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Special Report: RPO Is on the Go

Experts attribute RPO growth to the recovering economy, the increasing use of social media and mobile technology and the evolution of RPO services firms.

February 12, 2014

Ask two human resources managers what recruitment process outsourcing means, and chances are you might get two different answers.

In Europe an HR practitioner would point to the similarities in RPO and contingent staffing processes. An HR manager in Latin America would offer a similar answer. In the United States many in HR consider RPO to mean only external recruiting for permanent jobs at a client organization.

Although the U.S. definition of RPO differs from those in Europe and Latin America, those views may be shifting soon. Some RPO firms in the United States have started to offer their services in the contingent staffing field and vice versa. That expansion in services is one trend that’s been driving the recent steady growth of the RPO industry,  experts said.

Recruitment process outsourcing, which in general is defined as an employer that outsources all or part of its recruiting function, is growing fast. In 2012, the RPO industry grew by more than 12 percent, according to a report issued by Everest Group in February 2013. That comes on the heels of a 2012 report from Everest that found the industry grew by 25 percent in 2011.

Industry experts attribute the expansion to the recovering economy, the increasing use of social media and mobile technology as well as an evolution and maturation of RPO services firms.

Social Media and Mobile Technology

Hot List, February 2014Both social media and mobile technology have changed the way people communicate and companies do business ever since their widespread adoption in the past decade.

Some businesses have social media strategists to maintain a connection with their customers and curate the organization’s brand image. Companies, like 2013 Optimas Award winner UPS Inc., have created entire departments devoted to mobile recruiting to help fill much-needed jobs during the busy holiday season. And more people are turning to social media sites when job hunting.

Social media are “probably the fastest driver of innovation on the sourcing side of our business. In fact, even on the operations side, we’re a strong user of Yammer internally,” said Dan White, president of RPO at Pontoon, an RPO provider.

One of the biggest channels for candidate sourcing used by recruiters is LinkedIn. According to a talent acquisition survey conducted for Workforceby the Human Capital Media Advisory Group, the publication’s research arm, 78 percent of respondents use LinkedIn as part of their talent-acquisition program for sourcing talent. Thirty-eight percent of respondents said they use Facebook for sourcing candidates, and 26 percent said they use Twitter.

While social media services have provided deep talent pools for companies to choose from, the plethora of candidates poses a challenge for recruiters charged with selecting the best candidate for a job. One job posting on LinkedIn could result in thousands of responses. While applicant tracking systems are able to whittle down the thousands of job seekers to a handful of worthy candidates, recruiters still need to figure out how to intelligently engage the applicants if they hope to persuade candidates to take the job.

“Finding them is one thing, but unless you engage them intelligently, you understand the business, you understand the value proposition of the company you’re calling on behalf of, you may as well have not found them in the first place,” said Ian Dawson, senior vice president of RPO Solution Design and Implementation for Randstad Sourceright, an operating company of Atlanta-based Randstad.

Sue Marks, CEO of Pinstripe Inc. and Ochre House, a global RPO and strategic talent management provider based in Milwaukee, said technological advances have turned RPO into something resembling marketing and advertising because of how complicated it has become to sell positions to busy job candidates.

“It’s not just about having a firm help you post jobs on Twitter; it is much more complex. It is much more like a highly technical advertising and marketing program now,” Marks said. “You know it’s quite easy to find almost everybody, but how do you really engage them? Over time that’s how you recruit the best candidates.”

Despite the effect both technological developments have had on recruiting, companies such as Randstad estimate only about 5 percent of the hires they make come from social media. Dawson expects that to change as the generation following the millennials begins entering the workforce.

To make a point about the importance of social media and mobile to the future of the recruitment process, Dawson joked about having to text his 16-year-old daughter if he wants her to join him at the dinner table.

“She absolutely will expect to communicate and relate to a potential employer through social media channels. The effectiveness of social media has yet to make a tremendous impact,” he said. “We’ve got to understand people, different demographics, different industries, different countries even, are now communicating in a different way. Social media plays a part in that.”

