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Employers Move to RPO for Scalability and Cost Savings

November 19, 2009
Related Topics: Contingent Staffing, Candidate Sourcing, Workforce Planning, Featured Article
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In January 2008 before the recession fully hit, U.S. hiring managers at Weatherford International Ltd., a global oil field services company, were staring at 1,800 open positions.

In response, the company brought in Raquel Olsen as U.S. recruiting manager to build a centralized recruiting function at its Houston headquarters. Olsen quickly constructed a business plan to hire on 15 to 17 in-house recruiters, plus three employees dedicated to sourcing and data mining as well as two clerical staff members.

Two months later, Olsen scrapped the plan and prepared to outsource the entire recruiting process. Six months after that, the economy collapsed, taking the oil and gas industry down with it. Weatherford, with $8.5 billion in annual revenue and more than 40,000 employees worldwide, watched demand for its oil field services tumble in the United States.

“In November of 2008, our rig count tanked and our managers started canceling all those open positions,” Olsen recalls. “It was obvious that we had made the right decision to go with RPO. It was extremely apparent that if we had not gone RPO, we would have spent a lot of money hiring and training in-house recruiters, and then had to lay them off, with all of the associated costs.”

The recession has served as an urgent reminder that employers must be able to scale recruiting up and down to match radical shifts in the economy. Scalability—RPO’s strong suit—is particularly beneficial when hiring implodes and every cost comes under scrutiny.

At Weatherford, where the number of open U.S. positions is down by a staggering 90 percent from its 2008 peak, Olsen is acutely aware of RPO’s advantages.

“We pay only for what we use,” she notes. Although the company’s non-U.S. locations have helped it pull through the economic storm, expenses are still closely examined.

After lackluster growth of 3.5 percent in 2009, RPO growth is forecast to hit 12 percent in 2010, according to NelsonHall. Many of the firms that laid off recruiters when the recession hit will not hire them back when business conditions improve. Instead, a growing number will turn to RPO for maximum scalability and substantial cost savings.

Slashing cost-per-hire
In the relatively conservative oil and gas industry, comprehensive RPO is still somewhat uncommon.

“Initially, we had no idea that we would go to RPO,” Olsen says. But when the full cost of building an in-house recruiting function became apparent, Olsen investigated alternatives and compared the in-house plan with RPO costs.

The company contacted five RPO vendors, reduced that group to two and finally selected Futurestep, Korn/Ferry’s outsourced recruitment subsidiary with headquarters in Los Angeles and 40 offices in 17 countries.

“Futurestep was a little more expensive than the other vendor, but it had worked with other oil and gas companies in what is a very specialized niche,” Olsen says. “We didn’t want to have to continuously train and educate a vendor. We wanted oil and gas knowledge.”

Weatherford’s 10,200 U.S. employees include field engineers, technicians, welders, mechanics, sales representatives and account managers. With open positions for jobs ranging from geologic sample catchers to wireline field engineers and mud loggers, dedicated RPO staff with a technical grasp of the job requirements is essential.

Before the RPO deal, Weatherford’s hiring managers handled all recruiting and generated requisitions at will.

“There was no real structure, no real process,” Olsen says. Hiring managers placed ads to fill hourly positions and relied on contingency recruiters to bring in professionals.

With the RPO arrangement in place, Futurestep handles all recruiting. Olsen’s key contact is a project leader based in Futurestep’s Houston office. A team leader is based on site in Weatherford’s Houston office.

Four dedicated recruiters operate out of the Futurestep office but come on site at Weatherford to meet with human resources staff and managers. In addition, three dedicated sourcing employees funnel names to the recruiters from Futurestep’s shared services center in India.

The four Futurestep recruiters are branded as Weatherford employees, with company e-mails and phone numbers.

“It’s important that our managers and the job candidates see the recruiters as part of our company,” Olsen notes.

Every month, Olsen views how many positions were filled and the billing price per requisition. Pricing varies for nonexempt and exempt positions, but averages $1,100 to $1,200 for each position filled.

Compared with what Weatherford was spending on advertising for nonexempt positions and contingency fees equal to 25 percent of salary for exempt positions, Olsen calculates that the company is saving an average of $10,000 per hire.

High satisfaction rates
Best-in-class RPO users cut cost-per-hire by an average of 48 percent, according to a 2009 report by Aberdeen Group. In addition to cost savings, these RPO users achieve an average increase of 67 percent in hiring manager satisfaction, a 60 percent reduction in time-to-fill and a 55 percent improvement in their new-hire retention rate.

Ninety-one percent of RPO clients have achieved their desired benefits through RPO, a near record level of client satisfaction across the entire outsourcing spectrum, according to the annual Black Book of Outsourcing, the largest study of its kind. Notably, clients using comprehensive RPO services report the highest levels of satisfaction.

Among all RPO clients, 73 percent state that cost reduction is the most crucial rationale for RPO contracting in 2009 and 2010.

RPO clients report that scalability, adaptability, flexible pricing and best-of-breed technology were the five most important attributes influencing RPO client satisfaction with their 2009 outsourcing providers.

High-growth sectors for RPO from 2009 to 2011 include the energy, banking and financial services, high-tech, health care, and transportation and logistics industries, according to the Black Book study. Olsen believes that RPO will spread in the oil and gas industry because it is highly cost-effective.

Feedback on the RPO arrangement from Weatherford’s hiring managers has been favorable, but Olsen stresses that change management is key.

“The managers were used to having control and doing their own thing,” she says.

Weatherford now has 178 open positions, a number vastly reduced from earlier levels both by the recession and the company’s new ability to fill jobs quickly with the RPO arrangement.

“It’s a healthy level of open positions,” Olsen says.

The company has laid off 3,000 U.S. workers since January 2009, and average monthly hiring is down to 30 to 50 positions. In September, the company filled 40 positions.

“The number is slowly creeping up,” Olsen says.

“But we will not bring in in-house recruiters when the economy improves and our hiring increases. I don’t feel like I have to build my own little empire.”

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