How cost-effective is RPO?

Written by
Changeboard Team

22 Dec 2014

22 Dec 2014 • by Changeboard Team

The RPOs viewpoint

Darren Lancaster, European head RPO, Hudson

Q. What global resourcing challenges are employers currently facing?

A. There is a shortage of specialist skilled talent. With the economy improving, we must source and staff accordingly. We also need to measure the quality of hires and accurately forecast what talent is required in the organisation, as well as focus more on employee value proposition.

Q. What are employers’ top priorities when it comes to recruitment?

A. The primary focus for employers is on quality, time and cost of hire. We also wish to achieve greater candidate and hiring manager satisfaction.

Q. How has the RPO model evolved in recent years – are companies embracing it more? Are some countries more in favour of it?

A. RPO providers are taking on more responsibilities and now look after areas such as the EVP of a client and talent management. They have also pushed the boundaries of directly sourcing candidates – we are working on an average of 95% direct supply of candidates, which impacts quality and cost improvements.

The US, UK and Australia remain the key hubs of RPO solutions, but we are beginning to see international clients adopt services in continental Europe, Asia and South America. 

Global and local sensitivities

Q. When implementing a ‘one-size-fits-all’ RPO, is there a danger of organisations ignoring cultural/local sensitivities? How can companies overcome this?

A. We don’t believe in a one-size-fits-all approach. A solution has to be tailored to a client’s cultures and values, especially in regions such as Asia and continental Europe. If an organisation cannot adapt to the nuances of a country, the RPO solution will not work.

Q. What about executive recruitment – is RPO suitable for this level of hire?

A. Yes – and it is becoming more popular. We now take this on in around 60% of our solutions, with great success.

Q. Is there a danger that the RPO model detaches candidates from the organisation as a whole? How can this be overcome?

A. It depends how embedded the solution is. Our solutions are white-labelled, so a candidate would have no idea they are working through an RPO. 

How can you measure RPO's effectiveness?

Q. When measuring the effectiveness of RPO, how should organisations link this with retention rates to demonstrate true impact on the business?

A. We believe it goes further. We ran a whitepaper entitled Hiring for Success, surveying nearly 300 HR professionals worldwide. Some 85% of the companies that measure quality of hire said that doing so boosted hiring quality. Almost half believe this improvement can be quantified as a 25% increase or more.

Of those who measure quality of hire, 62% believe that it makes a dramatic impact (more than 25% improvement) on new hire retention. However, the majority do not use the most effective metrics. Also, more companies need to cross-reference metrics to create a multi-dimensional view. Often, one metric does not tell the full story.

Of companies that measure, most do not differentiate between job roles. Executives, managers, sales staff, customer service staff and others are assessed against the same metrics. For the greatest value, companies need to develop specific metrics to fit each job group or family.

Overall, companies grapple with their HR technology. Only 35% of respondents say their HR information systems are working “well” or “fairly well” for them.

Worldwide, hiring manager and recruiter skills were nominated as the most important influences on quality of hiring. Surprisingly, though, less than half of respondents identified a connection between candidate source and quality of hire.

Combined measurement of candidates’ motivational drives and behavioural capabilities is the most accurate predictor of whether a candidate will be a high performer in a role. When such formal procedures were used, 91% of hires were rated good or excellent.

Q. What are your predictions for the coming year?

A. Retaining staff will become harder as the economy improves. We also expect to see more regional and global RPO models.

Q. What are your top tips for navigating the changing recruitment landscape?

A. If you are working with an RPO provider, make it a partnership approach. Also, make sure you have your selection and assessment process linked to quality of hire and work on your employer branding – it makes such a difference to attracting candidates and keeping them engaged.

The HR director's view: Katy Wilde, PayPoint

We make hundreds of hires across all our geographies. In the UK, we’ve been using an RPO provider since July 2013, while elsewhere recruitment is managed in-house.

When demonstrating the business case for adopting an RPO model, we focused on improving candidate quality and time to hire while reducing cost per hire.

The main challenge was at the implementation stage. The new RPO model was taking over from a solution that was partly in-house and partly outsourced. We needed to attract the right recruitment team from Hudson and clearly communicate why we were continuing to outsource.

In measuring ROI, we look at the KPIs on quality of hire, cost per hire, time to hire, hiring manager satisfaction and candidate satisfaction.

Our data shows that 97% of new hires are now successfully passing their probation period. With a full year of data we are able to analyse and better understand the drivers of successful recruitment at PayPoint and ensure that our recruitment process is designed to deliver this. Technology will play a big part as recruitment evolves and it will be more important than ever to track the quality of hires. 

How to build effective RPO partnerships

  • Avoid opting for a one-size fits all approach
  • Make sure you have buy-in from the business when appointing an RPO provider
  • Work in partnership with the RPO provider to get the best results from them
  • Check that the RPO provider demonstrates expertise in your geographies and skills sets
  • Make sure you feel like you can work with the RPO team

Katy Wilde

katy wilde

Katy was appointed HRD in May 2012 with responsibility for developing and implementing people strategy across the PayPoint group.