Jobs For The Boys (And Girls)
People are the biggest company asset – and the biggest overhead. It costs an incredible £5,000 on average just to get someone through the swing doors and at a desk.
With this explosive combination of high importance and high cost, it might be assumed that the recruitment process would be a top priority for companies. Yet strangely, it’s often not given the strategic focus it merits.
“When you go to a client and say: ‘Tell me about your recruitment, how many permanent and temporary staff do you have?’, they just shrug their shoulders,” says Graham Snuggs, business sector director at recruitment company Hays Resource Management.
The same bemused look is likely to crop up if you ask how much companies spend on recruitment. “No one can give you a financially accurate figure,” notes Roger Clements, business development manager at Capita Managed Services. “When you take into account the time costs of recruitment, often their estimates are only 30 per cent of what they actually spend.”
Outsourcing may be the best way of really getting a handle on your staffing issues and giving recruitment the priority it deserves.
While companies rely extensively on recruitment agencies to help them fill positions, relatively few take that extra step and outsource the recruitment process as a whole. Yet recruitment is a good candidate for wholesale outsourcing: it’s resource-intensive, costly and often poorly managed. It’s core to the business, but it’s also a massive chore for HR and other staff.
“Outsourcing tends to start with things that are painful and recruitment is such a pain in the arse to manage!” says Snuggs.
It’s only in the last couple of years that companies have begun to look seriously at Resource Process Outsourcing (RPO) as a possible solution.
In an RPO arrangement, a third-party supplier takes care of the whole recruitment cycle, from sourcing candidates to exit interviews, as well as advise on long-term sourcing strategies.
“Before the general focus was on getting bums on seats, but now people are looking at more sophisticated requirements,” Snuggs points out.
Companies can expect a 50 per cent reduction in recruitment costs, believes Clements, which can easily translate into millions-pound savings. National Air Traffic Services, for example, saved £2.5 million in two years by outsourcing to Capita.
“RPO is all about identifying the true cost of recruitment. Once you know that, then you manage that spend more effectively,” says Clements.
Cost savings are all very well (and naturally very welcome), but there are more pressing reasons to put your recruitment function in order.
Demographic shifts mean recruitment and staff retention are ratcheting up the board agenda. A recent CIPD report placed attracting and retaining talent the second-biggest CEO concern after strategy. Companies are already feeling the pinch in areas such as engineering, where a 150,000 shortfall in skilled staff is anticipated by 2010, according to a report from engineering recruitment specialists Resourcing Solutions.
City companies are making matters worse, wooing engineering graduates with big cheques and leaving more traditional engineering recruiters with a smaller pool or possible recruits.
For employers in this market, the risk of not finding the right staff is far more of a motivator than any cost savings.
“Their outlook is not around small-time day-to-day cost savings, but the bigger cost of not doing business,” says Nicola Flux, sales director at Resourcing Solutions. “Clients are identifying areas of risk and then looking at how to go about sourcing skills. They want experienced companies that can add value and minimise their risk.”
Looking at recruitment beyond a simple one-out, one-in basis and creating a resourcing strategy puts companies back in control, even if that seems contradictory. “There’s a fear factor to outsourcing recruitment,” points out Clements. “They see it as a loss of control when in fact it probably gives them more control.”
A recruitment outsourcing specialist will have the industry knowledge, best practice expertise and the motivation (and SLAs) to improve their clients’ resourcing strategies.
Clients are not ceding control, but working in partnership with their outsourcer, whose whole aim is to help them set and achieve their staffing goals. “It’s a collaborative approach, dictated to by our clients. They don’t want a bums-on-seat type of approach,” explains Flux.
Rather than employ lots of agencies in a scattergun manner, having one agency or managed service provider in charge of your resourcing will streamline your recruitment process. On a more mundane level, it relieves everyday pressures such as the relentless cold calling from recruitment agencies.
In essence, it’s a shift in perspective from being reactive to proactive. “Companies can be totally reactive and we are educating our clients to look proactively and to put in place resourcing plans for three years in advance,” says Flux.
The day-to-day management improvements can be huge. In most organisations, HR has ultimate responsibility for hiring, but the real control of recruitment is far more fragmented, as individual departments or offices use their own favoured agencies.
“Often it’s fragmented and there’s no consistency,” says Clements. “Typically, in a medium to large company they could deal with 150 different recruitment suppliers and very few will be managed through the central HR function. In some cases organisations may be sent the same CV two or three times.”
He adds: “It’s impossible to get consistency round reporting and cost control with that sort of size of base.”
Simply rationalising the number of suppliers and standardising rates can make a huge impact on recruitment costs alone. Companies can of course do that themselves internally – and some companies call in consultancies to sort out their recruitment before they outsource – but clients don’t have the wider and deeper expertise. An outsourcer also has the technology, such as applicant tracking technology, which can speed up the process.
The true benefits of outsourcing recruitment are longer term and strategic. With a complete picture of staffing, companies could establish, for example, that it might be better to increase the ratio of permanent to contract staff.
Hays has about 500 other suppliers that it subcontracts work to, according to Snuggs. But Hays is the one point of contact for the client. This immediately means less work for the client, who may have to sift through duplicate applicants from different agencies.
How the lead agency or managed services provider treats other recruitment agencies is key.
The lead provider has to be transparent about the rates and the service level agreements. Otherwise, if the smaller agencies feel that they are being screwed down too far on margins, or that the lead agency always favours their own candidates, then they in turn will push their best people to clients who pay more.
That’s the difference between a ‘master vendor’ and a ‘vendor neutral’ approach. In a master vendor set up, there will be a lead agency, but they will always favour candidates on their own books. In a ‘vendor neutral’ scenario, the managing agency will put forward the best candidates, even if they don’t come from their own books.
Flux points out, however, that in a market with a scarcity of skills, master vendor scenario is the only one that will work. But no one agency can provide all personnel, so there has to be co-operation and what Flux describes as a “non-toxic” working relationship.
Companies are often nervous about taking a full RPO route. “The word ‘outsource’ a lot of our clients find quite scary and there’s a misconception that by outsourcing they lose control – but the opposite is true: it exposes areas of risk,” says Flux.
Being outside the company can make it easier to point out problems without any political ramifications. “As an outsider I can go in and diplomatically point out things that would be difficult for internal people,” says Snuggs.
It can also make it easier for an outsider to carry out exit interviews, which provide vital information about the reasons for high staff turnover. “It’s counter-intuitive,” admits Snuggs. “A recruitment organisation gets paid to bring in bodies, but we’re talking about working with companies for three years or more.”
Vanessa Robinson, advisor, organisation and resourcing at the CIPD agrees. “It makes a lot of sense. Employees would feel more comfortable talking to an outside party and it helps a company to know why people are leaving,” she says.
Equally, taking a resourcing outsourcer will also provide help when a company wants to downsize and maintain the right workforce balance and deal with the ‘outplacement’ side of things.
While it’s large companies that are looking to outsource large chunks of their resourcing, smaller companies can still take advantage of outsourcing – perhaps getting help with specific projects, rather than a long-term strategy.
“It’s seen as the domain of large organisations, but SMEs can take advantage of HR shared service centres and it’s exactly the same for recruitment too,” says Clements.
Whether companies outsource or tackle things in-house, those with their sights on future growth and prosperity need to put their recruitment house in order. It’s not enough to have bums on seats – they need to be perfectly pert bums.
Written by Janice Milne. Originally published in Outsource Issue 8, Spring 2006 p44