In the wake of the Covid-19 pandemic and the associated business disruption, many companies are strategically analysing how to rebuild their talent pipelines. Beyond direct sourcing and managed services, organisations are looking to another possibility for their talent acquisition strategy: recruitment process outsourcing, or RPO.

As defined by SIA, RPO is the partial or full outsourcing of the internal recruitment function to a third-party specialist provider, which provides the necessary skills, activities, tools, technologies, related recruitment supply chain partners and process methodologies to assume the role of the client’s recruiting department.

SIA’s recent report, “RPO Global Landscape Summary 2021,” can help staffing firms understand the size and maturity of the global RPO market, gain visibility into trends about the evolution of talent acquisition for permanent workers and identify the predominant models being used.

The data and analysis in the report are based on the results of a detailed survey regarding providers’ RPO geographic footprint, customer segments, service capabilities and sourcing models. A total of 22 RPO providers submitted sufficient data to qualify for inclusion in the report. Combined, these providers have an aggregate of 2,500 RPO buyer contracts and account for 1.7 million hires annually.

The 2020 global RPO market by revenue is estimated at US $5.8 billion, a year-over-year decline of 7%. Despite the Covid-19 related reduction in revenues for the full year 2020, RPO continues to outperform the wider global staffing market, which declined by 11% last year. SIA forecasts that for the full year 2021, the RPO market will grow by double digits, surpassing pre-pandemic levels as organisations seek to rebuild talent acquisition capability.

Why RPO?

The International Labour Organization estimates the equivalent of 400 million jobs were lost in the second quarter 2020 as a result of the pandemic. With an uncertain economic outlook, and an organisational focus on right-sizing operations to align with income, now may seem a strange time for firms to be procuring RPO, especially when forecasts are unpredictable. It is, after all, a service built entirely around the acquisition of talent.

Consider though, the challenge faced by HR and workforce leaders who have spent years building internal talent acquisition muscle, only to find that market conditions make retaining a large talent acquisition team a luxury they cannot afford. In this example, an enterprise-grade RPO solution can bring scalability, sector expertise and continuity, with the ability to flex delivery teams up and down in line with demand.

Despite challenging market conditions over the past 12 months, RPO vendors shone in 2020, pivoting to support their clients through their Covid-19 challenges. These challenges were multifaceted, complex and changeable, with providers initially required to support clients with remote hiring and onboarding of talent. Providers reported a wholesale move to remote work in affected locations, and several launched new services, leveraging existing technology investments to provide remote and automated sourcing, interviewing and onboarding services, predominantly to serve high-volume recruitment requirements in growth sectors such as healthcare and logistics.

The agility of RPO providers in responding to these numerous challenges served to underline their importance to client organisations, with many realising they cannot single-handedly navigate the rapidly evolving talent acquisition trends and ongoing pandemic challenges. Vendors continue to evolve their value-added services such as consulting; diversity, equity and inclusion initiatives; talent advisory; and advanced data analytics in order to further differentiate their offerings from internal functions as well as competitors in the market.

Technology to support talent acquisition is increasingly complex and requires dedicated expertise to deliver the best return on investment. RPOs have dedicated teams that are constantly evaluating this market and can consult on the best-in-class products and have the experience to demonstrate how best to deploy and use them. SIA’s “RPO Global Landscape Summary” report identifies 165 tools and technologies in active use by the RPO providers with 5% of RPO employees now in technology roles.

As companies expand their global footprint, they fully expect their RPO provider to be able to support an international growth strategy. In 2020, 36% of the RPO market related to multi-country scope contracts, with 12% representing programs that cover three or more regions.

Challenges and Opportunities

As a result of the healthy growth outlook, many staffing firms continue to consider the business prospects in the RPO arena. On the surface, RPO engagements may look enticing and profitable, but they can be very complex undertakings before they deliver on that promise. Managing a client’s internal recruiting process involves specialised expertise and skill sets. A client’s talent acquisition process will involve a chain of command with organisational specific dependencies, diverse technologies and systems the staffing firm might not be readily familiar with. Change management experience and process realignment/re-engineering are key to running a full-fledged RPO business successfully. So, while it may seem natural to a staffing firm to leverage its core competency into a new business venture, success is not necessarily guaranteed.

Given the market complexity and competitiveness, staffing firms should answer four key questions when considering launching an RPO offering:

  • Do you expect an immediate return? You can’t manage your return monthly or even quarterly. RPO requires a full investment in client partnerships and a long-term view.
  • Is your approach strategic or transaction-oriented? RPO isn’t staffing; it’s business process outsourcing. It requires a strategic mindset and complete alignment with each client’s goals and culture.
  • Can you handle complexity? The contracts are complex and so are the delivery models. It takes the right kind of leadership to manage through this kind of complexity.
  • Are you willing to cannibalise staffing revenue? The growing RPO marketplace is a potential competitive threat to segments of the “direct hire” business that many contingent staffing organizations have incorporated seamlessly into their business services portfolio.

RPO solutions have a strong, proven value proposition as evidenced by the current growth and adoption in the marketplace. Staffing companies that position and resource their RPO services and solutions carefully to align with buyers’ needs will find a marketplace they can profit from and excel in.