The phrase “think global, act local” has a good claim to be the unofficial
motto of international recruitment outsourcing, but in a time of global
economic downturn the industry is having to prove that the benefits of
outsourcing recruitment needs on a local level also apply across national
boundaries.
The conviction that a multinational corporation can outsource its recruitment
process to just one company is the big idea that underpins the global RO
market. Not only do providers of RO (also known as RPO, recruitment process
outsourcing) promise the cost savings, efficiencies and transparencies for
their clients that they would provide in a single market, but they claim to
have the knowledge to navigate global variations in employment legislation,
cultural issues and working practices – and successfully target the local
talent.
Craig Julien is director of global RO product management and marketing for
Kenexa, which has branches in 18 countries and recruits in 40 countries.
With the financial pages dominated by news of mass redundancies, he says
that “the US and other markets have been affected by the economic situation
but companies still have to hire the right people, even in a downturn. RO
has the capacity for recruiting in different climates because the
recruitment is becoming more specialised and there is always going to be a
level of attrition. Positions that were difficult to fill yesterday are
still difficult to fill today”.
Julien says he hasn’t yet seen any indication that recruitment is being
brought back in-house as a result of the downturn – and possibly the reverse
is happening. “If companies are having to shed costs, then they are
wondering whether they can justify maintaining their recruitment function
in-house,” he says. “If RO can manage recruitment capacity then it raises
the question of why people should still own it if they don’t have a business
reason.”
The credit crunch may, then, be good for business – if it’s the RO business.
Paul Mallinson, UK and Ireland managing director of Hays Resource
Management, says: “The downturn is a driving force behind RO because global
organisations with a large recruitment base are now wanting to see clearly
how much they are spending on recruitment.
“Large organisations are more seriously looking at RO as a way to give a
higher visibility of what are their key costs. Our sales pipeline has never
been stronger.”
Just how well are ROs delivering the benefits of a global service? With the
rise of globalisation has come the rise of the idea of the global recruiter.
International brands such as Microsoft, Unilever, Thomas Cook and BT have
signed multi-million-pound contracts to help them meet their staffing needs
around the world.
The market is certainly growing: a report on RO opportunities, published in
May by the independent analyst Datamonitor, estimated that the global market
was worth $720m (£470m) in 2007 and forecast that it would grow 22% to $880m
(£575m) this year. In 2009, Datamonitor predicted, it would be a $1 billion
(£653m) industry.
The report found that RO demand was coming mainly from Fortune 1000 companies
in America. But it also showed that the markets in the UK and continental
Europe were growing rapidly and a similar pattern was emerging in the
Asia-Pacific region.
While the industry has been expanding swiftly, RO companies do not yet have
the ability to offer a truly international solution by themselves, according
to Datamonitor. They are, though, able to deliver across the globe by
splitting contracts into regions and between different vendors The report is
clear on this: “The one-vendor global deal has not arrived yet, but a number
of vendors believe that a breakthrough will occur in the next 12 months. The
key reason for the break-up of global contracts has been the fact that
vendors do not have the capabilities to deliver on an international basis.”
Many RO providers with global ambitions are investing in international
expansion – acquiring companies, building a global set of processes and
forming partnerships with vendors in other regions. This year saw a wave of
mergers and acquisitions as providers began enlarging their expertise and
geographical footprint.
Mallinson agrees that RO is yet to become truly international. “Global RO is
an emerging market, rather than an actual market at the moment,” he says.
“Conceptually it’s there and it’s a market opportunity, but companies have
yet to establish a consistent approach across the globe.”
Ideas about what RO involves differ across the regions – EMEA (Europe, Middle
East and Africa), the Americas and Asia-Pacific – which makes it hard for
one operator to provide a common service, says Mallinson.
This is reflected in the big businesses using RO providers. “The issue is
about setting up an infrastructure of processes and people,” he says. “A lot
of client organisations themselves aren’t truly global. They have a global
presence but they’re run by independent regions which have autonomy.
“Very few organisations make truly global decisions, so it’s more true to say
that a global organisation may have three different partners in three
different territories.”
Martin Reddington, a human resources expert who recently co-edited a book
called Technology, Outsourcing and Transforming HR, says that the
attractions of global RO are often perceived to lie in a number of areas.
These are: “Enhancing focus; the benefits of scale and scope, often
supported by superior technology; dedicated skills and management; reduction
in overhead costs; and better operational data, including visibility in
areas such as legal compliance.”
However, he warns, there can be insufficient analysis of the strategic options
available and their relative merits, which may lead to long contracts being
entered into without sufficient thought as to what could happen if, for
example, market conditions change.
“The decision to enter into a global RO agreement must be taken only after
very serious thought and due diligence, otherwise what appeared to be an
attractive proposition at the outset may fail to live up to its promise,”
Reddington says.
Whether covering a couple of countries or half a continent, the RO provider
has to be sure to provide the critical factors across all markets, according
to Paul Hughes, UK director of strategic accounts for the business
leadership consultancy DDI.
“The challenge is to get the level of efficiency and consistency the client
wants,” Hughes says. “Clients want both a local and an international service
with common practices to be followed – and it is easier to do that with one
firm than managing many different relationships.
“But the question is: can you recruit in China the same as you would in
Slough?”
The answer to that is yes, Hughes asserts – although he goes on to add a few
qualifying observations. “When it comes to large-scale recruitment at a
lower level, then yes, you can. But the real challenge is when you are
looking to fill leadership positions. There, you definitely need a local
understanding of the market and the different philosophies behind different
cultures. And clients want to be reassured that their outsourcing providers
know all about local legislation.”
An RO company with a network of offices and contacts spread across a wide
geographical area is, though, a hard act to beat for providers that operate
only in the local market.
Julien, of Kenexa, explains: “They have the local knowledge but would they
have the expertise to source global-ly? The RO company might be in the same
city as the client company, but would that necessarily be where the talent
lives?”
Continental drift
With 4,000 staff serving 23,000 clients in 135 countries, the business
intelligence and performance management company Cognos had its work cut out
to meet its recruitment needs. And this was before it was acquired by
business information giant IBM earlier this year.
In September 2007 the company, which at that time had a £670m annual turnover,
signed an RO deal with Kenexa, which took over all its recruitment in
Europe, the Middle East and Africa from junior sales roles up to senior
managers.
Nick Falkingham,left, Cognos’s vice-president of European operations, says:
“We realised our managers were spending a great deal of time on recruitment
when they should have been managing the business.”
Cognos wanted to make the process as streamlined and efficient as possible.
“We need to react quickly,” says Falkingham. “We don’t want to have to wait
months for people and then spend a lot of time training them up for the
role.”
Matthew Moore, Kenexa’s client relationship director for the account, works
on-site at Cognos’s Berkshire HQ. He says: “We map the market so we know
where people work and what skills they have, and we try to predict where
recruitment needs at Cognos will arise. So the moment there is a vacancy, we
know where the right people are for the job and we can approach them
straight away.”
