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The Happy Medium

The Happy Medium | Human Resource Executive Online Once considered solely the domain of the Fortune 500, RPO is increasingly being employed by mid-market companies.

Monday, March 16, 2009
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Founded in 1954, New York-based electronic news distribution firm PR Newswire Association has seen its business grow substantially in recent years. Yet, despite this growth spurt, PR Newswire remains a relatively small organization, with a global staff totaling less than 1,000.

It was quite an undertaking, therefore, when it decided to establish a new hub in Albuquerque, N.M., in early 2007. The company found itself needing to quickly fill more than 100 positions. For a firm of its size, such a task would typically involve either enlisting the services of a headhunter or adding numerous recruiters to its payroll.

"That would have meant sorting through hundreds of resumes and looking for ways to screen people in and screen people out," says Angela Scalpello, PR Newswire's senior vice president of human resources. "I didn't want to bring people on staff just to do recruiting."

Instead, Scalpello turned to Larkspur, Calif.-based Accolo Inc., the recruitment-process outsourcing firm the company had been partnering with since late 2005. On behalf of PR Newswire, Accolo solicits applicants via its Web site and then prescreens them to determine who might be a good fit for the company. PR Newswire's hiring managers then make the final decision.

During the first three years of the partnership, Accolo has helped the media company bring people on board for virtually every area of the business -- from editorial staff and researchers to paralegals and HR professionals to sales and marketing professionals. It even found the company's current chief information officer and senior vice president of strategy.

In 2006, the first full year of the partnership, PR Newswire made 109 hires through Accolo. The following year, that number soared to 246. In 2008, Accolo's efforts included assisting with the recruitment of 20 new IT employees when the media company needed to build up its technology capabilities.

PR Newswire is just one of a growing number of mid-sized companies (generally, those with between 500 and 5,000 employees) turning to RPO. Jamie Minier, president of Findlay, Ohio-based RPO provider The RightThing, projects mid-market RPO will account for roughly 30 percent of her company's growth over the next year and perhaps 60 percent within two to three years.

Some may question whether RPO is even justified for mid-market firms, considering the relatively low volume of hires made by most companies of this size. However, analysts, providers and HR professionals tend to agree there are many instances in which RPO can be a very reasonable solution. 

"It definitely can make sense to employ RPO as a mid-market organization because an outside firm can play a myriad of roles -- managing the sourcing process, coordinating career fairs, or managing back-end processes like drug testing and background checks," says Amy Tilles, a principal in the HR effectiveness practice at Mercer's Chicago office.

Gary Bragar, HR outsourcing research manager for NelsonHall, a Boston-based outsourcing analyst firm, says that despite the troubled economy, the mid-sized market remains strong for RPO vendors.

"Even though these are smaller companies, they have the same talent-acquisition needs as the larger enterprise businesses, and they are looking for specialists to help them," says Bragar.

What's more, RPO providers say, outside firms can shorten time-to-fill, improve the quality of hires and bolster compliance rates, all for what they say is a significantly reduced cost. Some providers even argue that RPO actually makes more sense for a smaller company than for a large one.

"The giant companies have less of a need for RPO because they've got so much infrastructure, whereas with small- and mid-sized companies, you can really get in there and have a true impact," says Kim Shepherd, CEO of Decision Toolbox Inc., an Irvine, Calif.-based RPO provider. "The blood vessels are a little closer to the skin." 

Looking for Some Help

PR Newswire initially turned to RPO out of a desire to free up HR staff to focus more on strategic matters and less on administrivia, says Scalpello.

"There are big chunks of the recruitment process where HR people don't really add value," she says. "There were so many other things I wanted to focus on: How do we track the best candidates? How do we retain them? How do we develop them? How do we keep them ahead of the curve in terms of the services they offer to our clients? How do we make them better business leaders?"

RPO also enabled PR Newswire to respond to changing market demands by quickly ramping up or down without having to hire -- and then, most likely, fire -- an internal team of recruiters. This scalability is one of RPO's key selling points, according to Brian Pruitt, business development manager at Search Wizards Inc., an Atlanta-based recruitment firm offering a "select RPO."

As Pruitt explains, his firm supplements companies' recruitment efforts by taking over specific pieces of the process, such as sourcing, while the company manages the rest in-house.

"We put in place either the research side or interim recruitment support to help with the sourcing and recruitment of candidates," says Pruitt. "Once they're in the pipeline, the company can move them through the process."

Analysts say this scaled-back approach to RPO is becoming increasingly common, particularly in the mid market. While large organizations typically look to RPO providers for end-to-end recruiting services -- from job requisition to onboarding and everything in between -- Madeline Laurano, principal analyst at Bersin & Associates in Oakland, Calif., says smaller companies tend to focus their outsourcing on two key areas: sourcing and screening.

