New research explores how the uncertain economy is driving RPO services.
By Larry Basinait
2024 is proving to be a year of conflicting interpretations about the U.S. economy. The economy appears to be on track for 2.5% average growth this year, spurred by a sturdy labor market—similar to 2023’s performance. And a recession in the next 12 months appears less likely now than it did in the spring of last year, finds S&P Global Ratings. Meanwhile, consumer sentiment remains low but is starting to rise. In March 2024, U.S. consumer sentiment was 79.4, the highest since July 2021, reports Trading Economics. Then, of course, there is the impact of the 2024 presidential election that has many workforce planners in a “wait and see” mode.
Given all of this uncertainty, how will HR meet the challenges of talent acquisition in a year with atypical variables impacting hiring plans? Will HR even incorporate economic considerations into workforce planning, and how might the election affect plans? A new HRO Today research report, Economic Uncertainty and RPO Solutions, seeks to answer these questions and more.
Recruitment process outsourcing (RPO) is an option many are looking into since it brings flexibility in a time of uncertainty. But it may not be the clear choice for some organizations because of budgetary restrictions, despite the acknowledged need for RPO expertise.
This research report reveals eight key findings about HR leaders’ views of the economy and RPO usage.
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Most (57%) senior HR executives view the current economic environment their organization faces as strong, while only 4% consider it weak. This comes despite often contradictory headlines, forecasts, and political positioning about the direction of the economy.
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Economic concerns result in fewer services from RPO providers for two-thirds (67%) of those contracted with one. Short-term budget challenges often outweigh the benefits that can be obtained in an outsourced relationship. Instead, internal resources are tasked with completing needed deliverables.
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The majority (54%) of HR departments do an internal assessment of the areas that are most in need of support to determine RPO service level agreements (SLAs). Alternatively, just over one-quarter (29%) typically use a provider recommendation. Regardless of who takes the lead in determining SLAs, both parties must work in concert with each other to ensure success.
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The talent acquisition services area considered to have the greatest importance is sourcing. Nearly all of respondents (94%) rated sourcing as either very important or important. Screening closely follows in importance, with 92% rating it as very important or important. TA services includes a wide range of processes, with all of the 12 examined considered very important or important by at least one-half of the senior HR executives.
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The primary reason why some of the services that are regarded as important are not included in RPO deliverables is because internal resources are seen as more cost-effective. This belief often comes despite a lack of supporting metrics related to internal costs. The second most common rationale for not using a provider is that internal resources are seen as more effective.
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There is a widespread belief that RPO providers make their clients competitive for talent. Respondents that currently use RPO were asked to rate the extent they feel their provider makes them competitive for talent. In total, 95% indicate that the services make them competitive for talent.
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Clients of RPO services maintain a high level of trust with their provider across a wide range of areas. Overall levels of trust are very high in key areas such as with the account executive, flexibility and scalability, and honoring commitments.
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HR teams not using an RPO service provider rate themselves as having limited success delivering across an array of areas. The area of greatest challenge for the TA function to deliver on is reporting and metrics for talent acquisition operations, rated as 2.90 out of 5.00 in terms of how well the area is addressed. This is followed by social media strategy management, with a score of 2.93 out of 5.00.
While opinions about the current economic environment vary, most HR executives in the study maintain a sense of optimism about it. This is important in examining the relationship between RPO providers and organizations, as poor economic conditions are likely to result in fewer services required from providers.
RPO offers flexibility for many TA practitioners who may feel their current efforts are less than ideal. However, the solution is not always embraced, since budgetary and performance concerns outweigh the potential benefits that can come from a well planned and executed relationship.
