End-to-End RPO Unplugged

New contracts awarded by RPO specialists often say end-to-end services are provided, however many times only two or three recruitment services are actually stated in the press release, which begs the question what is end-to-end RPO?  Does it really include all RPO services to the client or is it just jargon to sound good?

In my recent RPO report, I’ve defined core RPO services and identified the full suite of RPO services.  Frankly, most vendors offer pretty much all services, but who is actually providing what?

Having worked for many years on the client side, I know how difficult it can be to work through public relations for an announcement. Ultimately, when you do, how much detail you are able to provide is another story. Congratulations to Adecco for not only winning an RPO contract last month with SI, a provider of systems engineering and integration services to the U.S. Intelligence Community, Department of Defense, and other agencies, but for also defining its full suite of RPO services that includes:

• Applicant tracking system
• Employment branding
• Research
• Talent market mapping
• Social media sourcing strategy
• Candidate pipelining
• Direct, indirect, and Internet sourcing
• Candidate screening, assessment, and selection
• Job offer management
• Onboarding
• All recruitment administration.

Although you might say this is an end-to-end offering, Adecco does not call it that, but rather full lifecycle services.  I don’t really think it matters what you call it, but it’s better to spell out more than a couple of components when using robust terms.

Beyond the core services of sourcing, screening, assessment and selection, job offer, onboarding, and administration are emerging services, which include employment branding and the use of social media for recruiting. With the direction the world is headed in with the use of social media, you need to be “LinkedIn” to the appropriate social media communications to find the right talent in addition to the traditional methods such as job boards as they have not gone away yet.

There are an increasing number of clients who will look to an RPO provider for assistance in developing and communicating the right employment brand to attract and retain talent that will stay. Success in providing both basic and advanced end-to-end RPO services that deliver will also create client and vendor partnerships that last and prosper.

Gary Bragar, Lead HRO Analyst, NelsonHall

RPO Growth Confirmed and Back on Track

Since my January 12 blog, All Signs a Go for RPO to Grow, I think it’s safe to say we are back on track with many providers stating that volumes are back to pre-recession levels.  Vendors including Kelly, SFN, Manpower, SeatonCorp, Kenexa, and Hays all reported double-digit total company revenues for the quarter ending December 31, 2010 (Talent2 were for the six months ending December 31, 2010).  RPO revenues were not reported separately, but several vendors were able to share that RPO revenues grew 50% – 70%.

That’s certainly terrific evidence that hiring volumes from existing clients has increased and that many new RPO clients were added in 2010 by all the vendors.  In Q4 announced RPO contracts included:

• Manpower’s global contract with Rio Tinto
• Hays’ contract with American Express in Europe
• Futurestep’s global contract by Cummins, Inc.
• The Talent2 and Allegis Services Group Alliance global contract with an unnamed financial services company
• PeopleScout’s contract extension by Waste Management in the U.S.
• Alexander Mann Solutions’ contract with Santander in the U.K.

For evidence of an increase in demand for job movement and hiring, I point to SFN’s Employee Confidence Index, which showed the highest employee confidence in nearly a year.  Also, four in ten workers stated that they are likely to look for a new job in the next 12 months.

What do I think?  Having recently completed twenty-seven interviews for my next global RPO market analysis (to be released within the next few weeks), I can say that 2011 will be another strong year of growth for the RPO industry.  It will be tough, but not impossible, to outdo 2010.  The report will include a revenue forecast by geography among numerous other data.

I’m bullish for several reasons including the need for scalability, and I also think a new phenomenon, expected a few years ago, will finally begin to occur in the latter part of 2011 and will ramp up over the next few years.  Baby boomers will finally begin to retire as 401(k) plans have been nicely recovering to pre-recession levels, which will increase their confidence and financial security.  This will create a huge shortage of talent in the workforce.  Employers should be wise to make sure they are doing succession planning and preparing for how they will do knowledge transfer before employees leave. This provides a great opening for staffing assistance and for all the ancillary services around workforce planning and talent management. The opportunity is coming for RPO to move up the value chain from an operational resource for staffing and recruiting to a strategic consulting partner in global talent management.

