The Culture Factor

Recruitment-process-outsourcing vendors are finding that success requires them to gain an in-depth understanding of their client's culture.

Sunday, March 16, 2008
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In 2006, as the Pepsi Bottling Group of Somers, N.Y., inked a recruitment-process outsourcing deal with The RightThing Inc., the vendor's representatives found themselves getting up at 3 a.m. to climb into trucks with Pepsi delivery drivers, and heading out with them on their morning routes. 

Why? Because Pepsi Bottling Group's arrangement with The RightThing specified that the vendor would be taking over the recruitment of PBG's hourly and commissioned employees -- about 10,000 new hires per year. And "delivery driver" was one of the jobs that the Findlay, Ohio-based RPO company would be expected to fill.

"Understanding our corporate culture is a really big deal," says Jane Nayagam, PBG's senior manager of diversity and workplace development.

That's the thing about having an outside party handle recruitment: Corporate culture is a big deal. One major problem with early RPO -- which tagged along as human resource outsourcing gained in popularity -- was that it tended to underestimate just how big of a deal it is to not just mimic a company's recruitment processes, but to truly "get" the company.

Prior to signing with The RightThing, PBG had been working with an RPO provider that got the job done on a transactional level, but hadn't insinuated itself into PBG's world as tightly as The RightThing has, says Nayagam. The result, she adds, were hires who had the correct skills, but who didn't understand PBG's culture -- who didn't really understand the jobs or the demands they would entail.

"Before [RightThing Inc.], the hiring managers would like and hire maybe one out of every four candidates I sent them. Today, they're liking three of the four," says Nayagam. "There's not a month that goes by without an RTI rep out in the field, meeting with our hiring managers, meeting with our location staffing contacts -- to not only help them understand the process better, but to understand our business better."

Strategic, Yet Outsourced

RPO stands alone in the HRO world as a bit of a paradox. While there are dozens of metrics that can help HR decide whether a process is a good candidate for outsourcing, the litmus test is often the question, Is it core to our business? Is it strategic?

The rule of thumb is supposed to be that non-core processes that can be "chugged through" by any properly trained party -- call-center functions, benefits administration, tech support, payroll -- are processes that can be outsourced. Core processes that serve a strategic function are usually kept inside the company.

The paradox comes when you take into account that most companies consider recruiting to be a core, strategic piece of the business -- and yet, more and more are looking to outsource it.

"People said, 'Wait a minute. If recruiting's not strategic, what is?' " says Doug Rippey, senior workforce planning consultant with Bethesda, Md.-based Watson Wyatt. "That's why the second generation of vendors out there now is really trying to sell the strategic, long-term partnerships, with the angle that, 'We know your organization just as well as you do. We have the expertise in recruiting and can provide better people.' "

According to Rippey, RPO models run the gamut from what you might expect an outsourcing arrangement to look like (all functions handled by an outside group that operates off-site) to a model he refers to as "co-sourcing," wherein client and provider employees operate side-by-side, at least partially on-site at the client's premises.

But even in the prior arrangement, RPO providers are seeking to interact with their clients on a regular basis to develop those partnerships Rippey refers to -- to know their business inside and out, to understand enough to recommend process improvements and to be able to convey the company's sense of "who we are" to applicants.

Legally, RPO representatives are distinct from a customer's own internal people, but in practice, they often act and appear to be just another group of employees, or just another department within the organization.

"[Co-sourcing] is a way of attacking the problem by providing a service without having to be 'fully outsourced RPO,' " says Christopher Doherty, vice president of business development at Philadelphia-based RPO provider TWC, a division of Houston-based Comsys Co.

Doherty adds that deciding whether to co-source or enter into a more traditional outsourcing arrangement ultimately depends on the client's needs. "We work with a customer to figure out what the best approach is and how we can add value in their particular scenario. We don't have a pre-decided notion as to 'how we do it.' "

CertainTeed Corp., a building-materials supplier headquartered in Valley Forge, Pa., has been working with TWC since April 2006. TWC recruiters work alongside CertainTeed's HR staff and handle all hiring that is sourced nationally. Local hiring remains with HR generalists at CertainTeed's 65 locations, but prior to 2006, all hiring was done by these generalists with no real control from headquarters.

"Almost half of our jobs were filled by search firms, and [reducing that] meant a large potential for cost savings," says Vice President of Human Resources David Bomzer. In addition, managers grumbled about the process, which was cumbersome and typically took more than 100 days to complete.

Bomzer lobbied to hire an internal staffing manager at the same time that TWC entered the picture, but says that the "outsource and forget" model that's possible in many areas of business-process outsourcing was not what the company had in mind for recruiting. It was vital to keep recruiting close to home, under the eyes and the control of CertainTeed.

