Build or buy? The case for outsourcing recruitment in uncertain times

People drive competitive advantage, so it is crucial to have the right model in place to acquire, develop and retain talent. In the decade preceding the global financial crisis, we saw a sharp increase in the number of firms investing in building internal recruitment capability.

Today, large in-house teams of well-remunerated talent acquisition, employer brand and strategic sourcing experts have become the norm, with recruitment recognised as a strategic enabler of business growth and success, rather than a secondary HR task.

While there is no doubt that such teams can demonstrate a return on investment, they often lack the flexibility to respond to changing business and economic environments. In a more fiscally constrained period is it time to pursue a ‘buy’ rather than a ‘build’ strategy in the talent acquisition arena?

Applying a commercial lens to recruitment outsourcing

Outsourcing recruitment strategy and delivery is not a new concept.

Recruitment process outsourcing (RPO) has been one of the fastest growing forms of business process outsourcing in the last 20 years, recognised for its speed of implementation and efficacy; in particular, its ability to deliver value in terms of expertise, flexibility and productivity.

In recent years, as RPO customers focus more heavily on employer branding, user experience and how talent acquisition can support broader business objectives such as diversity and inclusion, the commercial benefits of RPO have been somewhat less important.

But cost efficiency is now being repositioned front and centre in expenditure and investment decisions for talent acquisition. So how does recruitment process outsourcing stack up commercially?

How RPO drives cost savings

RPO providers apply several levers to take cost out of an organisation’s hiring activity.  

Firstly, almost all RPO models are designed to maximise low-cost direct hiring channels, leveraging expertise built over many years to develop careers websites that convert quality applications, source hard-to-find talent, drive internal referrals and execute internal mobility and retention strategies that reduce the need to source from the external market. The average cost per hire under an RPO model tends to be between $1,500 and $4,000, which compares very favourably to hefty one-off placement fees charged by recruitment agencies.

In comparison to an in-house talent acquisition team, RPOs deliver savings by helping organisations avoid large non-revenue generating functions with significant overheads.  The cost of building an in-house talent acquisition team is significant. 

Case in point: an employee’s total remuneration and benefits are usually between 1.25 to 1.4 times their base salary, so an AU$60,000 annual salary could cost a firm up to AU$84,000 annually. This does not consider other costs such as time for employees to reach full productivity, facilities costs or ongoing training and development. As organisations place increased focus on revenue and gross profit per FTE, a large in-house talent acquisition team can negatively impact the balance sheet.

An RPO offers an opportunity to ensure 100% team utilisation and productivity. With headcount, technology and other resources flexed up and down to meet demand and strict KPIs and SLAs to manage deliverables, an RPO gives businesses agility, certainty and cost efficiency that an in-house team is unable to deliver.

Consider partial outsourcing

A fully outsourced recruitment model may not work for all organisations and, in the current climate, there is certainly an argument for taking things one step at a time.

Contemporary RPO solutions offer a wide range of outsourcing options, including project RPOs that focus on a specific business unit, location or project and modular solutions that segment talent acquisition activities into strategic and transactional tasks, outsourcing those that can deliver the most impact in terms of efficiency and cost savings to the customer.

Depending on the size and complexity of the business, maintaining a lean in-house team to manage talent acquisition strategy and govern the relationship with an outsourced provider can also be advantageous. The RPO provider can focus on the heavy lifting associated with sourcing, screening and onboarding talent, and the customer’s team or representative can ensure that talent acquisition delivery supports broader organisational strategy and goals.

Whether a fully outsourced or modular solution is considered, it is important to ensure that flexibility is built into the operating model and contract.

Final thoughts

The ability to execute talent strategies that position businesses effectively for growth, while delivering the agility and flexibility to scale to rapidly changing business and economic conditions will be the hallmarks of successful talent acquisition functions for years to come. Get in touch with Harrrier to find out how RPO can create the cost advantages you need.