Almost 40 years after Ross Perot launched outsourcing by offering to take over a company's IT, outsourcing has become an accepted business practice. Yet it's surprising how much resistance there still is in the market.
The Outsourcing Center asked recruitment process outsourcing (RPO) and recruitment technology service providers why they believe companies still refuse to outsource in 2013. Many of the myths, however, can apply to any kind of outsourcing.
Here are the key reasons and the real truth behind each of them.
1. My company isn't large enough for RPO.
Amy Bush, head of the Americas for Alexander Mann Solutions, contests that myth. "There are outsourcing solutions that can fit any need," she observes. These days she says clients "have different needs in different regions at different times of the year." A good outsourcing service provider "can weave together solutions."
What is the right number for outsourcing to make sense? It depends! Chad Veen, client success manager at HireVue, believes in general if a company needs to hire at least 50 positions, it makes economic sense to outsource. However, "you don't need a sledge hammer to kill an ant," he says. It depends largely on the positions. He says if the buyer needs software engineers, the number may be just 15 positions. The rule of thumb is, "the harder to find, the less openings you need," says Veen.
2. Do I have to go offshore? Or, outsourcing=offshoring.
Veen says outsourcing buyers tell him, "I don't want to outsource to the Philippines," today's du jour location. He says the quality of the candidate needed determines if offshoring even works for the buyer.
Today, more and more service providers are opening American operations. Jim McCoy, head of US and Canada operations for ManpowerGroup Solutions, points out most service providers use a mix of onshore and offshore resources. "Your outsourcing provider should understand this mix, especially the roles that make sense to keep onshore," he says.
For example, Alexander Mann Solutions has shared services centers all over the globe, including Cleveland. "Certain clients want us to deliver all our services from the US," Bush reports. Others want their clients to interact with Alexander Mann's staff in Cleveland but prefer to have their 24/7 back office support from Manila.
Specific to recruiting, McCoy adds that "the reality is there is no substitute for rapport building. That really only comes from a local understanding of a country, market or company."
3. I can hand everything off to the provider and all my recruiting problems will magically go away.
Sue Marks, CEO of Pinstripe, says many first-time buyers believe "outsourcing transfers all their problems to the service provider that magically resolves them without intervention. "In reality," she adds, "both partners have to work together to design and nurture the solution to move beyond their challenges and transform their talent practices."
Travis Furlow, head of client services for Alexander Mann, believes "a bilateral partnership" is the best way to guarantee outsourcing success. "Working together is enormously powerful," he observes.
Chase Wilson, vice president, solution design for Randstad Sourceright, observes clients often view an RPO solution initially as "simply transferring their existing recruiting structure and processes to an external provider." But he says RPO "can be so much more." RPO providers share with their clients "their years of experience, their proven recruitment processes, sourcing innovation, compliance understanding and a constant view into the latest technologies and tools."
Wilson believes it's a mistake to restrict an RPO partner to doing things the same way they've always been done. "This will ensure the same results," he says.
4. Choosing RPO means admitting your current recruitment strategies are failing.
Talent acquisition leadership often fails to internally promote RPO solutions for fear senior leadership may construe that recommendation "as a surrender, admitting that the present recruiting strategy has failed," says Wilson of Randstad Sourceright. Today, however, challenges are tougher for the in-house staff. "Economic volatility, globalization and the changing demographics of the workforce are just of few of the challenges in developing a consistently effective, yet evolving talent acquisition strategy," he says.
Outsourcing, on the other hand, "brings a strategic partnership opportunity to talent acquisition leadership that mutually overcomes these challenges with collaborative solutions that provide a client with greater control and insight into measurable performance indicators," he says.
For example, senior management can't dock an in-house recruiter's pay because they didn't do their job. "But you can do that to an RPO provider," points out Wilson.
5. I don't have to nurture my relationship with my RPO provider.
Marks of Pinstripe says all good outsourcing relationships "need care and feeding." When things are moving forward, she says people tend to ignore the relationship. But the best outsourcing relationships "are based on continuous improvement and a firm commitment to partnership evolution. Organizations need to choose a partner who will push you to be constantly better. That's when RPO is at its best."
Elaine Orler, president of Talent Function Group, believes outsourcing partnerships need day-to-day interaction. "The buyer has to work," she posits. Orler adds buyers need to place a skilled vendor management team in place to help this relationship thrive. "These skills are more senior than most organizations put into play," she reports.
