The recruitment process outsourcing industry is in for a big change in 2016 with majority of outsourcing contracts up for renewal from 2015 to 2017. Last year, the industry witnessed rising time to fill across the board due to an increased specialization of talent and a shrinking labor pool. As job roles become more specialized and companies require highly specific skill sets, the pool of available workers gets smaller. In the United States, how job seekers find work is changing. Older recruitment methods like job boards and email marketing are less effective, so it has become common for recruiters to research individual candidates and even contact them by phone or text message. Recruiters are seeing more candidates declining offers, and there is a movement from referral programs, walk-in hiring and other traditional methods towards recruitment process outsourcing (RPO).
New technologies, globalized workforces and the need to reduce costs will continue to inform HR and recruitment outsourcing decisions in the coming years. Analysts expect the following trends to be big in Q2 and the rest of 2016:
The recruitment process outsourcing industry will continue to grow in 2016 and beyond. Everest Group estimates that recruitment process outsourcing contracts are currently valued at $1.8 billion. RPO revenues are expected to reach $6.6 billion by 2018, making it the fastest growing segment of human resource outsourcing (HRO). The main drivers of RPO growth are skills shortages and cost reduction. In 2016, companies will continue to work with third party recruitment and staffing providers locally and abroad to find low-cost experienced talent, cut turnover rates and address workforce scalability issues.
While the RPO industry is relatively young, it is slowly maturing and defining itself. Traditionally, RPO companies worked with clients that understood they were in for some risk. Today, clients know that they share more risk with the provider, and they gain productivity improvements and cost savings by outsourcing HR and recruitment to third parties. What once was an area exclusive to large enterprises is opening up to small and midsize companies, which are signing contracts with single RPO providers to help them develop a long-term strategy.
In the coming years, analysts expect more companies to realize the benefits of working with an RPO provider, something that other firms are have done for years. RPO will also become a popular alternative to traditional methods of finding talent.
The growth of RPO in 2016 will be challenged by increased competition among providers. Some providers set prices so low that they weaken their ability to provide great service to buyers. This hurts not only clients but also the provider and the entire RPO industry. This year, clients will set the bar higher for vendors. Clients are expected to work with RPO providers that are aligned with the company’s values and those that can demonstrate their capabilities successfully. In the end, it all comes down to establishing a collaborative relationship between client and provider for the long-term—something that vendors who focus on value excel at.
Because the need for talent tend to fluctuate depending on season, market environment, internal capabilities and other factors, businesses need a way to scale up or down easily while reducing waste and unnecessary costs. One solution is on-demand recruitment process outsourcing, which gives companies a strategic partner that can meet changing talent needs and ensure that capacity is always adequate. On-demand recruitment services also allow companies to shift from an expensive recruiting model to a predictable, variable cost model. In the coming years, more companies will use on-demand recruitment services to access best practices and improve scalability. Another related trend is project RPO, or the provision of on-demand recruitment services to clients without the associated in-house costs. Companies can get the services they need when and wherever they need it from third party firms.
This year, the industry will see more companies creating effective workforce plans to prepare for future hiring needs. Workforce plans include strategies to meet sudden shifts in hiring demand and options to take when circumstance require changes to the existing plan. Workforce plans consider the current size of the company’s workforce, different types of workers, level of experience, and current and future needs. More companies will outsource one or more aspects of their internal recruiting functions to third party firms to achieve scalability goals.
Custom, high-quality recruitment services will rise in popularity in the coming years as clients increasingly shy away from the “assembly-line” type of recruitment and demand the best candidates to fill open positions. Bespoke recruiting uses innovative methods and new technology to secure specialized expertise and high-value, must-hire talent.
Skills shortages continue to plague several industries, and many large organizations are turning to global recruitment centers to fill open positions. Local talent does exist, but it is mainly undiscovered. RPO is one key to discovering local talent through the use of innovative methods. As providers perfect methods to identify the right candidate for each job and retain high-performing talent, more companies are becoming confident that third parties can reduce time to fill and help them reduce costs. This will boost the demand for outsourced HR services in 2016.
HR and Recruitment Technology Trends
RPO is already at a stage where advanced technology underpins most processes. Data analytics is one example. From a good-to-have novelty, analytics has become a critical tool for HR departments and recruitment leaders, and this trend is only expected to intensify next year and beyond. Data is a treasure trove of insights into workforce trends, employee performance, recruitment planning and other HR processes, and companies that don’t leverage data will fall behind.
However, companies are still building their analytics capabilities as the volume of data rises every day, so they need external help from third party specialists. The most in demand analytics vendors are those that fully understand what they are offering and know precisely how it can help their clients. As the need for data analytics continues to grow, the need for master data management and data standardization will also rise.
More people accessed the Internet from mobile devices than desktop PCs in 2015, signaling the need to refine recruitment strategies. Millenial employees in particular tend to apply for jobs using mobile devices. This year, more companies are expected to recruit and reach out to talent from mobile apps (including social media channels) rather than use older methods. Expect employers to provide hiring and benefits information via mobile apps and social media to attract and engage potential employees. Social media channels serve as a direct link between employers and employees, helping to create a perfect match between candidates and the required skills. More companies will also start using mobile applications to help HR teams create appropriate job profiles. Vendors will continue to improve the usability and attractiveness of their mobile apps instead of simply offering mobile-compatible versions of their websites.
Rise of Software as a Service
The number of vendors offering SaaS is growing every day, which means that clients now have more choices and products that are specifically designed to address relevant HR issues. The rise of SaaS is also shifting the responsibility for tech support from IT departments to HR teams.
Talent Management Software
Today’s open talent economy requires a different management strategy. As workplaces become global and borderless, employees have fewer reasons to stay with one company for the long-term. Innovative talent management strategies are important to attract and retain high performers. Some companies are improving talent management by working with third party providers of human capital management (HCM) software, which includes tools for recruitment, onboarding, performance, compensation and others. This year, more companies will use third party talent management software that allows decision makers quick access to information that is required to meet business requirements. The move from on-demand to end-to-end solutions will be gradual as companies are still in the experimental stage.
New regulations in the U.S. have transformed certain HR processes, requiring the need to partner with third party firms to ensure compliance. For example, the Affordable Care Act (Obamacare) requires large companies to collect, track and report employee data on a monthly basis. Vendors offering integrated HR solutions that allow employees to access the information they need whenever they need it will be in demand. There is also a trend towards a single-vendor model, wherein one external firm provides all HR technology solutions that the company needs.
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