Outsourcing is the Delegation of one or more business processes to an external provider, who then owns, manages and administers the selected processes based on defined measurable performance metrics (Gartner, 1995)
Outsourcing has been on the agenda for HR department for at least 10years as is not a new phenomenon. Outsourcing of HR activities has been a growth area over the past decade, as organization has sought benefits in passing over labour intensive, specialists, or non core activities to a third party expert. The drivers of HR outsourcing are varied including, for example, a desire to reduce cost, increase effectiveness, obtain external expertise or release internal HR expertise to focus on strategic issues and business partnering.
Organization may outsource virtually all HR process or, more commonly, select specific component such as payroll or resourcing. So far very few organizations have outsourced their entire HR function. Molloy, E. and Whittington, R. (2005). In large organization it is most common to have outsourced the operational elements of delivery all HR activities but retain control over HR strategy and decision making interestingly, small organizations often do the reverse, effectively outsourcing their strategy (to HR consultant and other professional advisers) and keeping the delivery of HR Processes internal. Outsourcing therefore is not only a strategy relevant to large organization. Several providers now offer outsourced HR services to small organization.
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Recruitment Process Outsourcing (RPO) refers to the process by which organizations outsource their part or all of its recruitment functions. This can include recruitment, job postings, sourcing, screening, interview scheduling and logistics, offer execution, system compliance, and HRIS (human resources information systems) data entry, in a simple term End to end Recruitment Life cycle.
It is important to note the distinction between RPO and HRO, or Human Resources Outsourcing. While both fall under the Business Process Outsourcing (BPO) umbrella, HRO refers to the outsourcing of certain HR functions such as HR system input, paperwork processing, benefits management, compensation, and performance management.
RPO is a viable option for companies that are short on internal recruiting resources, as is recently the case in many organizations that have downsized as a result of the recession. Similarly, by outsourcing recruitment, the company can re-focus HR managers and other internal HR staff members on other initiatives.
Cost is another driving factor of RPO adoption. In many cases, RPO partners can leverage economies of scale to reduce cost per hire. Plus, they can utilize large contracts with job boards that individual companies often cannot afford.
Staffing is one of the nucleus functions of Human Resources Management which has crossed beyond the boundaries. Recruitment functions itself consumes lots of time and money driving serious concern over many corporate entities across the country. Constant increase in the complexities in recruitment process forces many companies to redefine the whole processes. Numerous entities come ahead to take the challenge to serve various industries in their staffing functions. Non-core part of their recruitment services are handled by service providers locating in other shores. The era of recruitment process outsourcing (RPO) has been emerged allowing many leaders in human resource staffing companies to blow in the outsourcing market. From screening to the boarding of candidates, RPO services providers manage non-core functions of recruitment activities with its unparallel solutions. Wide range of services have been delivered from the offshore front to manage the staffing functions of overseas consulting firms, staffing and other private firms.
Offshore companies get lots of advantageous by outsourcing their part of or whole of recruiting functions such as:
* Reducing operative costs to a outstanding extent
* Lessen time taken recruitment process
* Access to all available job boards
* Get considerably skilled search recruiters
* Deliver of results in shorter period
* Turnaround working time makes company's work to be processed on 24 X 7 basis
* Can generate leads by research on various portals
* Able to provide the details of passive candidates which are not mentioned in any job portals
* Can process collaborative with in-house recruitment staff
* Quick area dimension on job market through search recruiter
* Unhidden costs are not involved
* Job postings can be done within safe hand
* Able to expand or reducing its existing team as per client's requirement
Aim/Objective of the Research
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The objective of this research is to Study and discuss a picture of current trends in outsourcing in HR services specially an Outsourcing of Recruitment process prevalent in Indian firms. The research aims to discern common factors promoting or inhibiting the growth of HR outsourcing industry in India. Also, the data collected will help in finding parameters which are most common in terms of Recruitment outsourcing. The research tries to determine patterns while comparing organizations involved in HR outsourcing against those which are not. The research can be very useful to the HR professionals to understand the current trends in the market with regards to outsourcing of HR services. It will give them a comparison of the firms outsourcing HR services with those that have completely in-house HR functions. They will get to know about the perceived advantages and disadvantages of HR outsourcing and also the important considerations to be kept in mind. Outsourcing Vendors can also find this research useful in understanding the needs of their potential and existing clientele. The students can also benefit from this research as they will become aware of the new trends in the field of HR and will be better prepared for the challenges ahead of them when they join the industry as HR professionals.
