All Signs a Go for RPO to Grow

RPO recovered quite nicely in 2010, back to pre-recession levels.  But will clients do much hiring in 2011 and will this growth continue?  All signs I see point to yes.

The January 7 USA Today article titled “For Jobs, Signs of a Recovery” stated: “For the first time since the Great Recession began more than three years ago, the job market is expected to show strong gains this year as consumers spend more and businesses cast off their hesitancy to hire.”

Also, the SFN Group Employee Confidence Index increased in December showing that “…more workers are confident in the strength of the economy and more are likely to make a job transition in the next 12 months.”

Opinions are coalescing that there will likely be increased hiring in 2011, generating more revenue for RPO providers from current clients who pay for services largely on a variable basis, i.e. per hire.  Why are new clients outsourcing RPO, which is also fostering growth?  I recently conveyed my thoughts in an RPO article for the December 2010 issue of HRO Today based on RPO interviews I’ve recently conducted for my third global RPO market report to be published Q1 2011.  Here are a couple of the key points:

• Internal client recruiting HR departments have drastically reduced their HR and recruiting staffs during the last recession, yet again.  Thus, clients do not want to reinvest in rebuilding their recruiting departments only to downsize again.  Buyers are finding it is better to outsource to a provider that can quickly scale up and down to meet fluctuations in hiring needs, while helping clients to better control expenses by not incurring the fixed costs of an internal recruiting department; especially during slow hiring periods.
• Even with high unemployment levels, there is still a shortage of talent.  With an increased number of candidates searching for jobs, how does a limited recruiting staff go through all of those resumes to discover the best talent and be responsive to applicants who may someday be potential clients if they’re not already?  RPO is a great way to get access to the latest selection and assessment tools when there is no money to invest in capital expenditures.

As the hiring market improves, voluntary turnover is also likely to increase, further creating opportunities for RPO.  As the war for talent picks up, auxiliary services like employment brand management will increase, creating more revenue opportunities.  Expect overall RPO revenues to be nicely higher in 2011.

Gary Bragar, Lead HRO Analyst, NelsonHall

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