staff (%)

10

4. Conditions that have slowed or stalled the hiring process (%)

14

5. Anticipated permanent, temporary and university graduate hires in 2007

14

6. Main job categories to be filled in 2007 (%)

15

7. How organisations plan to use recruitment firms (%)

16

8. Number of internal staff that form the HR recruitment team

16

9. % of internal HR/recruitment team on recruitment duties only

17

10. Technology used to source or track candidates

18

11. Organisations currently outsourcing recruitment (%)

18

12. Areas most frequently outsourced (%)

19

13. Job types most likely to be outsourced (%)

19

14. Main expectations of an outsourcing partner (%)

20

15. Main criteria for selecting an RPO partner (%)

21

16. Average cost per hire


Preface Pam Berklich, Senior Vice President, Kelly Outsourcing and Consulting Group, and HROA Trustee Richard J. Crespin, Global Executive Director, HROA “It gives us great pleasure to introduce the Global RPO Report 2007 and to share its many findings with you. We live in rapidly changing times, affected by events like the millions of baby boomers leaving the global workforce, together with the lack of appropriately qualified candidates required by industry and the subsequent war for skills that this adverse talent shortage is producing. Overworked HR departments in companies of all sizes are finding it harder, more complex and time consuming to find the quality and quantity of talent they need to fuel their company’s growth. RPO offers organisations the opportunity to outsource the increasingly high skilled, high tech recruitment process. This creates a ‘seamless centre of excellence’ for the recruitment process, while allowing HR departments to focus on more strategic roles within their organisation. This report highlights the growing importance of RPO and how it has spread from the US through Europe to the rest of the world. It is interesting to learn how many of the senior HR managers surveyed in this report face recruitment shortages in their local markets that are replicated worldwide. While not a magic wand, RPO is proving to be the intelligent solution to combat the increasingly complex battle for skills. This insightful report follows the path of early RPO adopters, shares best practices and listens to the challenges they face in many established and emerging RPO markets.”

03


As HR departments come under increased scrutiny to meet their organisational goals and metrics, the efficacy of the recruitment process itself has become a key determinant of success.

04


Executive Summary The Global RPO Report 2007 was

labour markets has placed recruitment

experiencing increased cost pressures

conducted by Kelly HRfirst and HROA

at the forefront in determining business

and shortages of trained people.

Europe in June 2007 to explore

strategy and success. HR managers cite

Organisations seeking the best people

attitudes and practices relating to

growing difficulties in a number of key

will need to broaden their hiring efforts

Recruitment Process Outsourcing (RPO).

areas, notably the quality of candidates,

to an international pool of talent.

Respondents were mainly senior HR

the time-to-hire, and a less than

managers in a range of small, medium

efficient process.

Almost three quarters of organisations

Many HR units face their own

anticipated hires in 2007. The

responsibilities covering 89 countries.

skills challenge with a shortage of

overwhelming majority will use them

professionals and pressure to meet

for sourcing, screening and testing of

The impact of a buoyant world economy,

demanding recruitment benchmarks.

candidates. Large organisations are more

slowing population growth and retiring

Many seem to be under-staffed and

than twice as likely to use a recruitment

baby-boomers is contributing to a

overworked with some 40% having

firm as smaller organisations.

chronic and widespread skills shortage

two or less internal staff devoted to

with almost 70% of respondents

recruitment and more than 50% devoting

experiencing difficulties recruiting staff.

no more than 25% of HR staff to

and large national or multinational companies located in 25 countries with

will use recruitment firms to recruit

Slightly more than half of respondents were familiar or very familiar with RPO.

recruitment.

Approximately one third were somewhat

demand for skilled workers in a majority

As HR departments come under

heard of RPO.

of countries surveyed. Almost half of

increased scrutiny to meet their

respondents anticipated hiring more

organisational goals and metrics, the

than 100 permanent employees in 2007,

efficacy of the recruitment process

while one third said they would hire more

itself has become a key determinant of

than 100 temporary employees. Some

success. The survey found a median cost-

18% will hire more than 100 university

per-hire of 3,000 Euros with some HR

graduates.

managers reporting an average cost-per

There is a trend of strong underlying

familiar and just under 10% had not

More than half of the respondents currently outsource some or all of the HR function. The vast majority of respondents said that they would definitely consider outsourcing their recruitment in the future. The three

hire of more than 10,000 Euros.

