Most staffing solutions that involve the use of an outside recruiting agency fall under the On Demand Staffing Solutions category of what is known as “contingency recruitment”. It is so called because the fee that the staffing agency receives is contingent upon placing a candidate with a client. In other words, these staffing solutions involve paying a placement fee. Staffing agencies charge between 15% and 30% of a candidate’s base salary, with 20% being the most common arrangement.
By contrast, staffing solutions at companies like ContractRecruiter fall under the category of “On-Demand RPO”. What is an On-Demand RPO? To understand On-Demand staffing solutions, let’s first take a step back and answer the question “What is RPO?”
What is RPO?
RPO stands for Recruitment Process Outsourcing, and involves handing over some, all, or anything in between, of a company’s recruitment and/or sourcing functions to a third party.
With true, full-scale RPO staffing solutions, a client will outsource their entire staffing function, and will have little, if any, of their own staffing personnel left in-house. There are economies of scale to be had with these types of staffing solutions, along with risks that must be also be managed.
By contrast, On-Demand RPO staffing solutions supplement, rather than replaces, a company’s staffing function. On-Demand staffing solutions overlay recruiters and/or sourcers who then act as an extension, not a replacement, of a company’s recruitment team. On-Demand RPO is also commonly referred to as Project RPO, Limited RPO, Partial RPO, Mini RPO, or Sourcing RPO. Again, think “supplement”, not “replace”.
No More Placement Fees?
In regard to cost and pricing, On-Demand RPO staffing solutions are fairly simple. Instead of charging placement fees, On-Demand staffing solutions providers charge a fixed rate either by the hour, week, or month. Rates typically break down to between $40/hr to $50/hr. for sourcing, and $60/hr. to $90/hr. for full-scale recruiting. Your actual cost-per-hire (http://info.contractrecruiter.com/blog/bid/304142/Crazy-Sexy-Recruiting-Metrics) is highly dependent upon the level of difficulty for filling each of your positions, but will be lower, sometimes dramatically so, than by going the contingency recruitment route. After all, you are completely eliminating placement fees of typically twenty percent of base salary.
Five Reasons to Fall in Love
On-Demand RPO staffing solutions have five critical advantages over contingency based staffing solutions:
• Accountability. Why do your employees come into work every day, work hard, and hold themselves accountable? The answer is that you pay them to do so. And they are all keenly aware that there are consequences to not holding themselves accountable, the most likely and dire of which is termination. On-Demand RPO providers become adjunct staff, and as such, operate under the same rules. Just like your in-house employees, the survival of adjunct RPO staff is one hundred percent dependent upon holding themselves accountable and meeting or exceeding expectations. Otherwise, they will meet with the same fate as your in-house staff.
• Alignment. Contingency recruiters prioritize their time and energy based upon how likely a position is to result in a placement fee. Their priorities are based upon their own self-interests, not the companies that they purport to serve. They will not put much time and energy into working on positions that they feel are too difficult to fill, since in their minds they will not wind up getting paid for their work. However, with On-Demand RPO staffing solutions, each company’s priorities become the same and only priorities of the RPO provider. There is no more picking and choosing how much time and energy to expend on each of the client’s positions. The RPO provider will work with the same level of unabated rigor on every position, no matter how difficult or easy. Why? Because they are being paid to do so!
• Quality. Contingency based recruiters tend to maximize their chances of collecting a fee by emphasizing quantity of resumes over quality of resumes. Basically, throw enough resumes at the wall and hope something sticks so they can generate a fee. However, On-Demand staffing solutions providers are able to focus on quality (http://info.contractrecruiter.com/blog/bid/247038/The-Top-6-Reasons-Why-Poor-Hiring-Makes-You-Poor), since they are fully aligned and partnered with their clients, as opposed to being an outsider competing for the business against other recruiters.
• Speed. On-Demand staffing solutions deliver candidates faster than contingency staffing solutions because of the accountability that they are held to. More importantly, On-Demand RPO providers such as The Recruiting Division have the ability and incentive to put 100% of its resources on every job order, every time, regardless of how difficult the position is to fill. By contrast, contingency based staffing firms will only fully resource positions for which they feel they are likely to earn a placement fee.
• Cost. Your cost per hire (http://info.contractrecruiter.com/blog/bid/285662/5-Ways-to-Reduce-Your-Cost-Per-Hire) will vary depending upon the ease or difficulty of the positions, but you can count on your cost per hire being lower, often times dramatically so, with an RPO solution. As a general guideline, cost-per-hire can be as low as five to seven percent for easier to fill positions, or ten to fifteen percent for more difficult, niche positions.
Contingency based staffing solutions have been with us for a very long time, and undoubtedly will continue to be here for some time to come. But the rise of newer staffing solutions, such as On-Demand RPO, offer the ability to lower recruiting costs while at the same time increasing speed and quality. Companies such as The Recruiting Division have seized upon these newer types of staffing solutions, giving companies a leg up in their ability to recruit talent in the new economy.
Andrew Greenberg’s roots in recruiting date back to 1996. He has experience both on the agency-side and corporate-side of the staffing business, with a focus in the financial services space at companies like Bloomberg and UBS. He also has core experience with information technology staffing, and has worked for major software companies such as SAP Business Objects and IBM/Informix Software. To get in touch with Andrew, you can reach him by email or by phone at (800) 797-6160.