What Does the Future Hold for Recruitment Process Outsourcing?

454402149Between 1997 and 2001, I was considered the most hated man in recruitment.

My cardinal sin? I was building the first recruitment vendor management to the banking and financial services industry. Economics and events were in our favor; remember, the dot-com frenzy, EMU integration and Y2K killer bug created the perfect storm for professional services staffing demand and agencies were in a feeding frenzy.

The model is simple:

  1. Centralize the supply chain
  2. Measure agency performance
  3. Cut the weak and promote the effective
  4. Deliver certainty and business efficiency

Simple supply chain Darwinism. This proved a success and vendor management services (VMS) went around the world.

Core to success was the acceptance that institutional sized firms were big on HR strategy and poor on recruitment execution. Agreement that agencies added value was never in doubt. Chaos became calm, value was extracted and market supply and demand dictated vendor fees. At the height of the business model it was estimated some 86 percent of agency spend channeled through the VMS channel. Then, dot-com turned to dot-coma. Life changed.


Fast forward to 2015, and the world is now recruitment process outsourcing (RPO). As an outsider, it is evident to me that the greatest shift is direct sourcing – be it by client employed or leased recruiters from RPO providers.

In my simple mind, this paradigm shift is not necessarily for the best, with recruitment firms simply relocating their staff into the client offices. I understand the value of bringing in RPO for one year to a chaotic greenfield site to leverage control, but after that, what? My belief is that the combination of demographics (demographics are, after all, destiny) quality of earnings and commercial capitalism are going to create the perfect storm for clients who depend on the knowledge economy.

In the G8 World, there are more 61 year olds than 16 year olds — the war for talent has been lost. The best name their price and it takes a special set of skills, and time, to seek them out. The RPO direct hire model competes directly with professional services recruitment firms. However, the spin is spun, and the pressure is on for RPO teams to deliver all hires and cut out the external supplier. This can only create an adversarial relationship that amplifies direct-to-line behavior. Niche suppliers that understand verticals are often the call of last resort for some of the most important strategic roles. It is worth highlighting that true niche suppliers are not seduced of offers to access three thousand jobs — by definition they will only be focused on adding value across 5 percent of those vacancies and not trade margin for volume.

Finally, I highlight the reward economics. Agency recruiters are lean hungry and operate in a sales culture. Their basic salaries are lower, and their reward on results higher. By contrast on-site recruiters are won over by a higher basic, funded by minimal fees. Will they hustle to find that one diamond in the rough?

I predict as the developed world improves economically, clients will be increasingly reliant on engaging expert niche recruiters to act where RPO cannot deliver. Therefore, it is probably time to work out how to engage with niche experts and not see them as adversarial.

 MORE: One RPO doesn’t fit all

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One Response to “What Does the Future Hold for Recruitment Process Outsourcing?”

  1. Jack Trudeau says:

    The most economically viable business mix would combine an onsite
    recruiting presence with a small group of external, niche, expert suppliers.
    With such a model a true partnership can be created whereby companies achieve
    economies of scale through the placement of high volume, junior roles through
    onsite teams, whilst utilizing the highly skilled, niche vertical focused
    external suppliers for the ‘hard-to-fill’ or ‘time critical’ positions. 

    In this
    way, savings would be made on the ‘easier’ placements and the capture of ‘low
    lying fruit’ by internal teams whilst value is driven through the introduction
    of market leading talent for positions which otherwise would have been less
    cost-time efficient for the local teams. 

    That said – it is important not to
    dilute the significance of a senior role through the adoption of too many
    external providers, as for the most specialized roles, the qualified talent
    pool will not be expansive and multiple contacts to the same candidates through
    uninformed external providers may lead to negative brand connotations or even a
    client missing out on that true ‘diamond in the rough’, balance sheet
    augmenting candidate.

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