Recruiting Management Solutions: Recruiting Trends

Companies of all sizes are starting to outsource many of their HR and recruiting activities. As with other business areas, they are calling on outside experts to help streamline and optimize the process of finding, attracting, hiring, and retaining capable and qualified employees.

This involves not just a simple transfer of administrative tasks and burdens to a third party, but is rather an attempt to truly transform their recruiting strategy to better enable the company to compete now and in the future.

In the past, firms outsourced only portions of the hiring process (e.g., reference checking or drug testing). Today, however, they are realizing the value of outsourcing the entire recruiting process — development, implementation, administration, and management of selected (or all) recruiting processes by an external party.

According to a recent Gartner report, the HR outsourcing market in the United States is expected to grow at a rate of 21.9% annually. This means that by 2005, HR outsourcing will be a nearly $60 billion industry! The strongest areas of growth are expected to be in the areas of recruiting, education and training, and personnel administration — essentially, those HR capacities which have a direct impact on overall corporate competitiveness.

What is fueling this growth? What motivates companies to outsource such critical business functions? The answers vary, based on each company's individual situation. In general, however, the reasons for outsourcing may include:

	The HR staff is too small to develop and implement new strategies, in addition to managing day-to-day operations.
	Internal staff lacks knowledge regarding creative recruiting sources and methodology, and require the expertise of outside consultants.
	The company wants the broad, industry-wide perspective and unbiased competitive analysis that an outside resource can bring to the table.
	Companies expanding overseas need help in implementing local HR practices.
	Merging companies need assistance in consolidating and integrating multiple HR departments.

To sustain this level of growth, outsourcing vendors must promise and deliver value. So what benefits do outsourcing vendors deliver? What value and return on investment do companies get by retaining these services?

Some of the top benefits that an HR outsourcing firm can provide include:

	Raise the level of HR processes — many HR departments don't have the time or resources to do the job right.
	Reduce and control operational costs.
	Significantly reduce the time it takes to find and hire qualified employees, thereby reducing costs as well as the burden on other employees.
	Improve the focus of the HR department, and help the company focus on its core business objectives.
	Provide a single point of contact for HR staff, hiring managers, and employees.

In addition to delivering services, outsourcing vendors must provide their clients with benchmarks by which the companies can measure the success (or failure) of the outsourced services. To justify an on-going business relationship and continued expediture on a vendor's services, a company must be able to quantify the services' value. Such benchmarks can be broken down in to two categories: 1) hiring operational metrics and 2) business metrics.

Hiring operational metrics measure the efficiency of various aspects of an implemented process — in other words, how well a process is performing. With HR outsourcing, companies can evaluate the services they receive by analyzing:

	Time to hire
	Cost to hire
	Turnover within 90 days
	Quality of new hires
	New graduate hiring rates

Business metrics refer to the overall performance of the business, and can be measured by analyzing some key business performance indicators:

	Return on investment (ROI)
	Productivity and revenue growth
	Permanent cost reduction in HR expenses
	Improved employee satisfaction
	Improved communications

In the past, only large corporations with annual revenue in excess of $500 million had budgets allocated to outsourcing HR activities. Today, however, this segment represents only about half of the outsourcing market — companies of all sizes (and in a wide range of industries) are now taking advantage of HR outsourcing services.

Mid-sized companies ($50-$500 million) — In the past, many mid-sized companies were unwilling to outsource major HR activities for fear of losing control. Under increased competition with other companies for talent, and the fact that many have not spent the time or money to develop effective, forward-thinking strategies, they are now coming to depend on the value offered by outsourcing expertise.

Small companies (<$50 million) — In small companies, little emphasis has been given to HR processes, and in many cases, there is no HR department at all. These companies are beginning to depend on outside experts to provide the services and support that they lack internally, and to guide them in their aggressive growth pursuits.