People are the engine room of any business, but finding, nurturing, recruiting, and onboarding talent is resource intensive. Many organisations struggle to cope with the time needed to execute this effectively. So, what happens then?
Typically, larger organisations will have an internal recruitment function, and some small to medium-sized businesses may also employ an in-house recruiter or small team. However, many companies, regardless of size, will still look to external recruitment agents for help, or increasingly, many choose to engage with an RPO provider.
Despite a challenging economic climate, research from the Recruitment Process Outsourcing Association reports that the size of the global RPO market was at $5.4 billion in 2021 and is projected to grow to around $10 billion by 2027.
Definition of RPO
RPO (Recruitment Process Outsourcing) involves entrusting a specialist RPO provider with a company’s recruitment activity. This can involve taking over the whole of a recruitment function or just part of the process.
Multiple recruitment models are available, with many organisations using a combination to suit their needs, depending on their hiring volume, budget and industry.
Some of the key models include:
Recruit as you go
While not a recognised model as such, many very small companies or start-ups have no fixed plan, and hires are made on a reactive basis as the need arrives.
This is when companies use the services of an external agency to hire candidates. Often, organisations will work with multiple agencies depending on the type and volume of roles. In this instance, companies often have a Preferred Supplier List (PSL), usually with pre-agreed rates and business terms.
When hiring volumes increase, it becomes cost-effective to recruit an in-house recruiter or team to take responsibility for as much of the recruitment as possible. This might be supplemented with agency use for periods of high volume or niche and hard-to-fill roles.
Outsourced - Full RPO
With a fully outsourced RPO solution, the specialist provider takes responsibility for the full talent acquisition capability. The provider will manage the entire end-to-end lifecycle, from strategy, plan and processes, marketing, sourcing, interviewing, onboarding, and reporting.
Outsourced – Partial RPO
Partial RPO, sometimes known as blended or modular RPO, allows businesses with an existing talent lead or small in-house team to outsource specific components or stages of their recruitment process. This might include handing over the sourcing, screening or first interview stages while retaining control over the final interviews, job offers and onboarding. Partial RPO can provide companies with that valuable degree of flexibility without overburdening their internal team while maintaining overall control. Early Career recruitment is an excellent example of where this approach can be advantageous as it warrants a specialist approach as these important candidates will become the foundation of the company’s future workforce.
Outsourced – Project RPO
Project RPO provides a flexible and scalable solution that allows organisations to address a short-term hiring need without a long-term commitment, allowing the internal team to focus on core business functions. This can involve recruiting for a new region, supporting a new product, or increasing headcount for seasonal demand.
Recruiter on Demand (RoD)
Recruiter on Demand is a form of staff augmentation, allowing a company to add additional recruiters to their talent team on a paid-for-time model. Typically, there are no specific deliverables agreed between the provider and the client, and they would be managed within their existing HR infrastructure. This model is commonly used when businesses have a peak in hiring needs and need one or more additional recruiters for a short period of time.
A note on embedded recruitment
While all the RPO models offer a similar service, the approaches can differ. The embedded model entails integrating talent partners to seamlessly become part of an organisation. They immerse themselves in the culture, adopting the client communication channels and working on-site as internal team members. This integration transforms them into a genuine extension of the client organisation.
Other Recruitment Terminology
The recruitment industry enjoys an extensive variety of terms and acronyms, so here are some further terms explained.
Managed Service Provider (MSP)
MSP in recruitment refers to when specialist service provider manages an organisation’s contingent (non-permanent, contract, temporary) workforce. Generally, an organisation would need a certain level of demand (spend) to warrant outsourcing this. However, technological advances that provide access to sophisticated tools and resources have allowed companies with smaller demand to utilise this. From a regulatory standpoint, entrusting this management to an external entity offers a business added protection.
Statement of Work (SoW) and Services Procurement Management (SPM)
Statement of Work and Services Procurement Management, while not entirely new in the recruitment space, have seen wider adoption in recent years. They offer organisations more flexibility and control over their spending relating to contingent hiring. With constant changes in contingent labour legislation, many companies need to gain more control in this area, so they might choose to draw up a statement of work or add it to their MSP agreement.
The Total Talent Model is an emerging solution, encompassing the recruitment of both full-time employees and the range of contingent workers the company works with. This model allows a business to align the resources with the business needs, achieving a delicate balance between cost efficiency and heightened adaptability.
How does RPO work?
At first glance, RPO, with its broader and more strategic scope compared to other staffing solutions, is a more complex business arrangement. However, in the simplest case, part of the recruitment process is handed over to the specialist RPO provider to deliver against a contract which is made up of a service level agreement and key performance indicators (KPIs).
Here are some ways a specialist RPO provider can provide value to an organisation:
- Workforce Planning
- Talent Sourcing
- Multi-Country or New-Region hiring
- Specialist Hiring Types
- Employer Brand Development & Implementation
- Talent Intelligence and Reporting
- Candidate Lifecycle Management
- Pre-Employment Screening
- Compliance and Risk Management
- Onboarding Support and Planning
- Improving Efficiency
- Ensuring Inclusivity
- Providing Data & Reporting
When making decisions about engaging with an RPO provider, consider these two factors: -
Scope: What aspect of your operations are you outsourcing, and what is the anticipated duration of the agreement? Do you need to outsource all hiring, or are you targeting specific locations, skill sets or seniorities that are challenging to deliver?
