Outsourcing for Recruitment Agencies the Strategic Benefit 1. - - PDF document

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RCSA International Conference 2011

31 August -2 September Port Douglas, Queensland, Australia

Summary of presentation by Rod Hore, Director HHMC Australia.

Outsourcing for Recruitment Agencies – the Strategic Benefit

• 1. About HHMC

HHMC works with Recruitment Agency owners and managers across Australia and New Zealand, with an increasing interest from global clients in Asia and Europe. HHMC provides three services to these organisations: advisory services, merger & acquisition support, and introductions to offshore outsourcing. We are constantly in discussions with agencies about:

• Risk
• Sustainability
• The “Right to Exist”
• The Agency’s position in the market
• 2. Agency Process & Remuneration Models

For some time we have been concerned that the 360 degree recruitment model, where a consultant “owns a desk”, is not appropriate for all the models with which an Agency contracts with its clients. As an example, full commission arrangements that reward sales-oriented consultants for their results may not be appropriate for the consultant or the Agency when working on a procurement-led contract. We acknowledge that an existing process model and remuneration mechanism is difficult to modify, but the forces of change in the industry demand that owners and managers consider how they are positioned to address the challenges and opportunities of the next few years.

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• 3. Different Buyer’s Models

We evaluate an agency and its position in the market by considering what a client buys

• ff the Agency, and the agency’s response in terms of its:
• Promise to the client
• Relationship with the client
• Risk to the Agency
• Service provided, and
• Fees earned

Using these criteria, we view Retained business as being different from Exclusive business which is again different to Contingent business. The business models are even more distinct when a procurement-based PSA arrangement is in place, compared to a PSA that has been established to define terms and conditions but still allows for strong relationships with hiring managers. A different model again is when a Recruitment Process Outsourcing (RPO) model is employed by the corporate, or a Vendor Management System (VMS) and Managed Service Provider (MSP) is in place to provide the interface between corporate and

• Agency. In the USA we understand that up to 60% of all recruitment is undertaken via

a VMS/MSP arrangement – and this model is coming to Australia.

• 4. Strategy

So how is your agency managing for these models? How are you addressing issues of speed, cost, performance and risk? Today an Agency owner or manager needs a pragmatic understanding of:

• Market conditions
• Agency business strategy
• Client relationships
• Sustainability, and
• Risk

The best organisations are constantly applying great leadership, effective use of technology, and brilliant process management to ensure they have the flexibility and sustainability to provide high profitability.

• 5. Adding value to your client

A question that tells us a lot about an Agency is “what percentage of placements are made from fresh candidates that came from the Agencies own advertising?” If the number is high, we believe the agency is not adding a lot of value to its clients – the client could just run that recruitment process itself. If the number is low, the Agency has a provable value to the client. All clients are managing the procurement cost of talent and Agencies need to be able to show how and why they add value.

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• 6. What about Outsourcing?

Recruitment Agencies exist because their clients have agreed to outsource a function from their business. Yet recruitment agencies themselves do not always have an open mind on outsourcing functions. Business Process Outsourcing (BPO) is a multi-million dollar business. Agencies often consider outsourcing portions of their back office such as IT, or payroll and bookkeeping. The benefits of outsourcing include:

• Cost saving on activities
• Contracted performance levels
• Fixed costs changed to Variable costs
• Internal staff productivity (as tasks are removed from valuable resources)
• Management headspace
• 7. Outsourcing Core Recruitment Functions

Increasingly, agencies are turning to outsourcing within the core recruitment function. In some circumstances, everything but the client relationship could be outsourced Most agencies concentrate on support activity and transactional activity. The goal is to ensure scarce and expensive internal staff are as productive as is possible and focussed

• n high value tasks (such as winning new business and selling candidates into roles)

Examples of outsourced functions include:

• Candidate Registration
• Database Regeneration
• Passive search (finding candidates that do not respond to job-board adverts)
• Compliance (eg Reference Checks)
• Head Hunting and Name Mapping
• Shortlisting candidates to new jobs
• Running a procurement-type PSA
• Running a social media program
• Global Migration

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• 8. What is happening in Australia & New Zealand?

Outsourcing to onshore and offshore service providers is occurring in Australia and New Zealand today. Many multinational organisations have centres in countries such as India and the Philippines. In Australia and New Zealand the most prolific sectors include Engineering, IT, and Medical recruitment. The most common functions today are database regeneration, passive searching, and compliance processes. My prediction for the highest growth areas are in procurement-led PSA and RPO contracts, and in Global Migration. There is no doubt that outsourcing is part of the strategic conversation and will continue to increase in Agencies across Australia and New Zealand.

• For further information please contact:

Rod Hore Director HHMC Australia Pty Ltd T: +61 2 9925 2246 E: rod.hore@hhmc.com.au W: www.hhmc.com.au