In preparation for the emergence of a more mobile and connected generation in the workforce, Randstad has started placing QR codes at college job fairs for interested candidates to scan that will take them to a company’s website. There they can get more information about an organization, search open jobs or submit their résumé. 

“We’re finding that those sorts of innovations enable us to demonstrate differential and value — particularly for the younger demographic, particularly if you’re working in the IT sector, and particularly if you’re working in different countries like India, where they have a huge usage of mobile technology,” Dawson said.

Sector Specialization

Industry experts say some RPO firms have started specializing in recruiting for certain sectors of the economy. Firms aren’t looking to abandon recruiting across all sectors if the opportunity presents itself, but many firms see a benefit in specializing in just a few as a competitive advantage.

Pinstripe, for instance, focuses its recruitment processes on financial services in addition to the health care and manufacturing technology industries, which are two sectors that have been growing rapidly in the United States.

“With health care reform, everybody is in a state of flux right now. But there are significant pockets of high demand and low supply in all of the health care professions, whether it’s nursing, therapies, radiology — all the way up to physicians,” Marks said. Data Bank4, February 2014

While there may be high demand but low supply in the health care industry, specializing in that field, in part, allows Pinstripe to be more successful at finding qualified candidates, Marks said. By having a greater understanding of the industry, recruiters are more likely to engage a job candidate on a higher level than a recruiter who is more of a generalist.

“We happen to be pretty strong in financial services, manufacturing and a few other industries where you really can make a difference for a customer by knowing the intricacies of sourcing, or how to sell and compel a candidate to take an offer in New York for a financial services firm, for example,” Pontoon’s White said.

Dawson said he believes that specialization is one of the rData Bank1, February 2014easons that RPO is growing. Specializing in financial services or health care makes it easier for customers to turn to RPO for their talent acquisition needs, he said.

“I think the market’s beginning to shape so that if one provider specializes in something, that is more important to you as a customer,” Dawson said. “Everybody was doing the same thing for a long time, and there wasn’t a lot of real distancing or differentiation of providers. I think you’re beginning to see some of that come about.”

RPO Is Here to Stay

Private equity joined the RPO game recently, said Dawson, which he explained is another sign that the RPO industry is going to keep growing. 

“There are a few small firms backed by private equity companies, and those guys aren’t in it for charity. They’re going to want their money back at some stage,” Dawson said, explaining a trend he has noticed where small firms are given private equity money to grow in hopes of being acquired.

Data Bank2, February 2014

Data Bank3, February 2014

One explanation is that RPO is a relatively inexpensive talent acquisition business to get into compared with contingent staffing. The low cost but high demand for RPO services accounts for another reason why the RPO industry is growing in the U.S.

However, much of the growth the RPO industry experienced in the past few years has occurred outside the U.S. Many firms are looking to establish themselves in Europe, Latin America and Asia. To accomplish this, many large firms have been acquiring smaller firms, or even merging like U.S. firm Pinstripe and British company Ochre House did in July 2013, and Adecco Solutions and Beeline MSP, which came together in 2012 to form Pontoon. 

“Our company is seeing the strongest growth in global projects,” White said. “Western Europe has been slower recently, but Eastern Europe is pretty strong. Asia is also pretty strong. Latin America is probably strongest, oddly enough, because there are few providers and tons of growth.”

It’s a trend that isn’t going away, according to industry experts, which should be good news to those in the RPO industry. Forty-two percent of businesses said that their organization’s talent acquisition investment will increase next year, according to Talent Management’s talent acquisition survey.

The mergers and acquisitions are “a reflection on the first prior question which is, ‘Is the market growing?’ Well, if it wasn’t growing, there wouldn’t be any of this activity,” White said.

Max Mihelich is a Workforce associate editor. Comment below or email editors@workforce.com. Follow Mihelich on Twitter at @workforcemax.