6. Outsourcing is only effective if I outsource everything.
Orler says, "Outsourcing doesn't have to be all. It can be some." She suggests starting small, with a few types of positions.
Solutions can also involve only a part of the recruiting process, such as sourcing, screening or even just scheduling interviews, points out Wilson. Wherever a client is challenged with meeting the organization's requirements for speed, scale or quality, an RPO provider can often help.
7. My departments know the jobs and the industry better, so we can do it better in-house.
David Spector, global head of mobile for TMP Worldwide, posits outsourcers specialize, allowing them "to have knowledge of an entire industry." He points out the service provider "also knows the companies you are trying to surpass."
This can be a myth when it comes to compliance. Angela Lockman, vice president, product management for Equifax Workforce Solutions, points out compliance with government regulations and notifications, especially in the HR field, is far from simple. Employers face penalties for ignoring them, she says.
Governments can change regulation and legislation at any time. And employers operating in multiple states "can have challenges staying current on the requirements in each state," Lockman adds. A service provider has built its platform on meeting these regulatory needs.
In addition, outsourcing compliance to a company that specializes in your industry's particular compliance needs "can bring more innovation and improve efficiency," she adds.
8. Outsourcing is all smoke and mirrors.
Bush says sometimes outsourcing service providers do make exaggerated promises upfront. "They can make RPO seem like a talent management utopia," she observes. The right partnership, however, is key. "For example, we put our financials at risk to find great people for our clients. We want them to achieve their business outcomes, so we share the risk and go to bat together," she explains.
9. We can do it faster in-house because we don't have to spend time managing the provider.
Not true, says Spector of TMP Worldwide. He observes in-house departments have iterative cycles that require certain approvals. All too often, a major player is traveling, delaying the process. This can push the project back six weeks at a time, he has noticed.
The service provider, on the other hand, has set procedures that it rigorously follows.
10. If I outsource, the decision is irreversible.
When companies first outsource, they typically hand over processes they believe the service provider can do better than they can. But sometimes some processes, or even just parts of processes, really do belong in-house. Usually both buyer and provider will see the truth of the situation because of the pain it is causing and allow you to move that piece back home.
In addition, there are the natural vicissitudes of business. "Mergers and acquisitions, expansions and sell-offs, a changing economy — all necessitate changes to your outsourcing contract," points out McCoy of ManpowerGroup Solutions. "You should expect your outsourcer to grow and change with you," he says.
11. The service provider's staff is less professional than mine.
McCoy of ManpowerGroup Solutions suggests outsourcing buyers check out the CVs of the people who will be working on their account. "It might surprise you to learn about the backgrounds of your providers' employees," he says. He reports over the last 10 years most outsourcing service providers "have focused on developing their own talent to create career paths and salary opportunities" so they can retain the best and the brightest.
12. It's best to go with a single, full-service provider rather than a specialist.
Lockman of Equifax Workforce Solutions says today the HR process is "so complex and specialized," it's difficult for a full service provider to have "the knowledge and experience" necessary. That's why recent research has shown BPO buyers prefer to hire specialists rather than a single, full-service provider.
13. RPO is too expensive.
Wilson of Randstad Sourceright points out RPO is not just about transferring current recruiting costs over to another line item. "RPO is about fundamentally improving key performance indicators," he says. "If an RPO solution reduces a client's time-to-fill 25 percent, moves the 90-day attrition rate from 35 percent to 20 percent, or improves the interview-to-hire ratio from 8:1 to 4:1, the solution can pay for itself," he says.
Spector of TMP Worldwide says RPO providers "have previous," a British expression meaning experience. "We have done this before. We have gone through the pain of doing it the first and second time," he explains. This experience often makes outsourcing less expensive because the providers have paid for the initial mistakes in setting up their now tested systems.
14. Outsourcing is only for cost savings.
This is a big mistake, especially in the RPO space, believes Marks of Pinstripe. "Great talent makes or breaks your company," she points out. "If you settle for a 'your mess for less' solution, you will not achieve the results you need to establish HR as a true business partner to the organization."
Adds Orler, "HR gives a company its competitive advantage. Talent is now the only differentiator in any company because today the only thing that is unique is the people. " She says RPO can give an outsourcing buyer "a true strategic competitive advantage."
And that's no myth.