priorities for an outsourced provider

employers need to fundamentally

Many businesses have avoided local

hire, lower the cost of recruitment,

reassess how they attract and retain

skills shortages through off-shoring work

and rationalise multiple sources of

those people who are vital to their

to lower cost countries such as China

recruitment.

business. The sharp tightening in

and India. Even these countries are now

The competition for talent means that

would be to reduce the time-to-

05


Introduction Recruitment Process Outsourcing (RPO)

third parties that can do it better? If it’s

to provide an abundant new source

is one of the fastest growing areas

outsourced, what will be the cost? Is

of labour that would ease some of the

of business outsourcing in which an

there a risk of losing control over a key

pressure for skilled workers across the

employer transfers all or part of the

part of the business?

globe.

Changes in the external environment can

But that has not materialised.

also have an impact on the decision to

Multinational firms operating in China

There are many forms of outsourcing

outsource what was previously handled

and India are facing a shortage of highly

ranging from the simple use of

within the organisation. In regard to

skilled technicians and professionals.

contracted labour, right through to a

labour markets, the global skills shortage

Wages are recording double digit

complete outsourcing alliance that can

has had a powerful impact on the way

growth. Meanwhile in Europe, the US

encompass most of an organisation’s

that recruitment is executed as part of a

and Asian economies, skills shortages are

Human Resource functions, commonly

broader business strategy.

chronic.

When skilled labour was more abundant,

The challenge of dealing with this

The emerging model of RPO is one that

the recruiting function was generally less

candidate shortage is one of the

typically involves the outsourcing of the

complex, more routine and posed less

entire recruiting function, whereby the

of a risk in terms of poor hiring decisions.

service provider will serve as the client’s

It’s a different story when skilled labour

seamless recruitment/hiring department.

is in short supply. Furthermore, the

recruitment/hiring process to an external service provider.

known as HR Outsourcing (HRO).

This end-to-end approach to RPO has the advantage of allowing both parties to develop a model that fits the client

major structural changes afoot in the global workplace suggest that these skills shortages will remain for the longer term.

foremost issues facing organisations across all industry sectors, both large and small. It raises the question of how the recruitment process can be best adapted to cope with this major structural phenomenon. Because recruitment is largely a process-

organisation’s strategic direction. At its

The impact of an aging workforce,

best, it can assess current recruitment

buoyant economic conditions, and the

practices and engineer a solution

emergence of new industrial powers

that will manage the entire process

such as China and India have fuelled

including sourcing, screening, interview

global demand for skilled technicians

coordination, offer management,

and professionals across a wide range of

and on-boarding.

industries.

There are many considerations that

The emergence of these new industrial

to outside professionals. This allows

come to play when an organisation is

blocs has seen a substantial volume

the internal HR team to focus on core

making a decision about outsourcing.

of manufacturing shift away from the

business and organisational strategy,

Is recruitment its core business? Does it

higher-cost developed economies of the

while realising measurable and desirable

have the necessary expertise? Are there

West. This development was supposed

hiring results.

06

driven function, it is often well suited to being outsourced from day-to-day operational management. Non-core, transaction duties such as payroll and benefits administration are most frequently outsourced but increasingly, the entire recruiting function is handed


RPO can provide companies with cost

for HRO will reach $80 billion by 2008,

It also looks at efforts to calculate the

savings, increased candidate quality,

recording average annual growth of 12%.

actual cost of recruitment.

This report examines the global uptake

The Global RPO Report 2007 provides a

of RPO across major markets. It looks

rare glimpse into the thinking of some of

at the factors that influence the decision

the most senior HR executives in national

Research by Gartner Dataquest shows

to outsource and the types of industries

and multinational firms as they grapple

that in the US, approximately 85% of

and sectors that are most active. It

with the task of sourcing talent in a tight

all businesses outsource at least a part

examines the recruitment environment

world labour market.

of their HR function. The Yankee Group

to gauge hiring intentions, as well as

has estimated that the global market

the challenges in attracting candidates.

effective screening processes and tools, metrics and new technology without major capital investments.

07


Pie 1

A profile of respondents The survey was carried out by Kelly

The majority of respondents (53.2%)

HRfirst and HROA Europe in June

were from larger companies, comprising

2007 to explore attitudes and practices

more than 1,000 employees. Almost

relating to RPO. The respondents

one quarter of respondents were

were mainly senior HR managers in

from organisations with less than 100

small, medium and large national or

employees.

multinational companies. Responses were gained from a total of 94

senior HR managers in sectors covering

Slightly more than half of the

Banking and Finance, Professional

respondents were operating in more

Services, Health, Hospitality, Media &

than one country. As a result, the

Entertainment, Professional Services,

responses reflect the circumstances

Retail/Wholesale and Utilities.

countries represented by respondents is at Appendix 1.

