Recruitment Process Outsourcing vs Traditional Recruitment: Which One Is Right For Your Business?
Hiring new employees is necessary for every business. If you have new projects requiring manpower or positions that need to be filled up, you will need to find a recruiter for those requirements. As a business owner, you need to find the right recruitment partner. When it comes to recruitment you have an option to choose between Recruitment Process Outsourcing (RPO) vs traditional recruitment through a recruitment agency.
Each one has its own pros and cons so you need to choose carefully. While both can help you with fill your requirements, they have distinct differences. Recruitment agencies are the tried and true method while RPOs are an entirely new concept that is becoming popular. Before we decide on which recruitment method is right for you, let us first take a look at their differences. In this article, we shall discuss the following:
- What is Recruitment Process Outsourcing?
- Advantages and Disadvantages of Recruitment Processing
- What is Traditional Recruitment?
- Pros and Cons of Traditional Recruitment
- Difference Between RPO and Traditional Recruitment
- RPO vs Traditional Recruitment: Which One Is Right For Your Business?
What is Recruitment Process Outsourcing?
Recruitment process outsourcing or RPO is an industry that emerged from traditional recruiting. In RPO, an employer transfers all or part of its recruitment process to a third-party service provider. The provider can provide its own or may assume their client’s staff, technology, methodologies, and reporting.
RPO has grown considerably over the past few years and continues to gain ground. A report by Techavio reveals that the RPO market is projected to grow by US$5.09 billion from 2020–2024. RPO can reduce hiring time by 40 percent and delivers cost savings of more than 50 percent. There are different RPO models to choose from:
- End-to-end RPO. It can be used for a single market, country, region, or across the globe. It may focus on a specified business division, role, or encompass all hiring across the business.
- Project RPO. This type of RPO allows a company to hire a team of expert talent acquisition professionals to quickly fill a specific need within a designated time frame such as recruitment back-logs, launching a new sales team, meeting an unexpected hiring demand, or talent pooling and resourcing.
- On–demand. The same as Project RPO but involves having one or two outsourced recruiters join your talent acquisition team for a specific project or time period.
Advantages and Disadvantages of RPOs
In order to know if recruitment process outsourcing is right for your business, understanding its advantages or disadvantages is essential. Let us first take a look at the advantages:
RPO is cost-sensitive
RPO can deliver genuine savings for your organization. Multiple job requests can be filled and screened holistically. The RPO provider can readily optimize the entire process.
Specialized market knowledge
RPO providers are knowledgeable about the market that suits your business best. This will ensure faster hiring process, reduced project delays, and matching the right candidate to the most suitable compensation package.
Makes your business scalable
An RPO provider can give your business the scalability it needs. They can adjust to the pace of growth that you desire. You can work at your own pace while you give your service provider time to gain knowledge of the essentials of your company culture and brand identity. RPOs can provide you with the best talent available using extensive online recruitment databases. They have a ready talent pool that you can use now or in the future.
Realign your efforts to more strategic tasks
The RPO provider can interview high-value candidates and build relationships with them. They have the ability to understand if the applicant truly fits your company culture.
They provide data and reports
The provider can provide you with online recruitment patterns, key numbers, and important trends. They can also help you to understand the efficacy of the HR tools used, and other insights that can streamline your approach to the marketplace.
Now, let us go to the disadvantages:
This can be a challenge area so you need to be careful in choosing your RPO provider. Make sure that they are trustworthy and have security-enabled tools.
Too focused on numbers
Oftentimes, RPOs are focused on delivering the numbers resulting in bulk resumes instead of providing quality. To avoid this, you should clearly outline your SLAs to avoid any ambiguity.
Loss of control
Loss of control is another problem area with RPOs. As much as possible, you would want to have control of the recruitment process. Again, carefully consider this before inking partnerships with a provider.
Traditional recruitment, on the other hand, uses paper applications and resumes. Some managers still value face-to-face interaction to allow them to get a feel for how an applicant will perform in a job. In contrast to online recruiting which uses social media and recruitment platforms, traditional recruiters use any or all of the following channels to find applicants:
- Classified Advertising. This is a classic method for employers to recruit for open positions within their companies. It is one of the easiest ways to get the word out about available positions in the company. However, classified advertising has limitations when it comes to effectiveness. Most qualified candidates will not look at the classified ads because they are happy in their current positions and not looking for a job.
