RPO 2010 – Part 1: An Inflection Point…What’s Next?

(Courtesy: http://www.fordyceletter.com/2010/08/10/rpo-2010-–-part-1-an-inflection-point…what’s-next/)

By Wade Pierson August 10th, 2010

tags: candidates economy goals recession recruiting RPO staffing trends

RPO (Recruitment Process Outsourcing). Seems fairly easy to make an educated guess as to what this really means, but think again.

I myself own an “RPO” firm (or so I thought). I have attended several national and international RPO professional symposiums over the last five years. Typically these gatherings include RPO firm executives, as well as industry gurus, and more times than not, one of the breakout sessions at these meetings revolves around a panel of experts discussing what their definition of RPO really is.

Interestingly enough, and coincidentally, each individual always seems to have a slightly different take on what “RPO” really means. They are a group of peers, all in leadership positions within the “RPO” business, yet their definition and perspective of what this actually means and what services should be and are delivered under this type of model vary widely.

RPO EARLY ROOTS

Contrary to the opinion of some, RPO did not just appear as a business model out of thin air over the last five years. The RPO model’s precursor really started in the early to mid 1990’s. The semantics of those days did not include the RPO vernacular, but was described as “Project Staffing”, or “Staff Augmentation”, or even “Stampede Recruiting”. Many firms were created in the “RPO” style in the 1990’s based on the need of Technology companies to grow exponentially on a “real time basis”. Technology companies at that time, and still today, often need to “reactively” hire very large numbers of people to fulfill the demand of a newly produced technology product or service (i.e. think Google or Apple). It was, and is, extremely important to get new technology products to market as quickly as possible, and to do that, you needed increasingly large numbers of developers, sales staff and marketing staff. Because of the large increase in headcount in those areas, it became vital to hire large numbers of infrastructure roles to support the larger organization (i.e. HR, Finance, Procurement, etc.)

THE RISE OF THE MODEL

There were a number of regionally-based and a few nationally-focused “project recruitment firms” that were started in the mid to late 1990’s. Some are still around and have diversified their offerings to now include software and services, whereas others were acquired over the last 5 years by large conglomerate HR Services and traditional temporary staffing firms, and a few of the early pioneers have stayed focused as small niche-based pure “RPO” recruitment firms.

As “business outsourcing” in a macro sense increased, so to, did the number of RPO firms, and the demand for RPO centric services increased dramatically. Organizations found that the cyclical and unpredictable nature of recruitment and the “needs-based” demand for talent varied so frequently that an RPO model provided cost support, flexibility, and scalability.

WHEN YOUR UNEMPLOYEED AUNT TELLS YOU TO BUY REAL ESTATE & OWNS 6 “INVESTMENT” PROPERTIES, YOU KNOW IT IS TIME TO GET OUT OF REAL ESTATE ALL TOGETHER

The above headline draws a parallel to the RPO business in the sense that the model took off, and everyone that already own or led a “staffing” business, as well as ‘newbies’ in the industry altogether, hung a shingle on their front window and professed to be an “RPO” firm. Globally respected and recognized traditional executive search firms whose businesses and margins had been suffering in the early part of this decade even got into the “RPO” business by creating ‘umbrella’ or ‘sister’ organizations that marketed and delivered RPO services, but they were careful not to associate them too closely with their well-branded “retained search” business. Traditional HR services and HR technology firms now also added an RPO service line and professed to be “fully scalable and global” solutions that were now delivering RPO services as well. There were even a couple (that still exist) that tried to radically change the model to create a much lower cost per hire number within a purely transaction-based model, which goes against the core founding principles of what RPO was supposed to be and the value proposition it was supposed to deliver.

WHAT’S NEXT?

Because of all of the success of the early model design and the meteoric rise of the number of firms offering “RPO” services, as well as the seemingly never-ending client demand for such a service, it created a business model that started to get complacent with its success, to the point of many firms getting “fat, dumb, and happy.”

This attitude started to increase the cost structure (they thought clients couldn’t live without this service, so let’s charge even more for it), decrease the talent level and skills of the recruiters providing the services (firms were charging more and more for the service and putting more and more junior recruiters [thus having to pay them less] in charge of the delivery of these services), and lost in many cases a direct client connectivity that is of paramount importance in any talent acquisition initiative.

Then September 2008 came and really changed the landscape, probably for some time to come. No longer (or at least much farther and few between) were companies hiring thousands of people in the course of a quarter or two. Some larger RPO firms tried to adapt (and some have had some modest success) by acquiring or building more robust technology that they integrated with how they delivered recruitment services. Others created services that “fit the times” in the form of adding and marketing training services, consulting services, outplacement services, etc. to their overall portfolio. Still and yet, 2009 was a very difficult year for the staffing industry as a whole, and in difficult times, successful firms try to innovate, acquire, or adapt as quickly as possible.

Now that we are more than mid-way through 2010, and although from a macro perspective the economy appears to be in much better shape than it was even a year ago, the one thing that has not increased very significantly is the pace of hiring and the need to hire large numbers of people quickly. We are seeing temporary workers’ numbers increase, and we are also seeing organizations’ desire to create and own more internally in the area of staffing. Most companies have had deep cuts in internal recruiters and internal staffing leaders, and for the ones that remained, the organization asked them to figure out how to do it “faster, smarter, and cheaper” internally vs. outsourcing the things they typically outsourced in the past.

What we are seeing now is a movement within many larger companies to build “home-grown” centers of excellence or home-grown best practices in staffing. They are complementing these new internal practices by only outsourcing things on a “project” or “on-demand” basis. The must-have globalization and centralization of 2002 – 2008 seems to have been put aside for the moment, and the need for more intimate local relationships with the client and smaller hiring projects seems to be the new norm.

So I think that 2011 will look a lot like 1999, when RPO firms were called “project recruitment” or “staff augmentation” firms. We seem have come full circle.

In the end, is this a good thing or a bad thing? Stay tuned for part 2 of this series….


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