08

Size of organisations that took part in the survey Pie 1

24.5%

The results represent the views of

organisations located in 25 countries.

in a total of 89 countries. A full list of

1

53.2% 14.9%

IT&T, Manufacturing, Transport, Travel, 7.4%

Less than 100 employees Less than 100 employees 100 to 500 employees

100 to1000500 employees 501 to employees More than 1000 employees

501 to 1000 employees More than 1000 employees


The outsourcing phenomenon The outsourcing of a range of functional

2

Level of familiarity with RPO (%)

areas is a modern phenomenon of the business environment and HR has

Very familiar

increasingly become one area that many

Familiar / knowledgeable

organisations are choosing to transfer to

Somewhat familiar

a third party provider.

Not at all 0%

8.5%

17.0%

25.5%

34.0%

The level of awareness about the concept of outsourcing is still somewhat mixed across the organisations that took part in the survey. This is perhaps not surprising since the move to widespread HRO is still quite recent.

needs of industry are growing faster

demanding managers who want

than supply as a consequence of the

candidates quickly and within budget,

masses of retiring baby boomers and low

pressure to meet HR benchmarks, and an

population growth rates.

in-house recruiting team that is probably lean and overworked.

Slightly more than half of respondents (56.4%) were familiar or very familiar with

Many HR departments face their own

RPO while a little more than a third (34%)

skills challenge. There is a shortage of

Simply, for many organisations,

were somewhat familiar. Just under 10%

professionals with the expertise to attract

recruitment is no longer core business. It’s

had not heard of RPO at all.

and retain talented candidates.

these circumstances that have fuelled the

It is clear that recognition of RPO is

The traditional HR department is caught

increasing as companies deal with a

in a no-win position. It faces a depleted

challenging labour market. The talent

candidate market, rising wage pressures,

emergence of the fully managed RPO.

09


The Recruiting Challenge Recruitment has become the

3

Main factors causing difficulties in recruiting staff (%)

battleground of modern business.

Chart 4 Shortage of skilled staff

Whereas once organisational strategy

Salary uncompetitive

was the key differentiator of the high performing business and a constant

Location Current recruitment processes Other

supply of labour was largely taken for

0%

granted, now recruitment is the defining

20%

40%

60%

80%

factor for many businesses. The sharp tightening in labour markets across the globe means that recruitment

4

Conditions that have slowed or stalled the hiring process (%) Chart 5

is at the forefront in determining business success and even survival. The intense competition for talent means that employers need to fundamentally reassess how they attract and retain those people who are vital to their future prosperity.

Time to hire Quality of hires Cost to hire Quality of recruiters Poor processes Technology effectiveness Performance monitoring Hiring manager satisfaction Other 0%

For the majority of organisations,

15%

30%

45%

60%

this adds a considerable degree of complexity to the imperative of staying one step ahead of the competition: not only does the modern firm need to have

The option of training staff in new skills

What’s more, all the evidence points

a competitive strategic advantage, but it

can be costly and time consuming and

to the skills shortage remaining as

needs to ensure that the available labour

with high turnover, possibly a wasted

a permanent feature of the global

expense. Turning to the marketplace to

recruitment market for years to come.

force is capable of implementing the strategy. This can no longer be treated as a given. For many organisations grappling with the problem of attracting the right skilled

find the best people can simply result in a bidding war, if desired candidates are

The scale of the problem is evident in

available where needed.

the responses from employers. More than two-thirds of respondents (69.1%)

talent, the choices come down to a ‘build

Either way, it means higher input costs,

said they were experiencing difficulties

it or buy it’ decision; either train those

slimmer profit margins and less certainty

recruiting staff.

people internally to take on new tasks

about the long-term future of staffing.

or go to the market to attract them from

In the worst case, if the right people

The major reason for the difficulties

elsewhere. Executing on this decision is

cannot be attracted, it may mean that

were “shortage of skilled staff”, cited by

not as straightforward as it once was.

certain critical capabilities simply cannot

almost 80% of respondents.

be delivered.

