Creating a Mutually Beneficial – and Accountable – RPO Partnership Through the Power of Gainsharing

This year at the 2018 HRO Today Forum, Sevenstep and a multi-client contact, Jason Munoz, discussed a successful partnership model called “gainsharing.” We’d like to continue the thought-provoking conversation on how gainsharing can work within recruitment process outsourcing (RPO), which kinds of organizations it’s best suited for, and provide some suggestions on how to put it into action.  

In a traditional sense of the term, gainsharing is best described as a system of management in which employees or customers receive benefits directly as a result of cost-saving measures that they introduce or participate in delivering. Applying this concept to an RPO engagement is the natural progression of a strategic talent acquisition program; one in which RPO provider and client each has a vested interest in the measurable outcomes of strong performance.

The challenge – and the opportunity – of the gainsharing dynamic is that it helps better align talent acquisition results to actual business results. This alignment – between business and talent acquisition goals – is not a new concept nor is it being fully leveraged or executed on, yet. And whether or not you use an RPO provider, we encourage you to consider how talent acquisition can impact your organization financially.

The Math Matters: Where Gainsharing Works Best

Here’s the gainsharing clincher for some businesses: it’s a two-way street. The model requires asking another organization to venture out on a limb with you, and to share in your resulting profits or losses. RPO clients and their providers have to assess their performance as if they are one. As you can imagine, this requires a serious amount of transparency in order to work.

Well-executed RPO engagements are complex for many reasons. For one, they require a significant upfront investment in order to gain alignment in workflow, culture, and brand. It’s not a model you can simply put on top of your existing talent acquisition strategy. In fact, in order for RPO to really work, the relationship must move from one of vendor and client, to one of business partners who work collaboratively to drive a meaningful return on investment.

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When this happens – when good recruiting delivers positive and measurable business impacts – the consideration of gainsharing can enter the conversation. The why is obvious to anyone who has successfully shared profits this way, but some still might be thinking too transactionally, and less so as business partners. Gainsharing is a way to keep score, for both parties to profit, and for each to have an equitable amount of ‘skin in the game.’

Before moving from a traditional RPO to a gainsharing model – or as you consider it – factor in these five crucial areas:

  • Identify quantifiable areas of impact. This can include, but is not limited to: hiring manager productivity gains, overtime use and wages, vacancy rates, and turnover.
  • Benchmark waste. Calculate the right ratios, i.e., current levels of waste compared to the target, and appropriately incentivize your partner based on their ability to realize those targets.
  • Create fair targets. Arguably, this is one of the most difficult components of a gainsharing agreement. It’s important to assign a meaningful target that talent acquisition is reasonably responsible for impacting, i.e., if one of the measurements of the gainsharing model is to decrease turnover, this involves not only the recruiting function sourcing/presenting quality candidates, but also the hiring manager’s selection. Indicate the percentage for meeting – and exceeding – goals that will be attributed to the increase in positive results, or the decrease in variables like overtime, vacancy, and turnover.Our tip: be sure to consider all angles. For instance, if hiring managers typically bring in 10-12 candidates for any given opening and your RPO partner is able to reduce that to 2-3, calculate the time savings for hiring managers, then identify factors tied to the candidates themselves – like retention, performance, and decreased overtime – and assign a value to each. Here’s the example we used during our presentation at the HRO Today Forum:
  • Designate a target measurement period of time. Quarterly business reviews should be a standard feature of any RPO engagement, but this could also be measured on an annual basis.
  • Tie relevant compensation to results. This is where a percentage of gain or revenue is assigned to the results of the RPO engagement. If the targets have been appropriately measured and assigned a value, this step should write itself.

A successful RPO partnership will stand the test of time and should outlast any personnel changes on either side – because its business value has been proven. Gainsharing is a great opportunity to take that partnership to new heights.

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Greg Karr

Greg Karr
Greg Karr is executive vice president of Sevenstep.

Greg Karr

Jason Munoz

Jason Munoz
Jason Munoz is senior director of strategic staffing for Key Energy Services Inc.

Greg Karr

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