Q&A: Rebecca Callahan, Spherion
(Rebecca Callahan is Senior Vice President, RPO for Spherion, one of the world's largest providers of recruitment solutions. In this exclusive interview she tells SSON about how recruitment process outsourcing (RPO) differs from traditional recruitment strategies and what's driving the RPO boom in the USA and in the wider world.)
SSON: Firstly, Rebecca, let’s start from the beginning: what is recruitment process outsourcing (RPO) and how does it differ from traditional recruitment via an agency?
Rebecca Callahan: I would say there are varying definitions. When we define the recruitment process of outsourcing, it is taking your internal recruiting processes and outsourcing them to one vendor, and you even do that across multiple skill sets or potentially a specific skill set. The key difference between a recruitment agency and RPO, is when you choose to outsource your recruiting, you have done that across the typically across that entire value chain. So, whether it’s from the very beginning when it’s sourcing and screening, right all of the way to onboarding and all the pieces and parts in between, that is outsourcing a process - and the provider will typically make improvements on your process, they will make investments in technology to help you validate and manage that process.
The provider also brings contractual obligations with service level agreements, so whether it’ s a diverse slate of candidates, or it’s time to fill or it’s reduction to turnover, etcetera, there are a variety of things that we bring contractually to manage that. And we typically don’t work on a percentage salary; we typically work on a cost-per-hire basis and/or a management fee in combination with that. But the key difference when you talk about a traditional recruitment agency, they are typically finding you one or two positions, and they are bringing you a candidate and charging you a percentage salary. All they’re really doing is bringing you a candidate, or multiple candidates if you have given them multiple positions. They’re not handling the entire process beginning to end.
SSON: And you would expect your clients, basically, to give you all of their recruitment – to fill all their vacant positions?
RC: Typically clients give us all of their skills - and we have a lot of customers where we have their entire skills of the enterprise - or they give us specific skills. For example, they may choose to give us all of their sales reps, because it’s a big pharmaceutical company and they hire three thousand of them a year, and they feel that that capability is best outsourced.
SSON: So you need people within your organization who understand – in this example - the pharma business; you need enough people who comprehend and are familiar with the industry. Is it the case that if you as a company don’t feel comfortable within that industry you simply won’t offer such positions?
RC: Potentially; if it’s clinical for example and you’ve come to our organization and asked us to recruit nurses, well given the time to find nursing recruiters and to understand those potential certifications etcetera, we can’t gather the expertise in a short enough time frame to do a really good job for the customer, so we wouldn’t specialise there and we have partners and other vendors that do.
We have over five hundred – probably closer to six hundred - recruiters, and the reality is that across that skill-base of recruiters we have purposely recruited for a multitude of skill sets, whether that’s pharma, IT, insurance, or finance. We look at a recruiting base in two ways, horizontally and vertically; so we’d look at industry experience, then experience within a specific skill. And then we acquire those skill sets; we may have them do something else if we don’t have the customer base that is associated with those skills yet, or we’ll use them as those customers come.
SSON: How long have you guys been in the business?
RC: Spherion have been in the recruiting business for over sixty years, we have had the outsource recruiting division for six years. We are a $2.5-billion publicly traded company, and we’re really made up of five divisions that support staffing and recruiting, whether that is commercial staffing, IT staffing, traditional recruitment agency, recruitment outsourcing or high-end office professionals. I think our greatest success as a division is the list of compelling brands that we have had in an early-stage market; we have large Fortune 500 clients who have outsourced all of their recruiting to us, in really what is considered an early stage market. So to be able to have that confidence, not only in us, but in the value proposition, and leading that in the industry, I think that is pretty compelling.
SSON: How do you find potential candidates - how do you market your services?
RC: A few ways: we do try traditional marketing, and in fact being a market leader, we’re involved in the RPO Alliance Board and a lot of other things that sort of drive what is going on in the market place, and as a result of that we’re well known in the industry and customers call us. There’s not a lot of players here; we’re one of the largest, if not the largest, so there’s clearly some assistance there. We have a full sales organization that targets clients both by vertical, and by skill-sets from time to time; and then we do all of the traditional marketing as well, whether those advertisements or conferences or our own top leadership trying to educate the market on the industry. So we really run the gamut on all of those things. We can also go to a client making recommendations on how to proceed and then build an offering for them. We really customise the solution client by client, just because some of our clients tend to be so large that a traditional model may not work.
SSON: Let’s broaden things a little: what’s driving your industry right now?
RC: On the whole, it’s clear in the US that there is a skills shortage; the baby boomers are retiring and are leaving a gap of skilled workers. Then there’s the growth in particular verticals in IT, healthcare nurses and pharmaceuticals. That’s driving a lot of the market clearly in the United States. In the global markets as we start to see the RPO landscape grow - and it is dynamic - I think we would still tell you that it is still in validation mode, as people really start to understand the value of the proposition and collate the reasons to use RPO. A lot of US job growth is taking place overseas, and it’s all about how do I attract those workers and get my hands on that talent; and it’s becoming one of the key drivers.