10


Organisational size does have a

categories judging by the most frequent

shortage has highlighted the need for

bearing on the difficulty in recruiting

complaints from hiring managers.

active recruitment strategies including

employees. The worst affected were smaller organisations with less than 100 employees as well as the larger firms with more than 1,000 employees. In each

long-term relationship management and Broadly, HR managers cite difficulties

methods of searching for candidates not

in a number of key areas, notably the

currently on the market. Passive

candidate, the timing and the process.

job search techniques such as job

case, more than 70% reported difficulties

Candidate quality is the key issue and it

in recruiting staff.

has multiple impacts on the recruitment

By contrast, for those firms employing

boards, advertising and career websites are likely to struggle in the current market environment.

process. In isolation, a shortage of candidates simply makes it difficult to

It’s difficult to avoid the conclusion that,

between 100 and 1,000 employees,

attract a spread of suitable people from

in many instances, the lack of suitable

just 57% reported difficulties in

which to generate a shortlist.

talent and a lack of adequate recruitment

recruiting staff.

staff impose such strains on the entire Tied to the candidate shortage, but

recruitment process as to render it

Another perspective can be gained

not solely its cause, is the problem with

unworkable.

from looking at those factors that have

the length of time it takes to conduct

impeded the hiring process. Again, the impact of the skills shortage is evident with respondents citing ‘time to hire’, ‘quality of hires’ and ‘cost to hire’.

recruitment. In addition to a shortage of talent, HR managers cite factors such as being overworked or lacking the necessary resources to fulfill the task in a reasonable time.

Finally, the hiring process itself attracts criticism over such factors as a lack of consistency, inefficiency and insufficient support to manage the task. Recruitment companies themselves

There is a common theme to the

One of the key issues for recruiters in

also have their critics. The most common

nature of the issues that are plaguing

this environment is the extent to which

complaints relate to the number of

the recruitment process across many

they engage non-standard recruitment

vendors, quality of the process,

countries. These fall into a number of

strategies to uncover talent. The skills

and costs.

11


The vanishing global workforce One of the real quandaries amongst

have accelerated this globalisation of

The wage differential between these

those who examine the state of the

labour markets. Among them include

newly trained specialists and their

international labour market is how we

the moves to international trade

Western counterparts is narrowing

arrived at a position of such a skills crisis,

liberalisation, the rapid advancement of

and is expected to be on par with the

and whether it is reversible.

telecommunications and IT platforms

developed nations in the near future. Yet

which have standardised many business

despite this vast injection of talent from

It was always accepted that a skills crisis

processes, and a significant fall in

developing economies into the global

would emerge in the developed OECD

transport costs.

labour pool, skills shortages persist.

economies as population growth slowed

Why?

and the spike of baby boomers started

Certainly the impact of China and

to depart the workforce.

India, in particular, has given rise to the

International investment expert and

enormous growth of business off-shoring

author, Nicholas Vardy thinks he knows

But in the 1990s a fortuitous series

as firms have moved abroad to take

the reason – “Precious few Chinese

of events occurred as China, India

advantage of lower cost labour. The

and Indian university graduates can

and the ex-Soviet bloc joined the

scale of this transfer is most pronounced

play ball on the multinational playing

global economy in a move that would

in the markets for services such as IT and

field�. Despite the 2.5 million university

theoretically double the global labour

science and engineering, where skills are

graduates turned out by India each

pool from 1.46 billion workers to 2.93

universal.

year, only a fraction meet the standards

billion workers.1

needed by Indian companies let alone As the less developed countries have

foreign based firms. He says that by

This profound series of events would

invested in higher education, the

2010 India will have its own shortfall of

be the start of a move toward a vast

supply of engineering, science and IT

single global labour market and, for some, would provide the solution to the looming shortage of skilled workers. There have been other factors that

12

university graduates means that there is an increasing supply of talented

some 150,000 IT engineers and 350,000 business process staff.2

technical and professionals who can

Labor shortages in China have seen

perform many of the roles previously

salaries increase by more than 8% with

undertaken in higher cost economies.

some factory salaries increasing by 40%.


Turnover in some low-tech manufacturing

It’s not surprising that the next wave

particularly when faced with a localised

plants is reported as approaching 50% as

of low cost off-shoring has already

candidate shortage.

the supply of suitable cheap labour from

commenced as firms expand to countries

the countryside is exhausted.

like Vietnam and Indonesia.