Recruitment Process Outsourcing can refer to the entire Recruiting process or key elements of it. As organizations are under intense pressure to continuously improve business Execution and refocus on their core competencies, they must objectively evaluate the components of the recruiting process and determine what they do best internally, and what should be outsourced to an expert third party. Chubb, L. (2008). A thorough due diligence is required to carefully weigh and compare various product and service options, contract terms, pricing scenarios, efficiencies gained, and results achieved with the third party options as compared to maintaining these interventions in house. Duggan, B., & Croy, G. (2004). When it comes to goal quantification, many organizations rely too heavily on metrics related to a technology-enabled talent acquisition function, including time to fill, cost-of-hire, and total number of open positions. Hansen, F. (2006). A common theme with these measures is that they are all internally focused on the recruiting function and do not consider post-hire metrics associated with actual on-the-job performance, and the specific needs of the business. Brockett, J. (2006). Therefore, an important part of the goal setting process is to engage business line leaders and strategic planners in a discussion about the business impacts they find most crucial. Coupling the recruitment function goals with the business unit goals will provide a more holistic set of objectives for the recruitment outsourcing program.
First, the recruitment process technology industry continues to undergo significant consolidation, making it perplexing and potentially risky as a buyer. Secondly, more and more companies in this industry are focusing their efforts on integrated talent management suites as opposed to talent acquisition systems. Molloy, E. and Whittington, R. (2005). Finally, with many vendors, there is a greater focus on new system components rather than on ensuring the quality of hire. Meskanich, P. (2009). These trends are highlighted in terms of greater service, improved reliability, and wider reaching automation; but do these 'Benefits' best meet end-customer requirements? For organizations with the budget and time commitment required to implement a full talent management suite, or who wish to work with the Largest market share providers, the answer may be yes. For many others, the answer requires further consideration. As the RPO industry consolidates, acquiring companies are looking to reduce operating costs, quickly penetrate new markets, and add on components to their talent management solutions. It is not unusual for key product and industry experts from the acquired company to leave the organization and take with them the accumulated knowledge and expertise they possess. In many instances, the acquired product is added.
HR director's still fear outsourcing and see it as an "all-or-nothing solution", according to research by recruitment process outsourcing (RPO) specialist hyphen. Fifty-six per cent of the 168 HR directors surveyed saw outsourcing as an increasing risk to their organization and a similar number (49 per cent) doubted that it could add any value. And yet, of those who do outsource certain functions, most said they kept a degree of control over them, with only payroll being predominantly external, "HR directors tend to have a control mentality that says unless they do it, it's not right. Yet the best HRDs work in partnership with outsourcers and still control the endgame," "Heads of HR are still scared of outsourcing." (2007)
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Recruitment Process Outsourcing (RPO) is an option to shed expensive recruitment costs, while leveraging best practices in people, process and technology. HR departments have a lot on their plates these days, and the recruiting and hiring of significant numbers of employees (as well as establishing relationships with potential upper-level candidates) can tax the capabilities of even the most experienced HR professionals. Bridgeford, L. (2008).
The field is increasingly crowded with firms that offer RPO services. Not all of them are created equal. That's why it is vitally important that companies know what to expect from a potential RPO partner. Here are just a few of the best practices in RPO -- what at Pinstripe are indentify as own innovative, comprehensive Better Approach to RPO.
Frankly, the days when an employer could post a want ad and wait for the resumes to pour in are over. With today's demographics, RPO solutions must focus on building pipelines of passive candidates -- those who haven't declared their intentions of looking for their next job. An abundant supply of passive candidates, pre-screened and pre-qualified by your RPO provider, offers employers the surest path to the best talent, and enables them to maximize the speed, quality and cost-effectiveness of the solutions they seek from their RPO provider.
Using these methods to stay ahead of the hiring curve has another benefit: With the assistance of your RPO provider, you can establish deep, longer-term relationships with the best prospects in your industry. In turn, they will have a clearer picture of what your company can offer them and greater confidence in practices and procedures you have in place to both hire and train them.
Fact about Current Recruitment Process Outsourcing Trend:
Recruitment outsourcing to India has been slow to take off, as it involves a sensitive issue about letting in outsiders into company decisions on employee selection. However, activity in the sector picked up and is predicted to sustain growth in near future. A host of recruitment companies are taking advantage of the skilled workforce and lower costs in India to set up a base for their global operations. Intelliswift Inc, the RPO subsidiary set up its office in Mumbai in 200. Although Intelliswift inc, has been in India for more than a decade, its subsidiary was set up to cater only to recruitment process outsourcing. Another U.S. based recruitment process outsourcing company, Kenexa Technologies, operates from Hyderabad and provides services such as talent acquisition, recruitment management and support, retention consulting and employee survey administration and analysis from India.
