Procurement guide to RPO

Introduction

As organizations think about how they can improve flexibility, manage costs and mitigate risk across different business functions, procurement leaders play a vital role in finding, evaluating and selecting solution providers that enable departments to function as efficiently and effectively as possible.

While procurement traditionally assists in the purchasing of technology, equipment or business support services, these teams are increasingly involved in helping functions outsource business processes like payroll, benefits and talent acquisition.

For some procurement leaders, working in the talent space can be challenging, even uncomfortable, because they are not as familiar with the language, processes, metrics, costs and benefits of human resources and talent acquisition. Despite the differences from purchasing services like security, food, and housekeeping, the fundamental goals of investing in a recruitment partner should be the same: quality service, increased flexibility, high customer satisfaction, reduced costs, less exposure to risk and measurable results.

After all, no investment has a greater impact on your organization’s success than acquiring and retaining talent.

We created this guide to help procurement teams lead an effective selection process to make a confident investment in a recruitment process outsourcing (RPO) partner. Key topics include:

• Talent Acquisition and Dynamic Risk Models & Benefits
• Recruitment Process Outsourcing Models
• RPO RFP Procurement Mistakes to Avoid

Talent acquisition & dynamic risk

Evaluating TA models and sourcing external partners requires an understanding of precisely what your TA function needs.

Costs won’t be static, and economies of scale don’t apply to talent acquisition in the same way as other sectors. In manufacturing, every SKU needs to be a new line. Efficiencies can be gained when the demand for an individual SKU increases, but not when it comes to adding a new one. If you think of each role in a business as a SKU, then pricing in TA is similar to adding a SKU. You’re reconfiguring the assembly line every time for every new role that needs to be filled, not just scaling up.

The biggest risk of a TA purchase is that it could be shortsighted and inflexible, making the solution an inefficient use of investment and resources. You need to factor stability into the equation. Will you get enough stability from an external partnership that the purchase is not super risky and flexible enough that you don’t get locked into something as things change? With the cost of change high, a strategic partnership can provide the stability needed to keep risk low, while also providing the flexibility to respond to dynamic needs and demands.

Understanding what TA needs and how to effectively source TA solutions requires knowledge of key TA metrics and KPIs. And beyond that, you must understand how those metrics and key performance indicators (KPIs) and how they relate to the business and organization goals. Working closely with HR and TA leaders, as well as C-suite, can ensure you have the correct frame of reference for assisting TA performance before you even start evaluating options.

Recruitment process outsourcing models

RPO can help reduce costs and improve TA effectiveness while reducing financial risk to the organization.

RPO providers partner with organizations to transform their talent processes to better meet their objectives. Although technically employed by the RPO provider, the on-, near- or off-site recruitment teams act as a seamless extension of your internal recruitment function. This team will be completely immersed in, and aligned with, your culture, mission and values.

RPO gives your organization the benefit of experienced industry experts and state-of-the-art technologies in a scalable package. It provides you with a team of recruitment professionals who are – unlike contingent staffing and recruitment agencies – committed to your brand, your vision and your organization. This team is not distracted by the miscellaneous duties typically expected of internal staff. Instead, they can focus their attention and efforts solely on finding the best talent for the right fit in your organization. The RPO provides an outcome-based model and is measured on overall performance and mutually agreed upon Service Level Agreements and/or KPIs.

There are different types of RPO partnerships that could be right for your TA team’s needs and goals. Understanding how each one works will help you in your research.

Enterprise RPO

Enterprise RPO is the most comprehensive form of Recruitment Process Outsourcing. When your organization invests in an Enterprise RPO solution, it gains a team of expert recruiters who take on all aspects of recruitment for the organization. Here are some deliverables you should expect from an Enterprise RPO partnership:

• Improved Quality of Hire
• Decreased Time to Hire
• Reduced Recruitment Costs
• Team Scalability and Flexibility
• Access to State-of-the-Art Recruitment Technologies
• Enhanced Employer Brand
• Improved Candidate and Hiring Manager Experiences
• Increased Strategic Focus due to liberated Hiring Managers and HR Leadership
• Increased New Hire/Employee Retention
• Transparency into the Hiring Process with Data and Analytics
• Consistency of Process
• Improved Compliance
• Diversity, Equity & Inclusion Solutions
• Passive Recruiting
• Benchmarking, Tracking and Measuring Talent Performance

Hybrid RPO & Project RPO

Hybrid RPO solutions (also known as “co-sourcing”) take on the recruitment needs of a specific location, business unit or critical position. The benefits are very similar to Enterprise RPO, yet some of the perceived risk of enterprise solutions can be mitigated by keeping the recruitment of some job families in-house. Continuity, strong relationships, and business knowledge can be preserved by internal TA experts, complemented by the subject matter expertise and flexibility provided by an outside partner. With the expanded knowledge base and experience from an RPO provider, organizations can leverage their own internal resources to deliver on strategic business priorities while the RPO provider scales up or down to support ongoing recruitment needs.