McKinsey & Company estimates that

It’s all part of what has been dubbed

undertake recruitment on such a scale.

only about 10% of Chinese candidates

the era of homo sapiens globalus –

This is one area where an RPO provider,

for high value-added jobs like finance,

the universally skilled employee in a

with access to international databases,

accounting and engineering are qualified

borderless global market. With the

search and screening functionality and

to work for a foreign company.

advancement of communications and

local knowledge can add value to a firm.

As a consequence, the easing of the skills crisis that some experts believed would flow from this mass transfer of production to low cost centres has not materialised. Extraordinarily, it appears to have widened. The anecdotal evidence of the skills crisis noted above is not at all inconsistent with the findings of the Global RPO Report 2007. In India, the proportion of respondents experiencing difficulties recruiting staff was 72.7% - higher than in

3

the Internet, there are numerous jobs that can be undertaken anywhere in the world. Unless there is a need for direct contact with a customer, most jobs can be outsourced to achieve optimum price and quality.

The problem is that most organisations don’t possess skills or the technology to

Presently, there are a very limited number of firms that actively fill their current vacancies through crossborder recruitment. Candidates have shown themselves willing to move internationally but firms continue to

The advent of the borderless labour

concentrate their recruitment activities in

market and improvements in education

local markets.

and training in developing countries means that there is the potential for recruits to be sourced from a far larger pool of candidates.

It seems certain that many more organisations will need to broaden their recruitment horizons to international markets, and take a more strategic

the United States, the United Kingdom

For those organisations seeking to attract

approach if they are to compete

and even above the global average

skilled people, there is good reason to

successfully for talent.

of 69.1%.

tap into this international pool of talent,

1 2 3

Freeman, Richard 2006 “The Great Doubling: The Challenge of the New Global Labor Market” Vardy, Nicholas 2007 “The Surprising Shortage of Quality Global Labor”. Rybinski, Krzysztof 2006 “Global Labour Market and its Limitations”.

13


Global hiring intentions In order to evaluate the state of the

100 permanent employees in 2007,

The need to fill new positions is

recruitment market over the coming year,

while one third said they would hire more

the predominant concern of most

the survey sought views on anticipated

than 100 temporary employees. Some

organisations. More than half of

hiring levels for 2007.

18% will hire more than 100 university

respondents were recruiting for five or

graduates.

more locations.

economies means that there is a trend

When looking at the make up of the

The survey asked respondents to specify

of strong underlying demand for skilled

planned hirings for 2007, the impact of

which job categories they would be

workers in a majority of countries

the candidate shortage and the strong

seeking to fill. The highest numbers

surveyed.

labour market emerges again, evidenced

were for “Business operations support”

by the fact that the need to fill existing

(76.6%) and “Mid-level executive or

Almost half of respondents (42.6%)

jobs is swamped by the need to fill new

professional” (75.5%).

anticipated hiring more than

vacancies.

Buoyant growth in the leading global

5

Anticipated permanent, temporary and university graduate hires in 2007

Chart 1 Planning to hire 100 or more permanent staff Planning to hire 100 or more temporary staff Planning to hire 100 or more university graduate staff 0%

6

10%

20%

30%

40%

50%

Main job categories to be filled in 2007 (%) Chart 7 Senior executive or professional Mid-level executive or professional Business operations support Administrative Contact Centre Trades Other 0%

14

20%

40%

60%

80%


7

How organisations plan to use recruitment firms (%) Chart 8 Sourcing, screening, testing Reference checking Applicant/recruitment performance tracking Vendor management On-boarding 0%

25%

50%

75%

100%

And yet almost 80% of respondents are

would use recruitment firms to fulfill their

need to go offshore to attract the right

experiencing difficulties – it is no longer

staffing needs.

talent. This cross border activity has

a matter of securing headcount approval to recruit and fill vacancies – the key measure of success for an organisation is whether their recruitment strategy can bring on new, qualified employees in

become entrenched in some quarters as Of those who will use a recruitment firm, the overwhelming majority (93%) said they would use them for sourcing, screening and testing.

the timeframe that meets the

Large organisations (more than 1,000

organisations objectives.

employees) are more than twice as likely

It seems that the vast majority of organisations seeking to fill the required

to use a recruitment firm than smaller firms with less than 100 employees.

positions will turn to recruitment

Faced with the battle to attract skilled

companies. A total of 71.3% say they

workers, much has been made of the

a key element of the wider recruitment picture. But overall, the percentage of hires filled from cross border recruitment remains low. Some 88% of organisations will use cross border recruitment to fill up to 25% of their recruitment needs. But just 5.3% will use this method to fill more than 50% of their vacancies.