"Mid-sized companies don't necessarily want branding or reporting -- the other outsourced pieces that come with RPO," says Laurano. "They are not thinking strategically about what their unique hiring needs are. They are just looking for some help on an as-needed basis -- 'We need help doing phone interviews; let's outsource that.' "

Filling the Pool

For its recent foray into RPO, GeoServices, a 5,000-employee oil and gas consulting firm based in Le Blanc Mesnil, France, enlisted the assistance of London-based Alexander Mann Solutions to help meet its goal of recruiting 1,000 people each year. "It was the only way we had to address this massive recruitment," says Franck Thibault, GeoServices' human resource development director.

Through a system of "proactive sourcing," AMS maintains a ready pool of prescreened and interested potential employees. Each month, it presents 25 to 30 candidates to GeoServices, 80 percent of whom ultimately accept the company's offer of employment. That's up from acceptance rates that varied between 45 percent and 50 percent prior to when the company began working with AMS, according to Thibault.

Such a high success rate is achieved, in part, by ensuring that each candidate presented to GeoServices is a good match for the company's culture, says Steve Leach, managing director for AMS OnDemand, the provider's mid-market RPO offering.

During the implementation last fall, GeoServices took the time to educate a group of AMS recruiters about its unique culture, inviting them to the company's training center in Aberdeen, Scotland, where they were given a crash course in the oil and gas market and encouraged to ask any questions that came to mind.

Currently, GeoServices is only contracting with AMS to recruit recent college graduates. While he's been pleased with the quality of hires so far, Thibault admits to being skeptical about AMS' ability to recruit more experienced people.

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"My first target was to ask them to source, screen and recruit the graduates, which is probably less difficult than recruiting people with five, six, seven years of experience, especially in oil and gas, which is a very competitive job market," he says. "If, in a few months, the results are very good and the indicators are still good, we may be open to considering other positions."

Navigating the "Ebbs and Flows"

While GeoServices uses AMS only for entry-level hires, Decision Toolbox Inc. serves as the "de facto recruiting department" for Black & Decker Hardware and Home Improvement, a 4,000-employee division of Towson, Md.-based Black & Decker Corp.

From front-line administrative assistants to senior directors or even a vice president, BDHHI relies on Decision Toolbox for "any kind of recruiting we need to do," according to Trish Barnes, the firm's director of human resources.

Like PR Newswire's Scalpello, she considers RPO to be a reasonable means of ramping up without having to hire internal recruiters.

"It's a great way for us to be able to maneuver through the ebbs and flows of the hiring cycle," says Barnes.

When a need is identified, the hiring manager enters a requisition into BDHHI's Web-based applicant-tracking system, which then notifies a Decision Toolbox recruiter. The recruiter then works in conjunction with the hiring manager and an HR manager to ensure a good fit with Black & Decker.

Most of the time, Barnes says, the company hires one of the first three candidates Decision Toolbox recommends to a hiring manager. In 2007 and 2008, Decision Toolbox assisted BDHHI in making 53 percent of its roughly 75 external hires. (Hiring managers have the option of using Decision Toolbox, another vendor or their own network to find candidates.) 

The partnership has brought cost-per-hire down from 12 percent of a new employee's first-year salary to less than 5 percent, according to Barnes. She credits a dramatic reduction in cycle time -- from approximately 90 or more days at the beginning of 2008 to 53 days by the end of the year -- for the reduction in overall costs.

She also says she considers Decision Toolbox "an extension of my department," and is looking to expand BDHHI's relationship with the vendor, to include "giving them a place at the table from a workforce-planning perspective."

She has already taken one step in that direction, instituting "quality business reviews" in which Decision Toolbox recruiters are brought in to meet the hiring managers they've been working with and discuss what has and hasn't been working well.

"A lot of our hiring managers have been here a long time and may not know what the environment is like outside these doors," says Barnes. "[Decision Toolbox] can provide that insight for us and give us another perspective when we are looking at how our teams should be structured."

PR Newswire is forging a similar partnership with Accolo, bringing recruiters in for quarterly meetings with HR and hiring managers. Together, they review previous efforts and go over what recruitment is expected to look like in the next quarter.

These days, PR Newswire's hiring managers are completely onboard with RPO, says Scalpello. Initially, however, she felt they would be somewhat apprehensive. She took a "practical and economic" approach to getting them to try Accolo, telling them she would not force them to use the RPO provider.

However, if they chose to continue using their existing third-party recruiter, there would be financial ramifications.

"The first year we launched it, I said, 'We're not going to force your hand. If you list this job with Accolo, the cost will be on my HR recruitment budget,' " she says. However, if the managers decided they wished to continue using their contingency search firms, then "that 20 percent of that $80,000 employee would come out of their [profit-and-loss statement]. They would have had to have been fools not to give it a shot."

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