Recruitment is an important process that all companies have to go through. Essentially, it involves attracting, screening, identifying, shortlisting, selecting, interviewing, hiring, and onboarding new employees. Overall, the whole process could be quite tedious.
This is why business owners resort to different strategies when it comes to recruitment. Some of them opt for Recruitment Process Outsourcing (RPO), while others prefer in-house recruitment. There is a long-running debate between RPO and in-house recruitment but here at TalentHero we believe that understanding the pros and cons of each strategy can guide businesses to make informed decisions.
Let’s discuss the key differences between RPO and in house recruitment below.
Recruitment process outsourcing or RPO for short is when a company appoints a third-party organization to handle the task of looking for potential job applicants. This method allows business owners to have the least possible involvement from their own human resources department. Their chosen RPO provider would be the one to search, screen, and evaluate suitable candidates.
According to talent management firm Broadleaf, RPO programs can reduce cost-per-hire by more than 20% while cutting time-to-hire by up to 55%.
How RPO works is simple. The company and the RPO service provider would enter an agreement that outlines the scope of a project as well as the timeframe and costs. They would be discussing the job description or roles that need to be filled. Then, the RPO service provider will use its own methodologies, technology, and expert recruiters to start employing new people for the company.
Here are the pros and cons of hiring an RPO firm:
RPO service providers are experts when it comes to recruitment. Often, their team is more adept at identifying inefficiencies in a hiring process, meaning they could easily adjust it to deliver more hires who are more suited to a company’s needs. They would also have the data and metrics that businesses can use long-term.
Another thing that RPO firms are able to help with is they allow businesses to focus more on their own expertise. Without outsourcing their recruitment needs, companies would need to handle the entire recruitment process. This means that they might need to pause some of their operations to get new people on board. Pausing or slowing down any part of the operations could result in loss of revenue, this is why partnering with an RPO service provider is preferable.
RPO firms are experts in the recruitment field. They have their own methodologies in vetting the right people for a company. They have access to a global talent pool and employ their own talent acquisition strategy. They won’t have any biases, which could happen during an in-house recruitment, resulting in more fair hiring decisions. Business owners can get the best candidates when they partner with a reputable firm like TalentHero.
Since RPO firms have established relationships with candidates and have their own talent pool, they can reduce the cost-per-hire. This cost saving measure helps the business allocate their funds to more important parts of the business and scale their business operations.
Despite best efforts, it is possible for communication to go amiss when hiring an RPO service provider. Some things could get lost in translation when conveying key information. For instance, it may take a while for RPO service providers to truly understand a company’s culture, and could therefore result in hiring someone who doesn’t really match what they’re looking for.
In instances like this, a clause in the recruitment agreement could mitigate risks of incorrect hire. Both the service provider and the company should make an effort and be open in communicating potential problems with hiring or onboarding.
Before partnering with an RPO firm, businesses should consider that they may have to commit long-term to this arrangement. The reason for this is that firms would need them to establish the company’s preferences as well as scrutinize their good and bad hires in order to find the right candidates moving forward.
Naturally, the entire process would take time, and so companies may have to commit at least a year (if not more) to produce the best results.
RPO service providers usually do not have much insight into a company’s specific industry. This again may result in their team hiring incorrect people. To avoid this, business owners will have to provide enough information about their industries–be it finance, tech, or even legal. Needless to say, this would take time to accomplish.
A way to address this disadvantage is to find a recruitment firm that specializes in certain industries. If you are a tech startup for example, find a global recruitment firm that has the capability to find the best talents for your industry.
As the name suggests, in-house recruitment is when a company handles the entire recruitment process on its own. The team, who is responsible for hiring talents, is employed by the company itself. These people may wear multiple hats in the organization or be solely responsible for recruitment.
Similar to RPO service providers, in-house recruitment also has its own set of pros and cons. Let’s talk about them one by one.
Since the recruiters would be coming from inside the company, they could establish better communications with the departments that need new hires. The closer proximity may result in seamless collaborations and a well-aligned hiring strategy. In addition, they have a better grasp of the operations and culture that go on in their workplace.
With in-house recruitment, business owners can be assured that their hiring process can be prioritized. This is something that cannot be promised by an RPO firm, especially if they have multiple clients. As a result, this kind of exclusivity could foster more trust in the recruiters.
Companies may have more control of the recruitment process and they could hire a global workforce should they wish to. They could dictate how to run the whole campaign, from start to finish.
One major advantage of doing recruitment in-house is that the company, itself, could build its own database of shortlisted candidates. In-house recruiters would naturally be getting all the resumes of interested individuals. Not all of them would get hired, but the shortlisted ones could be placed in a database and could be contacted if another position opens.
This would surely save the company some time in finding the right people in the next round of recruitment.
Although internal recruiters are well-informed of their own company culture, it’s possible for them to get stuck on the same hiring strategies. They may also lack the exposure to produce fresh ideas and approaches.
External agencies, who often have the expertise, could provide second opinions that could prove valuable in the long run. Their team may also be equipped with the latest recruitment strategies to attract more people to apply for a specific job or position.
Having in-house recruiters is good for exclusivity, but not so much for a company’s expenses, especially during slowdowns when there’s no need for recruitment. Most likely, they are only needed if a company is actively scaling and if there’s frequent hiring. Otherwise, they would become idle, leading to unnecessary expenses.
In-house recruiters also need to be provided with training and continuous upskilling.
Aside from the possibility of resource idleness, doing in-house recruitment is also more expensive because business owners have to provide them with necessary equipment such as office supplies, desks, computers and even recruitment tools. Companies also need to offer them competitive compensation and employee benefits, adding to the overall costs of hiring and maintaining the entire internal recruitment operation.
Companies have their own unique set of needs when it comes to recruitment. To best gauge the answer on whether in-house recruitment or an RPO is more suitable for you, consider which things you wish to prioritize.
If you prefer exclusivity, then in-house recruitment is your best option. However, if you require recruitment expertise at a lower cost, then partnering with an RPO service provider would be more advantageous.
If you are scaling your operations and need to hire more people in a shorter period of time, RPO is the way to go. On the other hand, in house recruitment would be advantageous if you want to hire people based on culture fit.