BPO, Outsourcing, Recruitment, theOutsourcing-guide

Why Recruitment Agencies Need to Outsource Their Back Office

By Martin Conboy

Every time I speak to a recruitment company, they always seem to want to turn back the clock to a time when the market was nicely structured and ordered and clients and candidates behaved themselves. They fail to appreciate how things have changed.

Romantically, they cling to a time circa 1985, when clients paid for expensive display adverts in the Saturday papers that promoted the recruitment company’s brand and candidates dutifully applied for the advertised positions. Recruitment projects took six weeks; the earning potential was excellent and lots of recruiters were flashing around in very expensive motorcars. It really was the best gig in town!

Fast forward to today and the recruitment market in Australia has changed, according to the Manpower Australian Employment Outlook Q1 2015 – ‘Australian employers report encouraging signs for job seekers in the upcoming quarter. With 19% of employers expecting to increase staffing levels, 12% are forecasting a decrease and 68% anticipating no change. This remains relatively stable year over year.’ It is worth noting that the market has been in decline since 2010.


What changed? Today, recruiters are finding it difficult to articulate their value proposition to their clients. In many ways, a recruiter seems to be nothing more than an expensive resume screener to their clients and these employers are sceptical about the position of recruiters in the market. They are unable to see or understand the cost benefits of using an external recruiter.

When one considers that even though recruitment companies have large databases of candidates, because they are badly structured, they cannot access them to exploit the gold that lies within. In this day and age with all of the tools and specialist recruitment software available, it’s beggar’s belief to learn that companies are still trying to manage their candidates by using Microsoft Outlook and Excel (very last century).

Recruitment company databases, although having large numbers of candidates, are almost useless as they are not ‘clean’ and badly formatted. Moreover, no one inside the recruitment firms spends enough time working with the databases to really extract value from them – it’s just too hard!

As a result of recruiters struggling to deliver the touted value of their databases, they turn to throwing up adverts on an online job board with a wing and a prayer hoping that a candidate will put their hand up. Consequently, the notion of delivery of “Expertise – as – a – Service’ (EaaS) falls flat.

The recruitment market is saturated; is hyper competitive and costs are not going down. Retained assignments are rare and employers will only pay on a ‘first past the post’ basis. Whoever fills the position gets the prize. Many recruiters are working in a hidden factory underneath their business that no one is paying for and over ninety per cent of their assignments will not generate a fee.

Some leading recruitment industry commentators report that over one third of staffing companies are operating at a loss and another third are barely breaking even. The leading, savvier firms are automating their processes and augmenting their systems by utilising less expensive recruiters based in places like the Philippines to gain a competitive advantage. I have written about video recruitment firms like Canadian based VidCruiter (www.VidCruiter.com.au) who are leading the charge in the North American markets.

The market is driven by metrics like “speed to hire” and candidates are now sourced on social media sites like LinkedIn. Job boards and traditional job boards are passé and are no longer as effective as they once were.

A surge of new technologies and media innovations have really altered the landscape. The point is that those who know how to engage with the new ‘internet of everything’ world will thrive and those that don’t or cannot be bothered will be left behind.

Lastly, apart from all of the economic process considerations mentioned above that will impact on recruitment companies, the biggest shop stopper is poor candidate management. It’s like a slow burn or the death of a thousand cuts for a recruitment company’s reputation.

Everybody knows about it; candidates apply for a job, take time and consideration over their application; throw their hats in the ring – and then nothing! Guess who they tell about their bad experience – everybody, absolutely everybody and now their voice is amplified by access to social media. In fact, people work overtime to trash recruitment companies’ reputation.

The reader might like to read http://gregsavage.com.au/2011/03/02/“god-i-hate-recruiters”/, which provides an excellent insight to the issue. Better still put ‘I hate recruiters’ into a search engine browser and take your pick. I got 488,000 pages. Ouch!

Why not employ a less expensive assistant in the Philippines to do rejection emails and you may even win praise for being a leader in candidate care.
It is, therefore, little surprise that the outsourcing model is evolving quickly. Forward looking companies are adopting an outsourcing model into their core business process to generate high ROI, reduce cost, and fill job orders faster.