15


Internal recruitment functions With the global skills shortage now

Number of internal staff that form the HR recruitment team

8

the dominant workforce issue faced

Chart 9

by business, the performance of

1 to 2

the recruitment function in many

3 to 5

organisations is coming under renewed

6 to 10

scrutiny.

More than 10

While the typical recruitment unit may

No response

have managed adequately during an era

0%

12.5%

25.0%

37.5%

50.0%

of abundant labour, it’s a different picture when multiple firms are battling for the same scarce pool of candidates. If a recruitment division can’t attract

9

Chart 10

a critical mass of employees with the

Less than 10%

goals such as aligning with strategic objectives, formulating a workplace culture, or managing succession?

Recruitment only

minimum basic qualifications, what chance is there of meeting more abstract

% of internal HR/recruitment team on recruitment duties only

10% to 25% 26% to 50% 51% to 75% 76% to 100% No response

Arguably, there has never been a time

0%

10%

20%

30%

40%

when the recruitment function has been required to carry such a heavy load in delivering organisational goals and performance. The survey found that slightly less

40% of organisations having two or less

This raises the question as to what is

than half of respondents (48.9%) had

internal HR recruitment staff and almost

the template for a high performing

centralised recruitment processes. A

62% having five or less.

recruitment division within major

further 40.4% were decentralised and

national and multinational firms. How

5.3% were outsourced.

Not only are the staff numbers attached

is outsourced? What technology and

In regard to internal staffing, most

modest, but many of those staff are

processes are in place? What resources

recruitment departments appear to be

performing a range of functions other

are devoted to recruitment?

relatively lean operations with some

than recruitment. In the vast majority

decentralised are their activities? What

16

to recruitment departments fairly


10

Technology used to source or track candidates (%) Chart 11 Online applications/assessment Applicant tracking CV management CV search capability Job order tracking Electronic scheduling Automated reporting Other 0

17.5

35.0

52.5

70.0

of cases examined in the survey, the

worth considering whether some firms

surveyed dedicated less than 10% of

recruitment team was spending no more

are giving it the priority it requires.

their internal HR team to recruitment

than 25% of their time on recruitment.

duties, and with a tight labour market, Best practice in recruitment now follows

firms are experiencing stalled or delayed

There were only 15% of organisations

a rigorous path that encapsulates

hiring processes.

where the recruitment team spent at

job analysis and scoping, sourcing

least 75% of its time on recruitment.

employees, assessment and testing,

Respondents reported a wide range

selection, negotiation, and a range

of technologies to source and track

of legislative issues surrounding

applicants, the most popular being

recruitment, induction, and evaluation.

online applications/assessment (61.7%)

The relatively small number of people engaged fully on the recruitment function raises an interesting question about the

and applicant tracking (60.6%).

level of resources that some firms are

When the recruitment process works

allocating to this important operational

well, it can cut costs, reduce cycle times,

area when it is retained in-house.

leverage best practice and attract and

Given the pivotal role of recruitment

retain the best people.

in setting organisational culture,

Perhaps it is not surprising that with

performance and strategic direction, it is

almost half of the HR departments

17


The decision to outsource One of the threshold issues for any

11

Organisations currently outsourcing recruitment (%)

organisation deciding on the optimum

Pie 12

structure for its approach to HR is whether key tasks and functions should be retained in-house, or outsourced to a

31.9%

specialist service provider.

Yes No

There are a range of factors to be weighed up in deciding such an issue.

68.1%

Benefits can include faster time to hire, access to technology, improved quality of recruits and limiting the number of third-

Yes No

party providers through good vendor management. On the other hand, there

12

may be fears about a perceived loss

Chart 13

of control over a key element of the

According to responses received from the 94 organisations responding globally, less than one third (31.9%) currently

Company wide Organizational area

business.

Areas most frequently outsourced (%)

Contingent/Temporary Administrative Professional Business unit University graduates

outsource their recruiting or hiring

0%

12.5%

25.0%

37.5%

50.0%

processes. The scale of outsourcing is fairly consistent across both medium and large firms. The job category most frequently

function is whether their recruitment

outsourcing, provided it meets certain

outsourced was for ‘Professionals’,

services should be bundled under the

criteria.

perhaps reflecting the relative value

HR umbrella or outsourced to a separate

derived from optimum high-level executive appointments.

provider. A clear majority of respondents in the survey (70%) were using a separate

Approximately one third of organisations

provider to undertake their outsourced

outsource for all positions across the

recruitment.

organisation.

