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The Messy Challenge and Big Payoff of Outsourced Recruiting

It’s a tough road to travel, littered with reluctant hiring managers and the need for cultural change. But VPs of human resources say that outsourcing what is arguably the most important workforce-management function can yield big financial results.

October 3, 2003
Related Topics: Candidate Sourcing, Outsourcing, Staffing Management

David Reed, former director of recruiting at Accenture, remembers the day last fall when his bosses told him they were outsourcing his job. It wasn’t personal; Accenture management had just decided to outsource all of the company’s recruiting to its subsidiary, Accenture HR Services.

    "I struggled with the idea that somebody else could do my job better," Reed says. Initially, he reacted defensively, wondering, "How can an outside organization do this better, cheaper and faster than I can?"

    Recruiting directors all across the corporate world may be asking themselves the same question soon. Currently, only about 9 percent of companies outsource large portions of organizational recruiting, according to a poll, with about 57.6 percent planning to increase their large-scale outsourcing.

Sodexho’s reduced time-to-fill
    One company that recently took the plunge into outsourced recruiting is Sodexho, a $4.5 billion global food and facilities management services company with 130,000 employees in North America. As of September 2003, Sodexho began to outsource the hiring of all exempt employees across all of its divisions in North America to Spherion. Two years ago, Sodexho began working with Spherion on a pilot program in its campus division. Since then, the company has discovered that Spherion can recruit employees more cheaply and more efficiently than Sodexho can.

"Recruiting is not our core competency," says Diana Newmier, corporate VP of human resources at Sodexho, which hires more than 2,700 managers each year.

    "Recruiting is not our core competency," says Diana Newmier, corporate VP of human resources at Sodexho, which hires more than 2,700 managers each year. "Spherion comes in and does for us what we do for other businesses in the food-services industry--we make them more efficient and reduce their costs."

    Initially, Sodexho set a goal of 31 days for its average time to fill a job. Spherion far exceeded that goal, with an average time-to-fill of 16.3 days. In addition, Sodexho now has a fixed cost-per-hire, which makes it easier to plan financially, says Newmier. Still, she admits that change management--and helping hiring managers get used to the idea of outsourcing--is extremely important. Sodexho started with a pilot program, trying to prove to other departments that outsourcing can work.

Accenture’s 20 percent savings
    It took Accenture's Reed about six weeks to come around to the idea of outsourcing recruiting. It probably helped that Accenture HR Services offered him a position as vice president of resourcing services, North America. But the decision to outsource wasn’t a sudden one. Since May of 2001, the company had been outsourcing some of its back-office recruiting functions such as background checks and production of offer letters. Outsourcing recruiting was simply the final step.

    Today, Reed has changed his mind entirely about outsourcing recruiting. "It’s virtually impossible for an in-house function to make the kind of investment in skills and knowledge and technology that a company who’s working across clients can," he says. During this fiscal year, Accenture HR Services will hire between 5,000 and 6,000 new employees in North America for Accenture. "The cost-savings target we are on the hook to achieve is greater than 20 percent," says Reed.

Kellogg’s culture change
    Cost savings can go even higher. Recruitment Enhancement Services has helped Kellogg’s reduce its cost-per-hire by more than 64 percent since they started working together in the late 1990s. Today, RES fills 95 percent of available jobs at Kellogg’s, versus only 10 percent in 2000. By February 2003, RES had reduced Kellogg’s average time-to-hire from 67 days to 26 days. "Kellogg’s owns the strategy behind staffing--we outsource the execution--but it has been a very positive thing for us," says Cydney Kilduff, director of staffing and diversity at Kellogg’s, who was hired to implement the company’s decision to outsource recruiting.

    Still, Kilduff faced her share of challenges in the beginning. At first, the sweeping changes didn’t go over well with hiring managers. The company had been through a downsizing, and hiring managers were wary of further change. Since Kilduff was new to the company, she was also just beginning to learn that the corporate culture at Kellogg’s values relationships, many of which had been established between hiring managers and outside search firms. "I thought we were asking people to stop spending all that money [on search firms], but I was asking people to give up relationships they thought were important," she says. "We had to shift their thinking about relationships and create new relationships they could also value."

    Kellogg’s had pretty much eliminated its recruiting department in anticipation of outsourcing. That meant that when the company needed to hire again, RES had to hit the ground running. "All of a sudden they wanted us to handle hiring," says Barry Siegel, president of RES. Both Kilduff and Siegel say that, given the opportunity to do it again, they would approach it more gradually. "The big lesson is to pilot and work out the bugs on a smaller scale," says Kilduff.

Baby steps
    Experts generally agree that inducing a large change all at once is stressful for employees. It’s better to introduce change slowly. For Sodexho, that meant starting with a pilot program implemented by George Koenig, vice president of human resources for Sodexho Campus Services. After Koenig had successfully implemented outsourced recruiting in his department, management could use his experience as a positive example for other employees.

    If indeed the rebounding economy will soon yield more jobs, as some predict, corporations may have to think about outsourcing recruiting sooner rather than later. "Companies are not well positioned for an economic rebound or the coming demographic crunch [when baby boomers retire]," says Accenture’s Reed. "They will have to do something quickly," he says, adding that most companies don’t want to rebuild the recruiting infrastructure they’ve hacked apart in recent years.

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