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Magazine Issue: Vol. 6 No. 1 – January 2008/April 2008
Topics: Benefits Consulting,

Few true, global deals exist, but then again, who’s to say which ones qualify?

by Andy Teng

As a global provider of ITO services, CSC strongly believes in practicing what it preaches. Since 2001, the company has leveraged external recruitment services in Europe, establishing itself as a pioneering buyer of recruitment process outsourcing (RPO) at a time when the acronym was barely a concept in the HRO market.

Six years later, with interest in RPO heating up among HR organizations in North America, Europe, and Asia, CSC continues to blaze a trail in the market, this time establishing itself as a pioneer in the global RPO segment after expanding its engagement with provider Alexander Mann Solutions (AMS) to eight countries. Among a new breed of HR organizations engaging in multinational recruitment outsourcing, CSC is slowly but continuously rolling out RPO in a number of markets.

“It’s a combination of improving cost effectiveness, but equally, you can see some excellent benefits in skills, services, and processes,” said Bev Cunningham, a director for talent and resourcing for EMEA at CSC, concerning the value the company receives from its engagement.

Perhaps because it has relied on RPO for so long, or maybe because CSC itself is an outsourcing service provider, the company is a rarity in the HRO market. What’s more remarkable about its strategy is that CSC is leveraging AMS’ capabilities across different geographies at a time when many buyers are just now dipping their toes into the waters of RPO. With few peers in the global RPO market, CSC is helping to carve out a new niche.

What makes CSC unique in the market? A number of European organizations are buying RPO services but on a limited scale. According to industry observers, while RPO has become an acronym nearly as familiar to employers as HRO, its acceptance as a global phenomenon remains limited for several reasons.

Not Ready for Global
For starters, the market hasn’t built out yet, which means providers are still mostly focused on their own backyards. Many of the large U.S.-based RPO vendors—while gaining significant traction in North America—still lack mature global capabilities. Similarly, RPO providers in Europe are just starting to execute on contracts following market hesitation during the past two years. In Asia, RPO remains a novelty; few significant end-to-end deals have actually gone live. So even though some providers are predicting strong growth in global engagements, it’s unclear when many buyers will begin to contract for services with an integrated, global approach.

Beyond provider capability, some buyers are still leery of giving up recruitment responsibilities. Often, buyers may roll out RPO for a particular division or line of business, but they are timid about adoption for all of their recruitment needs. As is the case with CSC, some buyers may take on an “anchor” country to try out RPO before they look to implement it elsewhere. Others may adopt a best-of-breed strategy, preferring to engage RPO for certain types of projects or only using vendors with long-established track records in a particular region.

“There are not that many global players that can provide a global footprint,” said Edward Brooks, a senior advisor with sourcing advisory firm TPI. He pointed out that implementing a North American deal is significantly simpler than executing on a pan-European rollout. After all, with 27 countries and 23 languages spoken, and distinct recruitment practices in each market, the EU presents a complicated landscape.

“No one can jump into a pan-European deal and cover 27 countries overnight,” he added. “However, they can look at a few key markets like the U.K.”

Defining Global RPO
Ask 10 HR directors what RPO means, and you may get 10 different answers. Ask them what global RPO entails, and you might get 10 puzzled expressions. That’s because the global segment is so new and has so few market participants that a consensus definition has yet to emerge. Does “global” mean a contract must span all three major economic regions: the Americas, EMEA, and Asia? Or can it simply require that a deal covers multiple countries in one or more continents? Does a provider delivering service, in, say, the U.K. and Germany qualify as a global player?

Candy Lewandowski, vice president of RPO for the Kelly Outsourcing and Consulting Group, said while buyers and providers might each have a different definition, she considers a true global engagement to encompass a single program operated across all three major markets. That means HR has a singular, coordinated view of all its recruitment activities around the world run by one provider.

“I haven’t seen it (RPO practices) really reach a global program yet. It is confined region by region,” she said.

That’s not to say global RPO, as she defines it, is not in the pipeline. Lewandowski pointed out that today there are a number of cross-border engagements in Europe, and a few involve providers delivering services on a couple of continents. And as providers enter into joint ventures or acquire overseas operations, they will likely help accelerate the sale of global RPO services. For now, however, few employers can even fathom such a comprehensive deal in their organization.

