Recruitment Process Outsourcing (RPO) has significantly evolved over the years, becoming a crucial element in talent acquisition for many companies. In this Talent Leader Council series, Lamees Abourahma of RPOA spoke with Terry Terhark (RPO pioneer and founder of NXTThing RPO) about the concept of RPO, its evolving functions, and the critical role it plays in ensuring organizations hire top-quality candidates. They also explored the significance of focusing on the quality of hire in the recruitment process and how RPO providers contribute to this endeavor. The following is an AI-generated and human-edited version of part one of the interview.
RPOA: Why is it important to focus on the quality of hire in the recruitment process
Terry Terhark: Quality of hire is the holy grail. In any hiring situation, companies prioritize quality over quantity. We have experience working with high-volume and specialized hiring clients, all of whom share the goal of finding the best candidates and hiring high-quality individuals. Recruitment Process Outsourcing (RPO) has evolved to prioritize understanding the importance of filling positions and finding the best talent available. It’s been impressive to witness RPO providers mature and build strong relationships focused on hiring quality individuals.
Often, first-year and 90-day turnover are the key things companies look at when measuring the quality of hire. In the last 18 months, I’ve seen more movement around the ability to measure effectiveness. For example, we have a client that measures first-year sales percent to target and ties that back to the recruiting source; where did the candidate come from? And how are they performing? We have other clients that are using 90-day, six-month, and one-year reviews. So, they have a numerical system by which they review.
Post-Covid, hiring decisions and the dynamics in the labor markets contributed to a noticeable increase in employee turnover. Companies should take proactive steps to minimize turnover and maintain quality. We are seeing companies take that next step towards what I call the Holy Grail, which is quality of hire. It’s always been central to the discussion of everything we do in recruiting daily. I’ve been happy to see that movement. And because we have so much more access to data and analytics, we will see more and more movement in that positive direction in the coming years.
Q: How do Recruitment Process Outsourcing (RPO) providers ensure organizations hire top-quality candidates?
Terhark: In most situations, the RPO provider is going to have responsibility for sourcing and screening that requisition. Ultimately, the client makes the hiring decision. However, the RPO is accountable for making sure that they have a robust pipeline of viable candidates and that those candidates are screened appropriately based on the specifications that the client provides, as well as what the recruiter or the RPO knows about what works for that organization and what defines quality for that organization.
RPOs are uniquely positioned because of their expertise in sourcing and selection; those are two of the bigger differentiators when comparing an RPO to an in-house model.
RPO providers invest significantly in sourcing, market, and labor tools that they provide their recruiters so that the recruiters understand what quality is and what is available to that client. They educate that client on where they fit in the ecosystem and the types of talent they’re trying to bring into their organization.
The RPO provider is core to driving suitable candidates to the opening and ultimately getting the top candidates to the client so they can make a good selection.
Q: What is Recruitment Process Outsourcing (RPO) and how has its function evolved in the talent acquisition space?
Terhark: We’ve been fortunate to be in RPO for over 30 years. I’ve watched it grow from being a very nascent and somewhat point solution, meaning the client has a need, they bring you in, still feels a need, perhaps go away. Today, companies widely use RPOs. They’re a familiar presence in companies in all industries and recruiting for various positions to partner with an RPO to help them find and select the best candidates. Essentially, RPO transfers some or all of the recruiting responsibilities to the RPO provider.
Now, that can look very different for some clients. RPOs may do the front end, which is sourcing and screening. RPOs may do everything from opening the requisition to onboarding new hires. Many clients choose to deploy RPO differently. The thing I’ve learned over the past few years, and again, this goes back to the RPO industry maturing; often, I will tell our prospects and clients that RPO is in the eye of the beholder, meaning that every client has a different need.
Therefore, RPO providers should craft a very bespoke solution for that client. Now, in the same breath, hiring is relatively straightforward: you start with a req, you end with a hire, and you do a few things in the middle. That stuff in the middle makes each client unique. The RPO can work from the very beginning of that process to the very end. However, the customer needs to define if they need assistance, where they want to grow their talent acquisition function, and how the RPO fits into that.
Over the last few years, I’ve seen deep, meaningful partnerships form where the RPO provider is the same as the in-house team, if there is one, and works collaboratively with hiring managers. In many scenarios, that hiring manager may not know that an outside person is actually doing the work. And for us, that’s the ideal scenario. We want to be the company and the client and represent them well in the marketplace. RPO can mean a lot of different things. However, it all focuses on those steps within the hiring process and where the RPO can fit into that organization.
Q: How have RPO investment decisions changed?
Terhark: Primarily, RPO decisions have been made based on cost. And is it better for us to do it this way? Over the past three-plus years, there’s been a shift. Companies understand that. In today’s world, it is all about quality, getting the right person, targeting the right person, bringing them into your pipeline, and then being able to execute an offer when you have a position available for them.
In Conclusion
Terhark emphasizes the shift towards prioritizing quality over quantity in hiring decisions and the importance of measuring effectiveness through various metrics. He also emphasizes the need for RPO providers to customize solutions for each client, reflecting the unique nature of their recruiting needs. His comments underscore the crucial role of RPO providers in not only identifying top-quality candidates but also in collaborating closely with hiring managers to integrate into the organization’s talent acquisition function seamlessly. This emphasizes the broader trend of partnerships between RPO providers and companies, leading to more effective and tailored recruitment processes. As organizations continue to navigate the challenges of talent acquisition, the insights shared in the interview highlight the growing significance of RPO and the pivotal role it plays in shaping the future of recruitment strategies.