Gary Bragar, Lead HRO Analyst, NelsonHall

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

Earnings Reports Point to Global RPO Growth

In confirmation of NelsonHall’s past several quarterly HRO Confidence Indexes, this season’s earnings reports demonstrate that RPO is continuing to make a nice comeback compared to a year ago. For example, SeatonCorp’s PeopleScout RPO business reported 88 percent year on year revenue growth, with its best quarter ever (11 new contracts), Manpower total company achieved 19 percent growth and 24 percent in constant currency, and Hays total company reported 21 percent growth in net fees and 18 percent in constant currency.

From this representative sampling of RPO providers’ reported quarterly earnings, not too shoddy from the doldrums of a year ago. And the additional good news is that this growth is global. Looking at different world regions:

In the U.S.

90 percent of PeopleScout’s revenue came from North America, including RPO contracts with United Road and Chicago Career Tech. And Manpower grew its revenues by 84 percent in the U.S., in part due to an RPO contract with AIR-serv.

In Asia Pacific

Manpower increased its revenues in this region by 30 percent, led by Australia with 80 percent growth, and Hays increased net fees by 59 percent, with Australia and New Zealand permanent placement net fee growth up 60 percent, and Asia up 76 percent.

In Continental Europe

Hays and Manpower both experienced strong growth in several countries, including Germany, as Continental Europe’s economy has started to demonstrate signs of recovery.

In The Americas (outside the U.S.)

Manpower achieved growth of 31 percent in Mexico and 33 percent in Argentina, and Hays grew revenue by 35 percent in Brazil.

It’s important to note here that this increased hiring is not just patchwork quilting to plug short-term gaps. For example, Manpower reported that permanent recruitment was up across all regions, and Hays’ growth by segment was 34 percent permanent and 12 percent temporary.

So why the increase in hiring and use of RPO? Buy-side companies around the world are again acknowledging that it is not enough to improve earnings results by cost cutting, but rather that they must grow top line revenue and increase sales. As a result, they are beginning to reinvest in and grow their businesses, and thus are again facing the build versus buy dilemma when it comes to the recruiting process. But having lived through two drastic economic downturns in just this decade alone, many companies are recognizing the value of leveraging the expertise, scale and technological capabilities of third-party recruiting organizations, rather than rebuilding their internal recruiting departments only to potentially need to downsize them again someday. 

NelsonHall is initiating its third global RPO study of leading providers next month. When the results are in, I’ll share deep dive insights on how recruitment services are evolving and what lies ahead.

Gary Bragar, Lead HRO Analyst, NelsonHall

RPO, MSP and Continent Labor Contracts Gaining Ground

In my April 16 blog “An RPO and MSP Combo: the Best of Both Worlds,” I wrote about the value of workforce solutions that are rooted in both RPO and Managed Service Provider (MSP) services to meet the dynamic and evolving needs for both contingent and permanent employee hiring. We’re now seeing an increasing number of these types of contracts being inked, and some providers are partnering to gain the breadth of offerings needed to win to-be-awarded deals.

Recently awarded contracts include:

• SourceRight Solutions’ – originally an RPO provider – multi-year deal with Siemens for provision of contingent labor procurement programs in the U.S.

• An MSP and RPO agreement between AMN Healthcare and Hendrick Medical Center

• Alexander Mann Solutions’ three-year recruitment, contingent workforce and employer branding contract in the U.K. with aerospace and defense engineering firm Cobham

Recent partnerships and M&As for the RPO/MSP combo include:

• The RightThing with ZeroChaos to provide contingent labor services alongside RPO. The RightThing, which was always considered a pureplay RPO provider, partnered with ZeroChaos to enable it to provide a broader range of recruitment solutions in today’s moving-target hiring marketplace

• AMN Healthcare acquiried Medfinders for its clinical workforce managed services program

• SourceRight Solutions and Hays, per their strategic alliance announced in 1Q10, launched WorldSource, a new service offering to manage and integrate global RPO and MSP programs. (And SourceRight Solutions also further expanded its own MSP offering)

The primary driver of escalating contract and partnership activity in this HRO segment is clear: as companies remain cautious due to continued low consumer confidence and ongoing market uncertainty, they are hiring more temporary employees and utilizing more contingent workforces than on-boarding new full-time hires. And let’s not forget buyers’ increasing desire to keep their portfolio of service providers to a minimum, particularly when in the same service line.   

