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Four Talent Acquisition trends that benefit development of RPO

Talent acquisition is changing rapidly. Automation and data analytics open new possibilities for a data driven TA function while the ways of working and recruitment are changing. For the RPO (Recruitment Process Outsourcing) industry most trends work in its favor. Increasingly organizations will look for an outside partner to help solve their TA issues while RPOs themselves move up the value chain.

We asked Kevin Wheeler, Founder of The Future of Talent Institute, Belinda Johnson of research consultancy Worklab and Jeremy Tipper, Founder at 2HC, to share their views on the industry. From these conversations we were able to define four trends in talent acquisition that benefit the development of the RPO industry.

1. Dealing with the acceleration in automation is easier with an RPO

Automation is the megatrend touching all sectors of the economy, but especially in talent acquisition technology is rapidly changing the face of the industry. RPOs are particularly aggressive in adopting and embracing technology, says Jeremy Tipper. “There is amazing technology out there for outsourcing and matching these days. For example, there is quite a lot of chatter in the industry about a sort of recruiterless recruiting. I think that you’ll get to a point where certain aspects of the workforce rarely interact with a recruiter and the vast majority of the interaction is done through automated processes.”

Kevin Wheeler thinks in-house recruitment departments will find it challenging to keep up. “If you’re an internal recruiter, you need to be pretty sophisticated in your knowledge of technology and how to integrate it. You might even have a hard time to choose products since there are so many. As a recruiter or head of recruiting you might hear from ten companies trying to sell you a software solution and it’s really hard to decide which one is a good one and will really be right for you.”

The easy way to deal with this is to go for outsourcing to an RPO, he argues. “They have more knowledge and more expertise on how to do that. And they’re getting more sophisticated in how they use technology.”

Jeremy Tipper of 2HC agrees that in particular the leading RPOs like Alexander Mann Solutions and Randstad Sourceright are very advanced in their thinking how to employ technology in an impactful and effective way. TA functions that partner with them will benefit from that. “In many instances, the TA person probably hasn’t got neither the authority nor the influence in the organization to get that technology in, whereas if they’ve got it as part of an RPO contract, then the RPO provider can adopt that technology rapidly. So I think recruitment outsourcing businesses are able to bring more value and probably be more agile than customers would be themselves when it’s an in-house proposition.”

2. An acceleration in the need for data involves RPOs in everything

Linked to automation, while still a separate field is the application of data, and in particular data insights. RPOs have more access to data than their clients, both in terms of data from their own services as well as in benchmark data. Typically, they have the capabilities and skills to translate this data into meaningful solutions and tooling for their clients.

Belinda Johnson’s consultancy Worklab provides organizations as well as RPOs with critical insights. “We do deep dives into data and then blend that data to help clients answer any question they have. Companies use our insights to take decisions whether to do something or not.” The corona pandemic has accelerated the need for these kinds of insights, Johnson elaborates. It gave organizations big challenges in terms of knowing what to do. They faced a need to understand in real time what was happening to be able to make organizational decisions off the back of that.

She’s noticed that RPOs are very advanced when it comes to the application of data. “It’s a mature market, particularly when it comes to the second, and third generation solutions. I don’t think we’ve done a business as usual job with an RPO for four or five years. All the stuff that we work on for RPOs is not business as usual, it’s kind of ‘what’s next?’”

As a consequence RPOs have the capability to be strongly involved in the strategic decision making. “They could be helping the organization to learn where a new facility should be within a ten kilometers radius. Or they could help pipelining talent for a potential acquisition, or to look at productivity. It’s anything that moves, they’re absolutely involved in everything.”

Kevin Wheeler has a similar idea about the role RPOs can play when it comes to the application of data insights. “They have good knowledge of the market and they know what the future for recruiting looks like. They understand the businesses their clients are in. I think they have more data, better information and more analytics than the internal function will ever be able to have.”

3. The total talent model is similar to the RPO model

Another important development is the embrace of the total talent model. The strict borders between permanent and temporary roles that many companies have always had in place are blurring. Jeremy Tipper: “The vast majority of organizations still manage these resource types independently. They tend to think about hiring permanent employees as independent from that of contractor and consulting hiring. While in effect, these are all resources that organizations need to achieve their corporate objectives.”

Big enterprises are starting to think about the optimal combination of the permanent and contractor workforce, rather than looking at it through separate lenses. A major benefit of this development is that the TA function can become more efficient. “Those independent silos undoubtedly create inefficiencies. If you own the entire talent marketplace for an organization, permanent hires, existing employees, and contingent workers, you can have a conversation with the finance director about reducing costs.”

This in turn helps shift the conversation between executive leadership on one side and TA and their RPO partners on the other. That discussion is moving to the strategic level. “It starts to be about organizational productivity rather than about the cost of recruiting. I think that changes the dynamic of the conversation from one which is largely tactical and about getting people through the door to one which is about helping achieve organizational objectives.”

On top of that Tipper observes a change in the thinking about demand planning. “In my twenty years of experience in the industry, most of my clients have been absolutely terrible at demand planning. They might say that they’re going to hire two thousand people over the course of the next twelve months and then the actual number turns out to be four thousand. That’s a miss by as much as a hundred percent. There is an increased need for demand planning.”

This is also something that aligns well with the RPO model that traditionally had a focus on managing upswings and downswings in demand. “I think there’s a significant value add around workforce planning and demand planning. RPOs in many instances are better equipped to do it than the organizations themselves. And the reason for that is there’s actually a commercial benefit to having that foresight and insight into the demand plan”, says Tipper.

4. New ways of thinking about recruitment success

The traditional measures of talent acquisition are things like time to hire or cost per hire. Yet these measures say very little about how successful an organization is in attracting talent. Kevin Wheeler promotes a completely different way of thinking about success. “To me speed and quality are the two most important things. That doesn’t mean speed with high volume, it means speed with the lowest possible volume. I think that today we don’t really know what we’re looking for, and it’s really fuzzy and unscientific. I think technology can work to help solve this. It can help to really identify what the two or three key skills are you need a person to have to do a job.”

He sees a future where recruitment can be more effective. “If I have to bring you ten CVs and you have to have ten interviews before you can hire somebody, that takes a lot of time and costs a lot of money. But if I can bring you two people and you hire one of those two, that’s a really good deal.”

New KPIs that measure hiring success are emerging. One such example is hiring velocity, the percentage of vacancies fulfilled in time. Another one is hiring budget, which looks at recruitment costs through an investment lens. The return on recruitment costs is then measured in a way similar to customer acquisition costs. A third example is net hiring score, which gauges the hiring team’s ability to find employees that fit well within an organization. An important element of this line of thinking is that hiring success should be measured both from the perspective of the organization as well as the candidate.

Wheeler adds the RPO model is well suited to offer solutions since the providers’ incentives are aligned with this. “So hopefully, the metrics that will be started to be used are more about how we can have the fewest possible number of candidates to make a decision. For an RPO, that’s how they make money. If they have to bring in ten candidates, they’re losing money, that’s expensive. So for an RPO, the incentive is to review as few candidates as possible to make a great hire.”