There are also strategic advantages to using Hybrid RPO with more than one provider to recruit for separate job functions or business units. If one provider fails and the other succeeds, you can shorten the learning curve if you need to move portions of the work to the successful provider. But it is not always strictly a success or failure scenario – working with multiple providers to capitalize on their regional or functional expertise may be a smart way for your organization to operate.

Project RPO solutions help organizations meet their recruitment needs during periods of timely or unexpected growth. Typically, this arrangement covers a precise number of hires over a designated time period that lasts no longer than one year. Organizations benefit from the quality and quantity afforded by an RPO provider, balanced by the expediency driven by short deadlines.

Regardless of the model of outsourcing you select, with RPO you’re buying more than just a team or a contract recruiter. RPO partners bring to the table training for recruiters, leading technology, employer branding, recruitment marketing and more. It’s a full-service partnership. You pay for outcomes that are backed up by Service Level Agreements.

RPO procurement process and mistakes to avoid

A poorly executed process can lead to a suboptimal investment that negatively impacts TA’s performance – and consequently business success – for years. Knowing the key considerations for RPO procurement can help you avoid the most common missteps in the buying process.

The top 5 mistakes

1. Not understanding cost vs. value

Work with TA to gain a complete view of both the direct and indirect recruitment spend. Determine the total cost to fill a role, then consider the opportunity cost of unfilled roles to the business, also known as cost per vacancy. Looking at cost per vacancy is especially compelling because the impact goes beyond TA’s budget, it hits your bottom line. Vacant positions mean increased workload of other team members, reduced productivity, decreased employee morale, wasted hiring manager time, overtime expenses or increased agency spend–all ultimately resulting in lost revenue.

Calculate your cost per vacancy

2. Failing to support business continuity

Depending on your organization’s industry, location or other factors, hiring demand can be highly dynamic. And TA’s ability to respond to demand fluctuations to support the business ultimately impacts the organization’s ability to function. One of your goals in supporting TA should be to improve TA cost and service flexibility. Depending on the model your organization chooses, RPO with in-house support means built-in service continuity and scalability ready for any changes in demand.

3. Making a short-sighted purchase with long-term consequences

Fixed costs are risky and prevent the TA function from being agile enough to respond to fluctuating demand. For example, Borders, the now defunct book retailer, chased the best deals and made long-term investments in real estate and brick and mortar stores – a high fixed cost – only to see Amazon disrupt the market with their online model.

Work with TA to build a flexible model that reduces their biggest fixed costs: people and technology. With the rate of change and investment in HR technology, shifting some of those contracts and responsibility to your RPO provider is a way to ensure your business is always being supported with the latest innovations, while only paying for hiring outcomes vs. expensive technology contracts no matter what they deliver. An RPO partnership can shift these costs to the provider while improving–not reducing–TA performance and results.

4. Selecting low-quality service

An RPO partner that provides low-quality service is a low-value partner. When negotiating with your selected RPO provider, identify SLAs that reflect the desired outcomes from the partnership. This will help your organization to hold your RPO partner accountable and ensure a healthy return on your investment.

5. Lack of knowledge to partner with HR/TA

Understanding the value TA delivers to your organization and the challenges they are facing will help you be an effective business partner when it comes to seeking efficiencies and cost savings. Knowing TA operating and RPO models also will enable your procurement team to support the RPO selection process from the early stages.

Leading an effective process

You will be best equipped to support TA in sourcing partners if you start building your understanding of TA dynamics and RPO models now. Meet with HR and TA leaders to discuss their current approach and whether there are areas where cost, quality and risk could be improved. Align with TA on cost vs. value so that together you are researching RPO with a shared mindset.

Complete preliminary research on RPO providers and develop a tentative list for a potential future RFP. Third-party sources provide objective reports on global and industry-specific RPO providers. Consider important factors like company reputation and history, service delivery models and technology.

From there, think about the important information you need capture–pricing, reporting & analytics, compliance, change management and more. By first fully understanding Recruitment Process Outsourcing and your organization’s needs, you will be able to ask the right questions of potential RPO partners to ensure that you can make the purchase with the greatest value to the organization.

You also need to align with the TA/HR team to understand how to properly weight and score the responses you get from potential partners. With established decision-making criteria you will be better equipped to evaluate partners and make an effective purchase.