Asked whether they would consider outsourcing in the future, 75.5% of organisations responded positively, with 24.5% saying they would not. Prospective RPO customers have some

As awareness of RPO gathers pace, there

clear ideas about the areas that they

One of the issues confronting

is an increasing willingness on the part

would outsource, and expectations as to

organisations that outsource their HR

of organisations to embrace the idea of

what a vendor should provide.

18


13

Job types most likely to be outsourced (%) Chart 14

18%

7%

Company wide

17%

Contingent/Temporary Administrative

11%

Professional

23%

Business Unit University graduates Other

15%

23%

Company wide Contingent/Temporary Administrative Professional Business Unit

14

University graduates

Main expectations of an outsourcing partner (%) Other

Chart 15 Faster time to hire

Priority

Lower cost of recruitment Integrate multiple sourcing channels Gain access to technology Manage/limit number of third party providers Other 0%

17.5%

35.0%

52.5%

70.0%

Of those organisations that were willing

The organisations with an established

firms that are still considering an

to consider outsourcing, the most

outsource arrangement predominantly

outsource arrangement may be yet to

favored areas were for Administrative,

use it to recruit professionals whereas

appreciate its potential to enhance a

and Contingent/Temporary (both 23%).

those still considering a partnership

firm’s competitive advantage.

say their priority is Administrative and Contingent/Temporary.

If an organisation is going to outsource

that have already engaged an RPO

It’s possible that the more experienced

in-house, there has to be a compelling

partner and those still considering such

‘outsourcers’ have realised the leverage

value proposition to justify what, to

an arrangement.

that that can be extracted from these

many, represents a significant change

relatively higher value recruits in the

in approach and, for some, an element

current labour market. Some of those

of risk.

It is worth noting the difference in priorities between those organisations

an activity that it previously conducted

19


The decision to outsource continued

Given the labour shortages that have

15

Main criteria for selecting an RPO partner (%)

contributed to delay or collapse of

Chart 16

hiring activity for many companies, it’s

Recruiter quality

no surprise that the most important is to help achieve a speedier recruitment process.

Cost Criteria

requirement of a recruitment partner

Industry knowledge

Technology Years of RPO experience Breadth of RPO services

As well as increasing the pace of hiring,

Other 0%

the other two standout requirements of

20%

40%

60%

80%

an RPO partner are to lower the cost of recruitment, and to integrate multiple sourcing channels. Aside from the broad objectives

hire’ and cost of recruitment are

recruitment suffers. It seems that many

also improved.

organisations outsource recruitment

outlined above, it is instructive to note the comments from some of the

When asked about the criteria for

organisations considering outsourcing.

engaging an RPO partner, ‘recruiter

Typically, they are seeking a ‘better

quality’ was the single most frequent

quality of recruitment’ and a ‘better

factor cited.

selection that helps reduce turnover’. It becomes clear that quality in hiring is a

The overwhelming concern with recruiter

because their in-house resource does not have the range and depth of experience, or the market knowledge to develop and execute recruitment strategies. Significantly, factors such as ‘breadth of

quality should be seen in light of the

RPO services’, ‘technology’, and ‘years

findings about the lack of resources

of experience’ were not as important

devoted to recruitment. When firms are

to potential clients as ‘recruiter quality’

It also follows that once quality is

cutting back their recruitment staff and

and ‘industry knowledge’. Cost was

addressed, some of the main hurdles of

finding it difficult to attract appropriately

the third most important factor for firms

the recruitment process such as ‘time to

skilled HR staff, it is not surprising that

considering the RPO option.

key attribute that is frequently not being fulfilled by existing practices.

20


Estimating the real cost of recruitment Human Resource departments are

16

Average cost-per-hire

Chart 17

increasingly the focus of benchmarking studies that aim to determine their HR function comes under increased scrutiny to meet organisational goals and metrics, the efficacy of the recruitment process itself has become one key determinant of success. The concept,

Cost-per-hire (!)

performance and effectiveness. As the

500 to 1,000 1,001 to 1,800 1,801 to 2,500 2,501 to 3,500 3,501 to 5,000 5,001 to 10,000 More than 10,000 0%

5%

10%

15%

20%

known as ‘cost-per-hire’ is one of the common measures applied as part of this assessment process. But what exactly is cost-per-hire and how is it being measured? Cost-per-hire was first routinely

employee referrals, and college recruiting.