The bottom line is that vendors and buyers both win with the right workforce combination that best meets clients’ organizational objectives. I believe we will continue to see additional pureplay RPO specialists looking to partner to provide MSP and contingent workforce solutions to meet continued demand. And while contingent workforce solutions can be used in any industry, I believe the nature of seasonal demand and spikes in volumes will drive more of these types of contracts in healthcare, pharma, manufacturing, retail, technology and defense.

Gary Bragar, Senior HR Outsourcing Analyst, NelsonHall

Geographical HRO Growth: The NelsonHall HRO Confidence Index Says…

Earlier this week my colleague Linda Merritt wrote about the over-arching tune and tone of optimism and anticipated growth in the HRO industry, per the results of NelsonHall’s just-released HRO Confidence Index.  Today, let’s talk about geographical growth.

When asked about expected changes in 2010 HRO revenues by geography, year-on-year relative to 2009, the HRO providers that participated in this most recent HRO Confidence Index see increased growth in both mature and emerging economies in Asia Pacific and Latin America, expect maintenance of the growth experienced at the end of 2009 in the U.S. and U.K., and anticipate higher growth in major continental economies including France, Germany, Benelux and the Nordics.

Specifically – on a scale of 1 to 5, with 5 meaning a strong increase and 1 meaning a strong decrease – the geographical ratings were: 

Focusing specifically on the Asia Pacific market here (as it’s an emerging market for HRO) – and especially relative to RPO growth – data points made by Dr. Chris Chan (Chairman of the MBA Program at Hong Kong University), at the recent HRO Summit in Singapore support our HRO Confidence Index findings. For example, Dr. Chan stated:

• At 11.9 percent sustained year-over-year growth, China and Hong Kong have the world’s fastest growing economy

• The Indian economy has grown from $32 billion in the 1980’s to more than $1 trillion today

• 64 percent of Chinese, 50 percent of Hong Kong-based and 54 percent of Singaporean businesses expect to increase hiring in 2010

And it is clear that RPO activity is actually taking place and not just being talked about in Asia Pacific in 2010, with recent contracts being won by Hays, Kenexa, Manpower and Accenture.

However, hiring increase requirements in Asia Pacific come with a significant challenge, as noted on June 7, 2010 by Manpower Chairman Jeff Joerres at the World Economic Forum on East Asia summit in Vietnam. According to Mr. Joerres, talent shortages in Asia Pacific are 10 percent higher than the global average, led by Japan with 76 percent of companies struggling to source talent, attributable to an aging workforce and lack of immigration. On the one hand – as pointed out by Mr. Joerres – young people need to be encouraged to learn in-demand skills for jobs including technicians, engineers and skilled trades. On the other hand, this represents an opportunity for learning outsourcing providers to help re-train existing workers, and an opportunity for RPO providers to help source requisite talent via their rich local job banks and talent pools in other geographies, as well as develop innovative sourcing strategies. 

One thing I find very interesting is that the talent shortage problems currently faced by Asia Pacific organizations will soon need to be addressed in the U.S. and parts of Europe. Four or five years ago there was great fear that the boomers retiring and leaving the workforce would result in a severe talent dearth. While the recession has stemmed that fear, when the economy picks up and net worth restores, that exodus will begin and the talent shortage will become a reality. How should companies address this challenge? You know my answer.

In my next blog, a focus on industry growth per the most recent NelsonHall HRO Confidence Index.

Gary Bragar, Lead HRO Analyst, NelsonHall

Employee Management 101 and HRO Provider Value-Adds

In prior blogs I’ve written about low levels of employee satisfaction and confidence in their employer, and the negative impacts these can have on an organization in terms of lost talent, potential revenue loss and certain additional hiring expenses.

Sadly, employee confidence isn’t increasing. In fact, according to the Kenexa Research Institute, employee confidence decreased, yet again, in Q1 2010. In the twelve countries tracked, all but Spain declined in the first quarter of this year.