Getting the right information from an RPO provider means asking the right questions. Priorities should include making sure that the organization has a proven history in recruiting for your specific industry, as well as asking them to spell out their processes, who is responsible for what, and detail their pricing model and additional fees. You should come away feeling comfortable in predicting how the relationship will play out so that there are no surprises.

Procurement's role in the RPO buying process

Building an RFP

Include the following important questions in your next RFP to get the insights you need to make a confident partner selection.

RFP sections

Company profile

These will help you determine the provider’s basic qualifications. You want a provider with demonstrated experience in providing RPO solutions to a variety of clients. If they do not have a track record in your industry, see if there is anything that might be translated (e.g., hiring for similar roles).

1. Describe your company history and primary service offerings.
2. Describe what differentiates your organization in the marketplace (unique value proposition, innovation, approach, philosophy).
3. Describe the investments in growth and innovation that your company has made in your RPO business in the past five years.
4. Describe your experience in providing RPO solutions for clients similar in size and scope to my organization.

Partnerships/third-party providers

You will want to determine whether all the services in this RFP will be performed by the provider. If there will be a third-party involved, make sure to ask these questions:

1. Which specific services will be provided by your firm and which will be provided by your subcontractors/alliance partners?
2. List the subcontractors/alliance partners and their specific responsibilities. Indicate if any of the subcontractors are WMDVBE (Women, Minority or Veteran Business Enterprises).

Service delivery & account management

These questions will let you know how the provider would handle your partnership, with regard to staffing and structure.

1. Please describe the specific delivery model you would propose to effectively meet our organization’s staffing support needs, including the types of roles (recruiters, customer support staff, back-office support, etc.) you would have and the required numbers of each role. Provide titles and responsibilities as well as a proposed organization structure.
2. How do you ensure that your staff understands the specifics of our client’s culture and Employee Value Propositions, and the nature of our various divisions and functions? How do you keep that knowledge current?
3. Describe how you monitor and evaluate the performance of your teams.

Implementation, training & change management

Get details on how the partnership would work and exactly what steps the provider would take.

1. Provide a high-level transition plan for our organization’s RPO program.
2. How would your firm structure the implementation team for this project? Describe roles, training and responsibilities. How long after go-live are these resources assigned to the project? Are these implementation resources available to the team postimplementation, as needed?
3. Describe your firm’s approach to assisting us with change management.

Technology

Find out the provider’s proficiency with technology and the role it would play in your RPO solution.

1. Describe any proprietary technologies available through your RPO solution that you believe would benefit our organization.
2. How does your RPO solution balance reliance on technology with human interaction to create a positive candidate experience?
3. How does your firm’s technological solutions form a roadmap or development path that will keep my organization current and able to succeed as technology changes?

Governance & compliance

Learn the provider’s accountability structure, and how they would handle any problems to keep them from escalating.

1. Please describe your company’s approach to governance and your typical escalation procedures, including who within your organization would be accountable at each level.
2. Describe in detail your diversity, equity & inclusion recruiting strategy and approach. How do you monitor and report DE&I efforts? Please describe your methodology.

Quality & continuous improvement

Learn the provider’s approach to managing quality.

1. How do you define quality? What practices and procedures are in place to monitor it?
2. Provide an example of a situation where you demonstrated a commitment to continuous improvement with a client.

Reporting & analytics

To ensure you can determine the success of the partnership, learn more about the provider’s reporting methods.

1. What type of standard reporting capabilities would be included for our organization?
2. Do you monitor performance indicators? If so, what key performance measures do you track?
3. How do you capture customer satisfaction data? How often is it captured and reported?

Pricing

When delving into pricing, you will want to compare apples to apples. Keep a separate document that will allow you to easily compare the prices of different providers and make sure the categories line up.

1. Describe your pricing model, including the blend of fixed and variable fees you are recommending.
2. Describe your implementation and post-implementation fees.
3. What other factors should we consider when quantifying the total value of your offering?

With the answers to these questions, along with any you might add that cover topics specific to your organization, you can determine which RPO provider fits best with your goals. This will give you confidence to partner with HR in making the case to Finance and the C-Suite as to why they should invest in RPO.

Sourcing the right TA solution provider

Talent acquisition expertise falls outside the wheelhouse of most procurement professionals, but for any outsourced solution to be successful, the procurement team plays an integral part. Identifying quality service while reducing costs and risk isn’t possible without the active involvement and input of procurement professionals.

By working closely with TA to understand how their function operates and how outsourced partners fit into the equation, procurement teams can enable their organization to find and hire top talent better than ever before.