Kirsten Corbell, product manager, RPO, for Manpower, pointed out that global engagements suffer from the classic, new-market syndrome: Until more of these deals are executed, buyers will keep them at arm’s length; and deals won’t get cut unless buyers muster up the courage to get on the bandwagon. “I think we’ve only seen a handful of big RFPs come through so far,” she said, adding that it may be two more years before the movement reaches critical mass.

Most of the handful of multinational deals resemble the CSC engagement, comprising services in a number of markets supported by the vendor’s in-country, on-site workers and a shared-services center that performs administrative and sourcing tasks that don’t require a local presence. Greet Brosens, client director for AMS, said her company hires about 1,300 for CSC across Europe. As many as 15 of its employees work for CSC in the U.K., while the country with the smallest number of hires—Sweden—only requires one on-site person.

She noted that as one of the first multi-country deals in the RPO market, CSC incrementally recognized the benefits of an outsourced solution. By first implementing it in the U.K. and then expanding the relationship in measured doses, the company was able to get a better handle on governance and change management. At the same time, she added, AMS learned how best to deliver services across a number of borders.

“The relationship with CSC did help us to establish what parts of the process can be standardized in order to be efficient and what parts you should respect as high-touch, local services,” she noted. “It absolutely is about getting that balance right.”

Challenges Are Complex
But getting that balance can be tricky, and it’s why a key barrier to global RPO is the complexity of implementing such a deal. Within most multinationals, HR remains divided by region, with each operating its own processes, policies, and even platforms. Recruitment is usually the domain of local and regional offices, despite growing interest in centralizing activities through RPO. Myriad considerations must go into rolling out a global program, much as would be the case in a global HRO effort, and the critical issues vary from region to region.

For instance, TPI’s Brooks pointed out, cross-border engagements in Europe have a different cost structure than those in the U.S. Because the number of hires is typically smaller than in the U.S., the European RPO cost-per-hire is usually higher, especially when a particular market needs only a handful of people. “Recruitment processes are the same [from country to country], but scale will be an issue,” he added.

Of course, hiring practices also vary from country to country. What might be an effective strategy in the U.K. can be a complete failure in France or Spain. Similarly, efforts to brand the employer must account for cultural differences, language, and even regulatory mandates.

The complexity of a multi-country deal is one reason why CSC has incrementally rolled out RPO to eight markets: the U.K., the Netherlands, Switzerland, Germany, Den-mark, Czech Republic, Italy, and Sweden. Cunningham said the company doesn’t use AMS’ services in France, Belgium, Spain, or Portugal but is considering it in the future. And not all of the countries use the same suite of services in every country. Operations in the U.K., for instance, are engaged in the full spectrum of services. Although Cunningham said the eventual goal is to have all of its countries use the same set of RPO services, the fact is each is adopting outsourcing at its own pace.

“In each region, we’ve had very different experiences because you are dealing with different kinds of people and expectations, and there are cultural differences,” she added.

But those challenges are also the motivation behind growing interest in global RPO. In Europe more than elsewhere, HR leaders see opportunity to consolidate and standardize their recruitment processes. Europe has never been a homogenous market, and that’s why an HR service such as pan-European payroll remains elusive. Similarly, recruitment practices and processes vary. Global HRO can act as a tool for HR to unify its many, disparate policies and procedures to yield not only cost savings and operational efficiencies but also better candidates and a higher quality of hire.

As with any HRO service, RPO benefits buyers in a number of ways, and even though a global engagement is exponentially more complex, it is exponentially beneficial as well. Theoretically, having one provider administer an entire recruitment program around the globe means the client can more easily define jobs, holistically plan for human capital needs, and ensure that best practices are implemented across the board. Furthermore, by reducing the use of third-party agencies, buyers will see significant cost savings. And by turning over the administrative tasks to the RPO vendor, the retained organization can focus on core competencies and strategic initiatives, which have a more profound impact on the business.

Will many more HR organizations look to a single RPO provider and technology platform for all of their future recruitment needs around the world? With companies such as AMS, Kelly HRfirst, and Manpower all helping to speed up the segment’s maturity, the question might not be whether there will be an appetite for global RPO but how big and how soon.