- Networking. Over time, a good manager will develop relationships and build a network. One business associate may know someone in their network who while not looking for a job may entertain appealing offers. They may also source applicants from their current employees. They may also look for possible candidates from their customers.
- Interviewing. Hiring managers conduct interviews with people they want to know more about. The interview will usually take place at the office of the manager with job applicants dressing up for impression. This will allow the manager to have a better understanding of the candidate. If the manager is interested, a second interview is conducted and a job offer may be rendered.
- Impression. Traditional hiring relies heavily on the impression that the applicant makes during the interview. Some managers will require a second interview to get another opinion. They may also require the applicant to complete aptitude tests or other skills tests to verify if the candidate is suitable for the job requirement. They may also require a pre-employment physical to prove that the applicant is healthy.
Pros and Cons of Traditional Recruitment
Traditional recruitment has its own advantages and disadvantages. et us first take a look at the benefits.
Strong Pool of Applicants
Traditional recruitment often involves finding the best methods to connect with qualified applicants. Hiring managers would usually post job openings in newspapers, the company website, job boards, broadcast media,job fairs, etc.
Recruiting applicants for available positions focuses on evaluating the qualifications and traits of candidates. Although job interviews are also important, a study shows that evaluating work samples are of great value in screening a potential employee.
Proactive Strategic Alignment
Thorough recruitment and selection is part of company strategy. Open positions are established based on company goals and hiring plans to achieve these goals. Companies can conduct training and development when they recognize the need to grow people into more elaborate roles after getting hired.
Reduced Turnover and High Morale
When you hire people with the right personality type and job skills, it can help the company as a whole.. When the culture is fit according to employee preferences, it can lead to satisfaction and higher employee retention. Lower employee turnover and a positive workplace will lead to greater efficiency and higher profits.
Now let’s take a look at the disadvantages:
Traditional recruitment can be a costly venture. In general, fees of recruitment agencies are around 20% to 30% of the employee’s first salary, especially for hard to fill roles. You will also have to pay a fixed fee whenever you want to hire through them.
No cultural fit
Another disadvantage of the traditional method is that there is no assurance of cultural fit. Recruitment agencies can provide your company with candidates that are best suited to a certain position and role. However, there is no guarantee that the applicant will be fit to your company culture.
Lack of employer branding
Another disadvantage of using recruitment agencies is that you won’t be able to build your brand and own it. Every step of the recruiting process is an opportunity for you to formulate, present, and promote your reputation as an employer of choice. However, with a recruitment agency, you lose control of the employer brand. It will be the agency who will present and sell your brand to the candidate.
Difference Between RPO and Traditional Recruitment
Choosing between recruitment process outsourcing vs traditional recruitment can be difficult. While both are designed to provide candidates to fill in vacant positions in your company, there is a huge difference between the two.
Making Placements vs Best Fit
The primary role of recruiting agencies is to make placements coming from sourced applicants. They get paid when they sell one of their candidates. For this reason, they discourage clients from using employee referral programs and their website to source talents otherwise they won’t get paid.
With recruitment process outsourcing, the provider will use all possible resources to find the best talent. They source talents on their own, use employee referral programs, and the company website to find the most suitable candidate for your open positions.
Because they are getting paid for making placement, the aim of traditional recruitment is to “own” each candidate they present to their clients for as long as possible. This means that you cannot offer a position to a candidate in the future unless you pay the agency for that placement.
In recruitment process outsourcing, on the other hand, there is no concept of ownership. You own your candidates regardless of whether the provider sourced them directly or they came from your pipeline via your company website or employee referral.
Recruitment agencies only make placements. They sell candidate’s skills and leverage placement guarantees to help close the deal. Traditional recruitment is based on a “fill the job quick so we can get paid” mentality.
Satisfying the hiring manager, selling your brand, or caring for candidates is not their priority. Aside from that, recruitment agencies may leave some of the recruiting tasks to your internal team, including writing job descriptions. This means that you pay the recruiter but your team will still do a lot of work themselves.
On the other hand, recruitment process outsourcing manages the entire recruiting function. The provider will also take care of your people, process, technology, and recruiting strategy. They will be the one to write the job description, screen the candidate, and boost manager satisfaction and employee branding. RPO providers build strategic and long-term partnerships with you.