With that in mind, I found an article entitled, “Prevent Exit Interviews” in the April 2010 issue of Talent Management magazine very interesting. The article essentially says that to help increase employee retention, supervisors should be conducting “stay interviews” – or what I call Employee Management 101 – with their employees. These are frequent one-on-one meetings with employees to ask how things are going, gauge satisfaction, ask what the company can do to help, etc. Unfortunately, during economic downturns, many managers avoid such meetings because they fear they won’t be able to deliver on employee requests. However, hiding their heads in the sand simply creates more problems and exacerbates employee dissatisfaction. The article suggests simple things managers can do, such as tell employees how much they are valued. And when they ask the “what can our company do to help” question, there will in nearly all cases be at least one thing an employee wants that the company can provide!

So how can an HRO provider help? I certainly don’t advocate having providers replace a manager’s direct and continuous discussions with employees. However, proactive initiatives by HRO vendors can help identify employee concerns and provide managers with insights into how they can address, eliminate, and/or lessen them.

There are a variety of HRO providers assisting their clients with this type of support. For example, Kenexa, an RPO provider, also provides performance management solutions and conducts employee surveys to increase employee engagement. And U.K.-based RPO provider OchreHouse focuses not only on recruiting but also on key aspects of talent management including engagement, development and employee retention. It conducts employee satisfaction surveys, and has a “Keep in Touch” program wherein recruiters periodically contact new hires several months into the job to see how things are going and ask if there is anything they can do to help. OchreHouse also conducts exit interviews to find out why people are leaving. Although too late to retain the exiting employee, the feedback, along with recommendations on how to retain talent, is provided to the company’s hiring managers.

As an organizational leader or supervisor, what are you doing to help retain your talent, whether on your own or with the help of a third-party provider? We’d like to hear!

Gary Bragar, Lead HRO Analyst, NelsonHall

An RPO and MSP Combo: The Best of Both Worlds

As I read through HRO Today magazine’s recently published Baker’s Dozen Top Managed Service Program (MSP) providers, it struck me positively to see many companies such as Manpower Business Solutions, Hays, Allegis Group Services, SourceRight Solutions and Adecco on the list. That’s because those providers are also recruitment process outsourcing (RPO) providers.

In different mixes and offerings, the MSP solutions include contingent workforce management, program and vendor management, temporary staffing, employee process management and other services.

There are two primary reasons why provision of both RPO and MSP solutions from the same vendor is valuable to the marketplace.

Flexible Staffing Solutions from a Single Vendor

As NelsonHall and many others have written about quite a bit lately, permanent recruiting has largely been on hold due to the recession, replaced with utilization of temporary hires and contingent workforces. As we’ve also written about numerous times, HRO buyers are increasingly opting for service delivery consolidated under the aegis of a single provider. Thus, the ability to tailor multiple recruiting solutions to meet client’s evolving needs results in a win-win for both providers and buyers.

Employee Attrition

Per a Manpower study released earlier this week, 80 percent of 2,000 North American hiring managers surveyed believe less than five percent of their employees will voluntarily leave the company in 2010. But a survey from Manpower subsidiary Right Management revealed 60 percent of employees intend to pursue new jobs if there is improvement in the economy this year. This huge delta aside for a moment…while it’s not feasible that more than half of employees will leave their current jobs, what if it is more than the five percent employers expect? A contingent workforce must be leveraged simply to keep the business running.   

The bottom line is that vendors and buyers both gain value from a workforce solution that meets clients’ dynamically changing needs, whether it be for temporary or contingent employees through an MSP offering or permanent employees via RPO. Buy-side HR executives, are you ready to meet your company’s current and future workforce needs?

Gary Bragar, Lead HRO Analyst, NelsonHall

Conflicting Job Growth/Job Loss Reports – What are HR and HRO to Do?

As reported in the March 31, 2010 edition of USA Today, a just-released ADP report said employers slashed 23,000 private sector jobs in March 2010, while the median of estimates from 35 economists surveyed by Reuters for the ADP report was for a rise of 40,000 private sector jobs during the month. Economists expect The Labor Department’s closely watched month employment report, due out on April 2, to show employers added 190,000 jobs in March.

