Global RPO Report 2007
research sponsored by Kelly HRfirst and HROA Europe
A profile of respondents
The outsourcing phenomenon
The recruiting challenge
The vanishing global workforce
Global hiring intentions
Internal recruitment functions
The decision to outsource
Estimating the real cost of recruitment
1. Size of organisations that took part in the survey
2. Level of familiarity with RPO (%)
3. Main factors causing difficulties in recruiting staff (%)
4. Conditions that have slowed or stalled the hiring process (%)
5. Anticipated permanent, temporary and university graduate hires in 2007
6. Main job categories to be filled in 2007 (%)
7. How organisations plan to use recruitment firms (%)
8. Number of internal staff that form the HR recruitment team
9. % of internal HR/recruitment team on recruitment duties only
10. Technology used to source or track candidates
11. Organisations currently outsourcing recruitment (%)
12. Areas most frequently outsourced (%)
13. Job types most likely to be outsourced (%)
14. Main expectations of an outsourcing partner (%)
15. Main criteria for selecting an RPO partner (%)
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.”
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.
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
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.
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
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
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-
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?
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.
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
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
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.
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
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.
Size of organisations that took part in the survey Pie 1
The results represent the views of
organisations located in 25 countries.
in a total of 89 countries. A full list of
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
Level of familiarity with RPO (%)
areas is a modern phenomenon of the business environment and HR has
increasingly become one area that many
Familiar / knowledgeable
organisations are choosing to transfer to
a third party provider.
Not at all 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. Itâ€™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.
The Recruiting Challenge Recruitment has become the
Main factors causing difficulties in recruiting staff (%)
battleground of modern business.
Chart 4 Shortage of skilled staff
Whereas once organisational strategy
was the key differentiator of the high performing business and a constant
Location Current recruitment processes Other
supply of labour was largely taken for
granted, now recruitment is the defining
factor for many businesses. The sharp tightening in labour markets across the globe means that recruitment
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,
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
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.
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
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
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
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
labour pool, skills shortages persist.
economies as population growth slowed
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 â€“ â€œPrecious 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
fieldâ€?. 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
year, only a fraction meet the standards
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
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
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
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
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.
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”.
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
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
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
anticipated hiring more than
Buoyant growth in the leading global
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%
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%
How organisations plan to use recruitment firms (%) Chart 8 Sourcing, screening, testing Reference checking Applicant/recruitment performance tracking Vendor management On-boarding 0%
And yet almost 80% of respondents are
would use recruitment firms to fulfill their
need to go offshore to attract the right
experiencing difficulties â€“ it is no longer
talent. This cross border activity has
a matter of securing headcount approval to recruit and fill vacancies â€“ 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
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.
Internal recruitment functions With the global skills shortage now
Number of internal staff that form the HR recruitment team
the dominant workforce issue faced
by business, the performance of
1 to 2
the recruitment function in many
3 to 5
organisations is coming under renewed
6 to 10
More than 10
While the typical recruitment unit may
have managed adequately during an era
of abundant labour, itâ€™s a different picture when multiple firms are battling for the same scarce pool of candidates. If a recruitment division canâ€™t attract
a critical mass of employees with the
Less than 10%
goals such as aligning with strategic objectives, formulating a workplace culture, or managing succession?
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
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
to recruitment departments fairly
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
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
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
The decision to outsource One of the threshold issues for any
Organisations currently outsourcing recruitment (%)
organisation deciding on the optimum
structure for its approach to HR is whether key tasks and functions should be retained in-house, or outsourced to a
specialist service provider.
There are a range of factors to be weighed up in deciding such an issue.
Benefits can include faster time to hire, access to technology, improved quality of recruits and limiting the number of third-
party providers through good vendor management. On the other hand, there
may be fears about a perceived loss
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
Areas most frequently outsourced (%)
Contingent/Temporary Administrative Professional Business unit University graduates
outsource their recruiting or hiring
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 â€˜Professionalsâ€™,
services should be bundled under the
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
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.
Job types most likely to be outsourced (%) Chart 14
Business Unit University graduates Other
Company wide Contingent/Temporary Administrative Professional Business Unit
Main expectations of an outsourcing partner (%) Other
Chart 15 Faster time to hire
Lower cost of recruitment Integrate multiple sourcing channels Gain access to technology Manage/limit number of third party providers Other 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
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
It is worth noting the difference in priorities between those organisations
an activity that it previously conducted
The decision to outsource continued
Given the labour shortages that have
Main criteria for selecting an RPO partner (%)
contributed to delay or collapse of
hiring activity for many companies, it’s
no surprise that the most important is to help achieve a speedier recruitment process.
requirement of a recruitment partner
Technology Years of RPO experience Breadth of RPO services
As well as increasing the pace of hiring,
the other two standout requirements of
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
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
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.
Estimating the real cost of recruitment Human Resource departments are
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,
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%
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
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
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
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.
Appendix 1 Respondents by location of operations UK
Bosnia and Herzegovina
Republic of Korea
Papua New Guinea
Republic of Moldova
United Arab Emirates
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 HRâ€™s new future.
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