Recruitment Industry commentator Rod Hore recently published the following in his blog:

“Here are 5 big reasons why recruiting businesses are outsourcing their work to an offshore partner:

Reduce Cost: By outsourcing ancillary functions to an offshore recruitment partner, you can save a big-time cost. It has also been seen that staffing firms save up to 60% costs by outsourcing their work to an offshore partner. Additionally, recruitment firms even reduce their infrastructure expenses such as extra cost for hiring personnel, as once they tie up with an offshore partner, they need not establish an additional workplace in any new location.

Global Advantage: Success of recruitment businesses depends on how fast they can deliver qualified, available and retainable candidates from across the globe. Your client will always think of growing globally and would want to hire resources that can support their business plan in diversified geographies. Even recruitment agencies need to spread their network and speed up hiring faster from different geographies without adding cost to the business. This is possible only by outsourcing their sourcing process to an offshore partner that has expertise in hiring candidates at a global level.

Speed & Flexibility: Many offshore recruitment service providers work as per the time zone requirements of their client’s geography. Staffing firms can get the benefit of running their business in full control even in uncertain business environments, if they outsource their independent tasks to an offshore firm that offers flexible environment and works to meet on-demand needs.

Productivity: Recruiter’s efficiency is severely affected by overburdened non-core functions. By outsourcing ancillary functions to an outsource partner, staffing firms can optimally utilize the efficiency of their precious human resource in generating real time returns. With a strong support of offshore recruitment model the team can produce faster results and increase turnaround time to the costumer. It increases the in-house productivity and also overall business productivity.

Save Time: Efficient utilization of time is the biggest reason for which businesses are switching to ORS model. Staffing firms from different geographies enjoy the benefits of difference in time zones as they can run their business 24×7 in spite of limited team size by outsourcing their services. They can speed up their processes and reduce service delivery time remarkably.”

Recruitment Virtual Support Agents (RVSA) are here now and their use is growing quickly. Businesses like www.VirtualAssistantMums.com that support Australian recruitment companies with everything from screening, assessment and candidate profiling to resume harvesting from social media sites like LinkedIn and database maintenance.

Leading recruitment industry advisor and high performance recruitment coach Ross Clennett, said,
“Agencies lose productivity to sub-par support staff; however, offshoring these services is a time- and cost-efficient solution,” said Clennett.

“Business support specialist Rusher Rogers Recruiting turned to an offshore admin and support solution after escalating staff costs and turnover issues negatively affected the company’s profitability,” Clennett said.

“The company has had mixed success with admin and support consultants, typically being okay [at] admin but generally weren’t very good at sourcing candidates and only skilled at processing incoming applicants,” he said.

“The agency began using a ‘Recruitment Virtual Support Agent’ (RVSA) to address the issue,” said Clennett.

“For a monthly cost of $3,000 plus GST, the admin and support role is undertaken by an RVSA saving [the company] around $2,000 a month in salary ‘on costs’, before the savings of associated office costs.”

The old model of recruitment is broken. To survive, the modern recruitment firm has to lower its operating costs and outsourcing its back office processes is the most obvious and logical thing to do.

“After living with their dysfunctional behavior for so many years (a sunk cost if ever there was one), people become invested in defending their dysfunctions rather than changing them.”

Marshall Goldsmith

theOutsourcing-guide.com is the ultimate reference guide for the BPO and outsourcing industries and it will become the most comprehensive resource for organisations looking to engage BPO and outsourcing providers. As well as providing a range of eBooks, articles and whitepapers explaining the various aspects of BPO, theOutsourcing-guide.com provides an online directory of providers segmented by category and location.

theOutsourcing-guide.com is a vehicle for vendors and service providers to showcase their organisations and the outsourcing services they provide. Visit theOutsourcing-guide.com for more information.

Originally Published in the Sauce eNewsletter – theOutsourcing-Guide.com


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