"We didn't want to totally outsource our recruiting," says Bomzer. "We thought it was important to retain local staffing with the generalists, and to have a centralized staffing function that drove a consistent process."

Today, TWC recruiters based at CertainTeed attend staff meetings to try to get the "feel" of the company. When a new job requisition arrives, it is TWC that receives it, meets with the manager to get specs, finds candidates and handles interviews. TWC then works with the CertainTeed HR manager to develop an offer, which is presented to the applicant by a line manager. As far as applicants are concerned, each person they interact with is simply a CertainTeed employee.

"The hiring managers feel as if the TWC person is part of the organization, and that's the way we wanted it," says Bomzer. He adds that the co-sourcing arrangement allows the company to hand off a lot of tasks -- and have the flexibility that comes with keeping headcount down -- without sacrificing oversight or control.

The results have been impressive. Time-to-hire in corporate staffing (which is handled by TWC) is down to 62 days. Search-firm usage dropped dramatically in 2007 and conservatively saved the company $750,000 for the year. This, while 2007 staffing costs, including TWC's charges, hovered around $1.5 million total.

The "Science of Achievement"

Like CertainTeed, Fullerton, Calif.-based biomedical company Beckman Coulter Inc. wanted to centralize and standardize recruiting while reducing costs, especially the $25,000 or so per hire it was spending on search firms, which it used extensively. Yet the company did not want to simply hand off recruiting in order to reduce costs. Co-sourcing was the only solution that seemed to make sense for such a core function.

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"In order for [RPO] to work, the provider has to be an extension of the company," says Catherine Pendleton, Beckman Coulter's director of global talent resources. "Even to screen people, you have to understand the culture; you have to understand the products. You have to understand enough about the company you're working for to refer the right quality of people into the pool."

In mid-2006, the company entered into a relationship with Wayne, Pa.-based Kenexa, which began providing what Kenexa calls employment-process outsourcing, or EPO.

"We look at things more from the full lifecycle of employment -- not just the attraction and hiring of an individual, but also the performance and retention of that individual post-hire," says George Vollmer, Kenexa's practice leader for EPO.

Kenexa's approach is to find the "science of achievement" for each client (see sidebar) and to embed it into the recruitment process.

"After year one, we start to look at turnover," says Vollmer. "Are these people staying? Are they getting promoted? Are they moving into management positions? We're also looking at their engagement. Are they engaged? Are there things that we can look at from a selection standpoint that will predict engagement? We look at the performance of those individuals. Are the people who we're delivering doing better than the folks who were hired under the previous program?"

Pendleton says some elements of this follow-up approach (via manager surveys) are currently in place, while other elements (plotting the performance scores and sales revenues of Kenexa hires) will begin in 2008. It's too early to tell if the quality of hires has truly improved, but she does say that the cost-per-hire has been reduced nearly tenfold, to $3,000 each with all Kenexa costs factored in.

And perhaps as importantly, the previous decentralized, haphazard system of staffing, which Pendleton described as "chaotic," has been replaced with a central process that, for all entry- to mid-level professional jobs, is handled end-to-end by Kenexa.

The corporate staffing team was reduced from 12 people to four, and some of those became generalists who partner with Kenexa at the interview stage. With Beckman Coulter needing only to conduct interviews and decide whether or not to hire, HR has been freed to work on other issues.

"The intent was to eliminate the tactical recruiting activity that all of us were very involved in and outsource it to someone who could provide a diverse sourcing pool in the hope that we would improve the quality of hire," says Pendleton.

Yet, the partner-like relationship that has come to characterize what Watson Wyatt's Rippey calls "second-generation RPO" allowed Beckman Coulter to have all of this while keeping recruitment -- still a core, strategic function -- very much under its nose. For companies that turn to on-site RPO representatives, entering into an RPO arrangement is similar to hiring specialized employees.

Setups such as Pepsi Bottling Group's arrangement with The RightThing, which entails no on-site RTI presence at PBG facilities, are almost like adding an entire department.

"We really do act as an employee," says Jamie Minier, The RightThing's chief operating officer. "When an applicant calls into a 1-800 line, we answer it as [the client company]. We go through pretty robust training. We'll stack products on a shelf. We'll sit through orientations. That makes it possible, when a candidate asks about the company's benefits program or why they should work for this organization, we actually have the passion to be able to deliver that message."

"When you're sitting in a room of RTI folks and PBG folks, it's a very blurry line as to who is RTI and who is PBG," says PBG's Nayagam, who adds that she learned from past experience that the partnership required for successful RPO is a two-way street.

"We can't sit there and assume that it's all their responsibility to 'get' us. We have to teach them. I give our field organization a ton of credit for teaching RTI about our business, but on the flip side, I give RTI a ton of credit for what they've done."

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