Apart from the subsidiaries of foreign recruitment companies, several India based vendors are also trying to tap the global opportunity. Their business model can be of two types: providing services to a recruitment company abroad or to an overseas company directly. In the former, the vendor develops a relationship with the recruitment company for outsourced services, but does not directly deal with clients. In the latter, the vendor generally looks to cement long-term relationships with clients. Then the vendor caters to requirements across geographies, and develops dedicated databases to fulfill volume-based needs.
Most Indian vendors are as yet catering to the lower end of the value chain where they sift through databases, select candidates, contact them and fix interviews. But the higher value adding work - which involves conducting interviews and recommending a candidate to the company - is slowly finding its way into India. Vendors believe that this will grow over time, as they build greater understanding of issues such as education systems abroad, structure of particular industries, etc. Vendors have initiated expansions looking at the growth prospects - Elixir Web Solutions, a leading Indian recruitment services provider, plans to obtain licenses in the US, UK and China by 2008. Elixir has developed specific teams for industries such as BPO, IT, FMCG and Retail.
The opportunity certainly seems huge. Some estimates show that the potential for recruitment process outsourcing to India will be at least $30 billion by 2008. Besides, firms that have a presence in India also have an expanding domestic opportunity to look forward to. Industries like IT, ITES, Pharma and more recently retail have brought in a job boom - the market is growing at 20 to 25 percent per annum - and Indian companies too, are turning to professional recruitment agencies to handle the additional HR workload. Although the domestic market is at a nascent stage, hectic activity is expected in the next two or three years, and as of now, marking their presence in India seems to be a win-win situation for recruitment companies.
Outsourcing appears to encourage the measurement of the value of HR and suggests that this comes about through the need for service level agreements and key performance indicators with a greater focus on customer satisfaction. Cook et.al. (2005).in the USA identify a wide range of benefits from outsourcing such as allowing a firm to concentrate on its core business; gaining from the specialist supplier's economics of scale and learning from them; shifting the burden of risk and enabling greater numerical flexibility; and the ability to keep the cost down due to competitive tendering processes. Outsourcing has also been introduced as a vechicle for effecting changes that would be hard to implement internally. For example in large organization outsourcing has been used to bring different parts of the organization together to reduce costs, apply common standards and share best practice and to provide access to innovative IT solutions. A further advantage that is claimed is that the internal HR function can now concentrate on driving the direction of HR rather than carry out more mundane task.
Outsourcing the whole of HR (called End to End Outsourcing) is also a very different proposition from outsourcing differentiated activities, which has been happening in an ad hoc manner for a much longer time. The IT firms like Hexaware & Patni, India for example has outsourced all to RPO service provider including strategic HR, which is the one part that most organization retain In house. Many organizations have clearly experienced advantaged from outsourcing, although many of these are based in India and there is a question as to the extent to which such as an approach should be applied in the same way in different international locations. (Torrington, D., Hall, L. & Taylor, S. (2008)
RECENT TRENDS OF OUTSOURCING IN INDIA
In India, the HR processes are being outsourced from more than a decade now. A company may draw required personnel from outsourcing firms. The outsourcing firms help the organization by the initial screening of the candidates according to the needs of the organization and creating a suitable pool of talent for the final selection by the organization. Outsourcing firms develop their human resource pool by employing people for them and make available personnel to various companies as per their needs. In turn, the outsourcing firms or the intermediaries charge the organizations for their services.