Technology: Will the provider introduce their technology and systems, or will they align with your existing technology, methodology and processes to fulfil the recruitment needs? The specifics will depend on the RPO arrangement and what works most effectively for the business.
Five challenges RPO can mitigate for smaller businesses
1. Access to the best and the right talent
The job market is dynamic and subject to regular shifts dictated by the changing economic situation. LinkedIn’s State of the Labor Market Report shows that the overall job market seems to have cooled since its post-COVID recovery, with hiring falling across all sectors. However, despite fewer job vacancies, many businesses are reporting they are still struggling to recruit. Attracting the best candidates for a role is time-consuming, and a lack of awareness of a business makes it exceptionally difficult. A reliance on job adverts and a hope that the right person sees them isn’t adequate. But for resource-compromised small companies, this is their only way to recruit.
Working with a specialist, RPO gives access to expertise with connections to high-quality talent without placing excess pressure on the internal team. Understanding where to find that resource and how to access it is a challenge for SMEs, particularly when they’re competing with similar or larger organisations for the same talent.
2. Creating an efficient recruitment process
Designing a robust process for efficient and engaging candidate communication is key in preventing unnecessary complexity, a factor that often discourages candidates and leads to dropout rates. In smaller companies, processes tend to be more adaptable, often involving direct interaction with the hiring manager, who may not have a background in recruitment and is managing the process in addition to their existing responsibilities. This can affect the candidate's experiences and sometimes result in poor candidate feedback, impacting overall attraction. A specialist RPO provider can mitigate these issues by creating best-in-class processes, ensuring a positive experience for everyone involved and facilitating efficient hiring decisions.
Organisations often underestimate the cost of recruiting a new hire. On a fundamental level, this encompasses the salary cost of the new hire, potential fees from a recruitment agency and any advertising fees (job boards, etc). However, the financial impact can escalate swiftly when factoring in the time taken away from regular business activities by those involved in the recruitment process, along with the 'empty seat cost' resulting from a prolonged hiring process. This can be particularly challenging for smaller businesses needing to manage their budgets efficiently. They are faced with the need to fill positions quickly but often lack the internal resources to do so, placing them in the difficult position of being under-resourced and stretched thin, ultimately increasing cost pressures across the entire organisation.
4. Diversity, Equity and Inclusion (DE&I)
DE&I has become increasingly important, not only for companies looking to outperform against their competitors but also for candidates. Glassdoor reports that 76% of job hunters cite a diverse workforce as a non-negotiable factor. While many small companies are aware of their obligations around DE&I, many do not know how to start implementing effective initiatives that will result in meaningful change. A specialist RPO partner can offer invaluable support in cultivating a culture that welcomes and celebrates diversity. They can handle the heavy lifting of creating an inclusive process and ensuring appropriate outreach and representation. With extensive experience in improving hiring diversity, RPOs can allow the company to focus on retention and cultural alignment.
5. Building a strong Employer Brand
In a competitive job market, a strong employer brand is crucial, and this must encompass an organisation’s policies around hybrid working and offer candidates a sense of what it is like to work there. Being seen to be authentic is critical to engaging with candidates. Gaining valuable external candidate feedback is often overlooked as it is time-consuming; however, relying purely on internal feedback leads to a skewed view. Taking the time to research and then implement findings is critical. Most RPO providers will have a dedicated talent marketing function, which offers access to an expert or team to help build a strong employer brand.
Is RPO only for big companies?
In the UK, nearly half of businesses outsource a portion of their recruitment activity. In smaller companies, this typically entails the use of recruitment agencies. As we move up the scale to larger organisations, it’s estimated that approximately 15% entrust their entire recruitment process to outsourcing, with over 55% of them outsourcing at least some recruitment services (excluding any agency usage). That said, RPO isn’t exclusively for large organisations. We have demonstrated that SMEs can benefit significantly from outsourcing their recruitment, provided they choose a specialist supplier that understands their unique challenges. Conversations with HR and business leaders frequently point to the need to drive business growth and services forward, and often, the quickest route is outsourcing.
What some of our clients have to say:
Helen Godliman, Head of HR at The Instant Group, shares her experience working with Instant Impact as their RPO partner.
“When we look at our partnership with Instant Impact, from day one, they’ve helped us to find the most talented team members, which is a key priority as a growing business. Not only are the hires of a better calibre, but the hiring process is faster.”
Helen expanded, “Our partnership with Instant Impact has helped to control our costs and, with it, our reliance on agencies. As part of the partnership, we have a number of SLAs in place, one of which is an 80% direct hire rate, which contributes to our controlled costs. Using one partner for all our recruitment needs means we benefit from having one in-house team, or that’s how it feels anyway. They understand our business, our pain points and genuinely care about the people being placed into it and our future growth.”
James Doyle, Head of Operations at Octopus Energy shares his experience working with us as a trusted partner - “In a world where reliable partners are critical to growth, we've found a gem. For over seven years, Instant Impact has been a phenomenal partner as we have grown to become the 2nd largest energy retailer in the UK and have a pretty big impact driving for net zero globally. They understand why we're different and what we need, and I'm looking forward to continuing with them on our journey!"
Where to go from here
Hopefully, you have an improved understanding of the various staffing solutions available in the industry and the potential business challenges that can be solved using RPO. In our next blog in this series, we will outline some best practices for building a business case for RPO. In the meantime, feel free to explore our RPO solutions or contact one of our team for an informal chat.