RPO a major threat to traditional recruitment
This article originally appeared in ShortList on Monday 29 October 2007. ShortList is the number one source of information for both corporate recruiters and recruitment companies.
The growth of RPO is the biggest threat the traditional recruitment industry faces, says specialist recruitment industry trainer Ross Clennett.
Speaking at the RCSA Vic/Tas annual conference in Melbourne, Clennett said the growth of pure RPO companies such as HRX and its competitors threatened a major shift in the flow of expenditure away from traditional recruitment companies.
Clennett said that while many recruitment companies were rapidly developing separate RPO services, the pure RPO providers like HRX were based on a business model which involved cutting the amount of work done by traditional recruitment companies.
The trend toward RPO and internal recruitment was being driven by both cost considerations and by a desire by big employers to gain more control over their talent acquisition, which many now saw as a key competitive advantage.
He cited the example of New Zealand's Auckland District Health Board, which had been using recruitment companies for about 95% of hiring in recent years. A new HR manager arrived, whose mantra was 'recruitment is core business for us', Clennett said. She set up a 25-strong internal recruitment team, bought in high-tech database technology and a candidate tracking system, and launched an alumni program to keep in touch with exiting staff. Three years later, the health board's use of recruitment companies was down to 1%.
He said other companies were looking at completely new avenues of candidate sourcing such as job fairs, alumni programs and employee referrals and all of these involved spending which traditionally would have gone to recruitment companies. Recruitment companies have some key advantages To retain their market share, recruitment companies should capitalise on a range of advantages that they held over corporate recruiters, Clennett said.
Foremost among these was independence.
Talent would always go to agency recruiters, because they had a "helicopter view" of career options across a range of industries. In contrast, corporate recruiters were focused purely on their own organisation, and could offer candidates only one choice.
They didn't have the luxury of being able to float a candidate in order to get the best deal for that candidate, and for themselves, Clennett said.
He also noted that corporate recruitment was still parked in HR, where it was staffed by people who weren't interesting in selling. Proactive, "hunter" personalities were much more likely to be drawn to traditional agency recruitment.
Furthermore, he said, in-house recruiters weren't seen as key talent in their organisation, or paid the kind of bonuses that salespeople earned - so there was little incentive to go the extra mile.
Corporate recruiters were often flooded with job orders (as many as 50 at a time, compared to between six and 12 for perm recruiters with an agency) which made it harder to do their job properly.
And unlike agency recruiters, corporate recruiters couldn't sack difficult clients, because they were "probably going to find them in the coffee queue the next morning", Clennett said.
Third-party recruiters would always be critical to recruitment, Clennett said, but recruitment companies needed to shed their "last-century mindsets" in order to keep offering a service which went well beyond what clients could provide for themselves.