SSON: How popular is RPO, and how popular is it going to be in the next few years?
RC: Like I said, it’s in validation mode. There’s a lot of different numbers that validate the size of the market anywhere from $350 million to half a billion dollars; anywhere from forty per cent to eighty per cent growth annually, so that gives you an idea of how it is still being defined. I will tell you that with those numbers, the low end of that range is too low; it’s probably somewhere in the middle range: that will tell you for an early-stage market, it’s considerably fast-growing. I think the job-growth overseas and the lack of skilled workers in the US covering the retired baby boomers are going to draw more attention to outsourcing in the next twenty four months.
SSON: Which industries are most active in RPO at the moment?
RC: Insurance, hi-tech, finance. The skill-sets that are the most active are IT and engineers, I would say across all industries; I would say anything IT- or engineering-related is very popular. Followed by nurses – in the US anyway, because there’s a shortage - and pharmacy.
SSON: To what extent can RPO be offshored, and is this happening?
RC: It is starting to happen. I think all of the providers in the US are looking to take advantage of what’s happening in different parts of the market, but there is not one RPO company that has full-scale operations across the globe. I think you will see some consolidation in the market to take advantage of that, and you’ll see a lot of partnering coming up here.
SSON: Is there a basic point of company size where RPO becomes uneconomical?
RC: If people are looking to hire less than fifty people, even less than a hundred people annually it may not be economical, but it really depends on the complexity of your skills sets. If you are having difficulty finding chemical engineers and you rely on generating revenue, whether you need 50 or 300, that could have a significant impact to your business.
SSON: Isn’t there a danger that companies using RPO lose a degree of control or independence? What’s your accountability?
RC: There are the service level agreements that we agree to contractually; that’s why it’s rarely just a couple of positions, it’s typically more than fifty and we are contractually obligated to fill the role, so we may decide in advance with you that you need the positions in fifty days, or once you give us the requisition we have fifty days to fill it. If we don’t, there are typically penalties associated with that not happening.
I do think by the way that it is a valid concern - that clients believe that they may lose control - but most of our clients have found they actually have more control because they have more control over resources: being able to scale them up and down as necessary versus their old model. Their old model may just have had two or three or four recruiters in their office and then all of a sudden they realise, based on business needs, they have to wrap three hundred sales people. They are out of control in that example because they don’t have the method to do that; we do. One of the key reasons that folks decide to do outsource recruiting is to take advantage of that ability to scale it up and down. They have more control.
SSON: Is there also a potential problem with confidentiality (ie, RPO providers might have access to psychometric details etc of high-level employees) and is there legislation in place to prevent this problem arising? It seems that there could potentially be a problem, and you’d have to be far more confident outsourcing this than you would taking people on to be internal recruiters, wouldn’t you?
RC: Yes… This doesn’t actually come up too often, but we do have one client that has some fairly high-level positions in which we are gathering some confidential data up-front. There’s a couple of points here. One is, when we act as the outsource provider, one of the key differences between us and a recruitment agency is that we do not own the candidate. The candidates are owned by the client; we may bring the technology but we operate on a database that ultimately belongs to a client. So we may have access to it, but we don’t own that data: that is a key issue.
The other point is that typically when we have higher-level-type positions where the confidentiality is really key - and this is true for a lot of clients - we have some subset of dedicated resources so the information is not available to the masses. If you’re in an account that has a dedicated team associated with it, then they are the only six people that are going to see the data. We provide all of the possible checks, background, we have them sign NDAs etcetera, so we don’t open the data to the masses.
SSON: And is there any legislation in place, or is this a new subject?
RC: Not really, there isn’t; this is always a problem. Even as you use independent agencies, particular in a very high-end firm that is potentially looking for a higher-end candidate, you have always had that problem. Which really today is protected by non-disclosures.
SSON: How do you feel about operating in, let’s say, India, China and maybe the Philippines, what precautions would you be taking to ensure the integrity of your data – and your client’s data?
RC: We primarily operate with partners in these overseas markets, because the laws vary so greatly country by country, whether it’s a privacy protection law, or a law of how you handle the candidate. So, rather than trying to enter a market and trying to understand those legal issues, we may actually operate with a partner who is specific to that country who understands those rules and regulations.
SSON: So they would have signed up to the same agreements as you at Spherion?
RC: They would sign up to the same agreements as us - the overall SLAs around the contractual obligation time to fill, technology and what have you - but when it comes down to recruiting in that specific country, we actually have them handle the specifics because they understand the law. We actually contractually obligate ourselves to those, but with the assistance of our partners so we don’t go misrepresenting.