Another major difference between recruitment process outsourcing vs traditional recruitment is the cost. As mentioned earlier, recruitment agencies will charge 20% to 30% of the salary of each candidate they place. So if you have an open position with a $100,000 salary, it would cost you $120,000 — $130,000 for that position despite your internal team still doing the work.
With RPOs, they will charge a monthly management fee for the entire hiring function along with some transactional fees to fill individual positions. Overall, the total cost for hiring an RPO provider is 60% to 75% less than what agencies charge. At the same time, your internal team will be free to accomplish some of their tasks.
RPO vs Traditional Recruitment: Which Is Right For Your Business?
To make the right choice between recruitment process outsourcing vs traditional recruitment, you need to carefully consider your hiring needs and resources.
- Do you have an in-house team who can handle your hiring needs? How will you benefit from developing it?
- Are you investing in a long-term recruiting strategy or you are just looking for a quick fix?
Answering these questions will help you make an informed choice between recruitment process outsourcing vs traditional recruitment.
Step In Choosing A Recruitment Agency
If you take the route of traditional recruitment, here are some of the steps you need to find a recruitment agency to work with.
Do your homework
Treat recruitment agencies the same way you will evaluate candidates. Look at their LinkedIn profile for their experience. Do they have experience in the area you want to hire them for? Is there proof of their experience as they claimed in your conversation?
Interview them like candidates
Interview the agency as you would a potential employee. Check if they already have potential candidates for your open position in their database. What will be their sourcing and evaluation method of the candidates for the position? How will they keep you updated with the status of candidates? How long will it take to fill the position?
Check their recruiting experience
If you are filling hard-to-fill skill sets, you want to find the best recruiter. Experienced recruiters may already have a pool of potential candidates. These applicants are not found on job boards because they do not need to post their resumes. They will not only reduce the time to fill the position but also provide you with quality candidates.
Evaluate their terms
Some recruiters can be rigid when it comes to talent acquisition and the like. Look for an agency that can be nimble and easily adjust to help you and your company find and retain the best talent. You don’t want to get stuck working with a recruiter that gets bogged down with inflexible terms.
Check their expertise and track record
Consider the agency’s expertise and track record in their field. When was their most recent fill? How large is their network? How often do they update their records and replenish their pool of applicants? What are their recruitment strategies?
Be clear with what you want
An agency will not be able to fill up open positions if you don’t know what you are looking for in the first place. Intermediate Excel skills may be advanced skills to the recruiter. So be clear with your requirements in a candidate.
How To Select An RPO Partner
If you choose recruitment process outsourcing, your hiring success will depend on your choice of RPO provider. Here are the steps on how to choose your recruiting partner.
Determine your reason for choosing RPO
While savings may be one of your reasons for choosing RPO, you must also consider the quality of hires. When choosing between recruitment process outsourcing versus traditional recruitment, you want to land the best candidates, reduce turnover rates, and boost your employer brand. In return, this could yield higher revenues in the long run.
At the onset, your provider should be informed about the reasons you want to partner with them. This will help the provider customize their recruitment plan based on what you need.
Understand your hiring needs
First of all, you need to look at your hiring needs. Determine the areas of your hiring process you want to improve, areas that are functioning well, and which positions need to be filled. This will help create a better framework for your organization. This will help you with your search for potential RPO partners.
Identify your requirements
Once you have determined your hiring needs, identify the key factors that you think will make the process successful. Some of the factors may include:
- Niche. You may want to partner with a provider that is knowledgeable in areas such as information technology, medical staffing, or computer science. Their rich database will help you fill up your required talents.
- Technology. Having the best recruitment technology can be a crucial factor in your choice of RPO partner. You may want the provider to have cloud computing so they can share data faster for better business collaboration. If data security concern is one of your main concerns, you may want to work with a partner with strong data security.
- Scalability. You may have unpredictable growth or hiring seasons so you need a provider that can easily scale up to meet your changing hiring demands.
- Quick Time to Fill. The faster the hiring process is over, the lesser will be the cost to you. Choose companies with a reputation for filling up positions quickly. But even with the quick hiring time, they should be able to provide you with the best talents for your job requirements.
- Understanding your culture. The RPO provider will represent your company in the job marketplace. Hence, they need to have a good grasp of your company culture so they can hire talents with similar values as yours.