It is important to measure what works

Other data: average annual salary of new

and what doesn’t as rigorously as

hires, recruit workload, and number of interviews versus number of hires; acceptance

possible. For some businesses, hiring via

calculated in the late 1960’s. It proved

rate, time-to-fill; time-to-start, turnover,

the Internet, for instance, may go some

to be a relatively effective tool for

relocation costs and average sign-on bonus.

way in cutting cycle times and lowering

forecasting recruiting costs. By the early

Experts in cost-per-hire calculations agree

cost-per-hire.

1980s, although many organisations were beginning to calculate cost-per-hire, no standard formula was in place.

on one thing: calculating cost-per-hire can be complex because there is no consistent and accepted standard of measurement. The biggest variable centres on the treatment of management time and overhead costs.

have put forth various methods for

Among respondents who replied to the

determining cost-per-hire. It is generally

latest survey, there was a wide range of

accepted that a good cost-for-hire

estimated average cost per hires, with a

assessment should include, internal,

median of 3,000 Euros. It is interesting

external and direct costs as well as other

to note that almost 12% of HR managers

relevant charges:

reported average cost per hire of more

Internal costs: employment/ recruiting office

than 10,000 Euros.

entertainment; and administration.

or new methods, having an effective way to calculate cost-per-hire is essential to both proving the value of HR and making

Many institutions and consultants

salaries and benefits; staff travel, lodging and

Whether an organisation uses traditional

HR operations as efficient as possible. A good RPO provider will help an organisation to first understand the complexity of calculating cost-per-hire, and then control costs. Some studies have cited cost savings of between 8% and 35%. It’s worth remembering that

It is always prudent to ask the question:

cost-per-hire is not the only measure

entertainment, and salaries for other

what does it cost to bring in key talent?

of recruitment effectiveness. Reducing

recruiters.

For any organisation, it is vital to monitor

hiring costs needs to be correlated

Company visit expenses: candidate travel,

costs and have a program of continuous

against measured improvements in hiring

improvement, ensuring that money is

quality. Good metrics will help reduce

Direct fees: advertising, job fairs, agency

being devoted to the right areas and that

costs and improve quality of hire, and will

and executive search fees, cash awards for

there is an appropriate pay off.

result in recruitment process efficiencies.

External costs: travel, lodging and

lodging and meals; interview workday expenses, and others.

21


Appendix 1 Respondents by location of operations UK

Chile

Taiwan

USA

Czech Republic

Venezuela

India

Japan

Bahamas

Germany

Luxembourg

Bangladesh

France

Malaysia

Barbados

Netherlands

New Zealand

Belize

Australia

South Africa

Bolivia

Belgium

Israel

Bosnia and Herzegovina

Denmark

Philippines

Botswana

Sweden

Romania

Bulgaria

Norway

Argentina

Cambodia

Switzerland

Estonia

Croatia

Turkey

Greece

Cuba

Canada

Latvia

Iceland

Finland

Morocco

Kuwait

Italy

Republic of Korea

Malta

Singapore

Saudi Arabia

Myanmar

Spain

Slovakia

Nicaragua

Brazil

Ukraine

Nigeria

China

Uruguay

Papua New Guinea

Hungary

Colombia

Paraguay

Ireland

Cyprus

Qatar

Mexico

Ecuador

Republic of Moldova

Thailand

Indonesia

Senegal

Austria

Jordan

Slovenia

Egypt

Kazakhstan

Sri Lanka

Poland

Lebanon

Tunisia

Portugal

Lithuania

Uganda

Russian Federation

Pakistan

Yugoslavia

United Arab Emirates

Peru

22


About sponsors Kelly HRfirst Kelly HRfirst is a specialist business unit of Kelly Services, Inc. and has been an industry leader in Recruitment Process Outsourcing (RPO) since 1995. Kelly HRfirst is dedicated entirely to providing businesses around the world with established strategies proven to optimise recruiting efficiency in nearly any industry, while attracting the highest caliber of talent to your organisation. HROA Europe HROA Europe, the European chapter of the HROA is the only professional membership association committed to promoting the advancement of human resources transformation in complex organisations. Membership in HROA Europe provides you with access to the largest Pan0European network of HR executives and experts who are pioneering the transformation of their organisations and creating HR’s new future.

www.kellyocg.com www.hroa.org

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