Outsourcing the Recruitment (HR) processes is the latest practice being followed by middle and large sized organizations. It is being witnessed across all the industries. In India, the HR processes are being outsourced from nearly a decade now. Outsourcing industry is growing at a high rate. Human Resource Outsourcing refers to the process in which an organization uses the professional services of a third party (generally professional consultants) to take care of its HR functions while HR management can focus on the deliberate measurement of their function. The functions that are typically outsourced are the functions that need expertise, relevant experience, knowledge and best methods and practices. This has given rise to outsourcing the various HR functions of an organization. HR Consultancies such as Ma Foi and Planman Consulting provide such services through expert professional consultants. Human resources business process outsourcing (HR BPO) is a major component of the worldwide BPO market. Performance management outsourcing involves all the performance monitoring, measurement, management being outsourced from a third party or an external organization. Many organizations have started outsourcing its recruitment process i.e. transferring all or some part of its recruitment process to an external consultant providing the recruitment services. It is commonly known as RPO i.e. recruitment process outsourcing. More and more medium and large sized organizations are outsourcing their recruitment process right from the entry level jobs to the C-level jobs. The present value of the recruitment process outsourcing industry (RPO) in India is estimated to be $2.5 billion and it is expected to grow at the annual rate of 30-40 per cent for the next couple of years. According to a recent survey, only 8-10 per cent of the Indian companies are complete recruitment processes. However, the number of companies outsourcing their recruitment processes is increasing at a very fast rate and so is the percentage of their total recruitment processes being outsourced. Outsourcing organizations strive for providing cost saving benefits to their clients. One of the major advantages to organizations, who outsource their recruitment process, is that it helps to save up to as much as 40 per cent of their recruitment costs. With the experience, expertise and the economies of scale of the third party, organizations are able to improve the quality of the recruits and the speed of the whole process. Also, outsourcing enables the human resource professionals of organizations to focus on the core and other HR and strategic issues. Outsourcing also gives a structured approach to the whole process of recruitment, with the ultimate power of decision making of recruiting with the organization itself. The portion of the recruitment cycle that is outsourced range from preparing job descriptions to arranging interviews, the activities that consume almost 70 per cent of the time of the whole recruitment process.
Outsourcing the recruitment processes for a different sectors like BPO, ITES, Finance etc which faces an erosion of almost 50-60 per cent, can help the companies in BPO sector to save costs tremendously and focus on other issues like retention. The job seekers are also availing the services of the third parties (consultants) for accessing the latest job opportunities.
In India, the trend of outsourcing recruitment is also contagious up fast. For example: Vodafone outsources its recruitment activities to Alexander Mann Solutions (RPO service provider). Wipro has outsourced its recruitment process to MeritTrac. Yes bank is also known to outsource 50 per cent of its recruitment processes. Many such Organizations have outsourced there recruitment process to services providers for the effective Hiring for the right opportunities.
Two methodologies were adopted while undertaking the research:
Secondary data collection: large amount of secondary data is available in the forms of articles, journals, and previously conducted researches on the similar topics. This data was collected and studied to determine some of the broad trends prevalent in HR & recruitment outsourcing across the world and the presence of HR outsourcing industry in India. Also, the data thus gathered helped in identifying key parameters to examine through further exploration and thus helped in defining the hypotheses for further study as well as designing the questionnaire.
Primary data collection: Primary data was collected through the means of a survey & Questionnaire. For this purpose, a questionnaire was mailed to some of the Resource Manager of the organization have been working for and executives in various organizations and their response was solicited. Being away from the country, had a telephonic Discussion with the HR Manager's of Different IT firms in Mumbai to know more about their mode Recruitment Life cycle and Recruitment process outsourcing.
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QUESTIONNAIRE (Recruitment Outsourcing service provider's)
Name - SANTOSH BANGERA
Company's name - INTELLISWIFT INC PVT LTD
Designation - RESOURCE MANAGER
Note - Please tick the appropriate option.
1. What source you adopt to source candidates?
a. Employee referral
b. Campus recruitment
d. Recruitment agencies
e. Job portals
f. Other, pls specify -
2. How many stages are involved in selecting the candidate?
3. Do you use any of the following tests during the process of recruitment?
c. Group Discussion
d. Personal Interview
e. Psychometric test
f. Other, pls specify -
4. How do you track the source of candidate?
5. Apart from the HR Manager, who all from the other departments are required to get involved in interviewing process?
c. HR Executives
d. Other, pls specify -
6. What is the average time spent by sales dept. during recruitment (each candidate)?
b. 10 to 20mins.
c. 20 to 30mins.
7. What is the average time spent by HR dept. during recruitment (each candidate)?
b. 10 to 20mins.
c. 20 to 30mins.
8. What is the average time spent by Admin dept. during recruitment (each candidate)?
b. 10 to 20mins.
c. 20 to 30mins.
9. Do you follow different recruitment process for different grades of employees?
10. What is the back out percentage of candidates after being offered?
11. What percentage of candidates leave within the period of less than1- 3 month?
12. What percentage of candidates leave within the period of less than3- 6 month?
13. What percentage of candidates leave within the period of less than 6-12 month?