After experiment with outsourcing, RBC brought recruitment back in-house

Employees and managers were unhappy with the internal recruiting process

After a four-year experiment with recruitment outsourcing, RBC Financial Group brought recruitment back inside the fold in 2001.

The plan called for the outsourcer to start with all external recruiting before taking over internal recruiting and staffing as well, explains Maureen Neglia, senior manager, recruitment strategies. It worked well at first, when the recruiter was only managing external recruitment. “That was their expertise; how to source a candidate, how to put together a short list.”

But internal recruiting was another matter, she says.

“Where they ran into trouble was when it came time to assess a candidate who had been there for a few years.” RBC makes 20,000 hires a year; about 60 per cent of those are internal. Employees and managers were unhappy with the internal recruiting process, because the outsourced recruiters were unable to see the fit between internal candidates and openings. That kind of understanding of fit comes only with working inside the organization, so the entire function, internal and external recruiting, was brought back in-house, she says.

External recruiters may be very good at some parts of recruitment, but ultimately a good hire depends on a good understanding of fit between candidate and job. “A third-party organization will never be able to do that as well as our own employees,” she says. Similarly, an external recruiter will not be able to sell the benefits of working at RBC the same way an employee of RBC can.

Neglia says that far from being a growing trend, recruitment outsourcing may have already had its moment in the sun.

“Our research is showing that many companies are bringing recruitment back in-house,” says Neglia. A lot of outsourcing is driven by cost-savings objectives. But often customer organizations discover, after signing the deal, that to get the desired service level costs more than was initially expected.

Most models operate on a shared services model where every customer organization gets the same service. “If you want to deviate from that, you are going to pay a premium,” she says. “The cost ends up being comparable to what you do in-house.”

A lot of the cost models also overlook key metrics and end up with skewed expectations about the value of the service. Only looking at cost per hire or time to hire ignores things like quality of hire, how long the new employee stays and how long it takes to get someone up to speed.

“I am not saying that there is no place for outsourcing in recruitment,” she says.

RBC uses a third party for pre-employment checks and to fill some specialized positions in niche markets and in new markets. But ultimately, recruitment will be better if the people making most of the recruitment decisions are inside the organization.

Monica Belcourt, professor of HR at Toronto-based York University, says outsourcing may make sense for some organizations but not in others.

“I think the fundamental question is, ‘Is this a core activity,” she says. “You don’t outsource a core activity where you are getting a competitive advantage. There are situations where it is core and not in others.”

Outsourcing makes more sense when culture fit isn’t really important, she says. “That could be with jobs that are more mechanical or if you are going to tolerate high turnover. If you are running a call centre, you can outsource it because culture fit isn’t as important.” But if the organization is keen to find employees who will feel comfortable in the organization and stay for a while, it makes more sense to keep control of recruitment.

“If you want to bond with the employees, keep it in-house,” she says.

Alice Snell, vice-president, of iLogos Research, a division of Recruitsoft, says retention should be an important gauge for companies outsourcing recruitment.

“You don’t want your only driver to be cost containment or cycle times,” she says. If the outsourcer doesn’t thoroughly understand the client’s culture, it won’t matter how quickly the positions are being filled. “The issue is, can you outsource this function and improve your retention rates? What kind of quality are you going to get? You could put someone into a seat very quickly but that may not be the best person for the seat.”

Snell’s sense is that there is an increased interest in recruitment outsourcing, but at the moment it looks like most HR departments are just testing the waters.

Many organizations dramatically expanded staffing functions during the economic boom when the war for talent was at its most fevered pitch. But when the recession hit, those same organizations found themselves with far more recruiters on staff than needed.

They don’t want to make the same mistake again and are asking, “How do we smooth out the rocky supply-and-demand road? Do we look at outsourcing rather than expanding and contracting internally all of the time?”

Because so few organizations have taken the fully outsourced route, it is hard to predict what the future holds. While there have been some success stories there have also been organizations that were unhappy and have taken it back in-house.

“I am not convinced that this is a trend,” Snell says. “I don’t see this sweeping away corporate staffing departments entirely.”

Some organizations feel staffing needs to be kept in-house because it is too strategic and an important competitive advantage. Instead, those organizations are more interested in improving the performance of the corporate staffing departments. Staffing leaders are striving to get returns from cost containment, fast hiring and improved quality. “The principles of process improvement in other areas are now coming to visit HR,” Snell says. Once they do that, it is easier to see if they should be doing it in-house or if it makes sense to outsource it.

“Large corporations, those that have optimized their processes and technology, can be extremely cost efficient and effective.” There is no reason for them to outsource the staffing function. “They may find that then looking at outsourcing becomes a lot less attractive,” she says. “Organizations need to be asking if the staffing department is a cost centre of a profit centre.”

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