While the ADP report only covers private sector jobs and the Labor Department numbers could be somewhat inflated as many temporary workers were hired to conduct the 2010 census, this is still a huge delta. Did we lose jobs in March? Did we gain jobs in March? What will happen in Q2, Q3 and Q4 2010 in terms of hiring? The answer is…there doesn’t appear to be much more than murky answers.

What is clear, however, is that we all know job growth is coming, even if we’re not certain when it will really begin and then stabilize. And apologies for this focus in another of my blog postings, but it is so important to the health of the economy, the job market and indeed the survival of many organizations…astute companies know they will need to begin hiring again to meet demand as consumers start spending more. But really smart organizations, particularly mid- and large-sized companies, are starting to prepare now by seeking the help of external recruiting process outsourcing providers that can build a ready talent bank to fill jobs when requisitions are approved. These forward-thinking companies know one of the keys to competitive advantage is an ongoing search for top quartile talent to tap when they are ready.

Evidence of this proactive and front-loaded talent search is demonstrated in The RightThing’s March 29 announcement of seven new RPO contracts Q1 2010 with companies including Homesite, Nationwide and CUNA Mutual. And there indeed has already been hiring in some pre-Q1 2010-signed contracts. For example, The RightThing hired 500 employees in North America, South America and the U.K. for five existing pharmaceutical clients during Q1, and 2,100 new hires in Q1 for seven clients expanding call center operations.

And additional recruitment contracts were awarded during the last quarter to companies including Hays, Kenexa, Manpower, OchreHouse, PeopleScout, Pinstripe, CPH Consulting, Capita and Kelly Government Solutions.

So while there are conflicting reports on job growth or job loss today and into the near future, we know the growth will come. As a buyer, are you ready now?

Gary Bragar, Lead HRO Analyst, NelsonHall

Employment Optimism: Clear Signs of Increase in Temp-to-Perm and New Hires

According to a USA Today article published on March 8, 2010, a growing number of businesses are converting temporary workers to permanent employees, signaling the start of an improved job market. According to the article, temporary jobs increased by 48,000 in February 2010 to two million, and are up 284,000 since September 2009. And an increase in temporary hiring is a usually a leading indicator that permanent hiring will be on the rise.

In a normal economy, one in three temporary workers is ultimately made a full time employee. That ratio plunged to well under 10 percent during the recession, according to Jonas Prising, head of Manpower’s Americas division. But about 30 percent of the temporary workers placed by Employco’s Carlisle Staffing unit have become permanent hires in recent months. That’s up from 2 percent during the downturn. And Tig Gilliam, CEO of Adecco North America, stated the company has recently seen a whopping 50 percent rise in its temporary placements who go full time. All this bodes well for temporary workers.

In terms of new hires, a Manpower Employment Outlook Survey of 18,000 U.S. employers revealed that 16 percent anticipate increasing staff levels in 2Q 2010, 73 percent expect to keep staffing levels the same, and eight percent expect a decrease. These findings net an increase of eight percent and +five percent when seasonally adjusted. And approximately half the firms surveyed by the Society for Human Resource Management (SHRM) are boosting hiring in March 2010, the most in two years. While these findings don’t signal a rousingly positive increase, any increase in today’s job market is good. 

Globally, there is much more optimism according to the Manpower survey. Employers in most job markets expect hiring levels in 2Q 2010 to at least equal (or in some cases exceed) those in the same period last year, signaling a long-time-in-coming return to positive job growth. The Asia Pacific region has the strongest job outlook, led by India and Taiwan. While the outlook for job growth in the Americas is modest, Europe is mixed. Although European companies may not be ready to return to year-over-year-growth, the view is that hiring will at least keep pace with the Q4 2009.

What does this indication of hiring increases mean for the recruitment process outsourcing (RPO) industry? Not reason yet for providers to jump for joy, but certainly good news for them as many RPO contracts have been restructured to pay on a more variable basis, i.e., per hire. And going back to statements targeted to potential RPO buyers in a couple of my previous blogs…with staffing levels in many cases cut to the bone and with employee satisfaction at extraordinary low levels, if companies don’t step up their hiring activity – and obviously RPO can assist here – at least modestly, quality of work will suffer and top performers will jump ship to better opportunities on dry land.

Gary Bragar, Lead HRO Analyst, NelsonHall