3 Keys to Building a Business Case for RPO
You’re thinking about hiring an RPO firm, and you have a wish list for all the ways the company could improve your talent acquisition: best-in-class tools, a more consistent process, improved candidate experience, better candidates, happier hiring managers – all valuable things an RPO firm can bring.
Yes, those are great goals, but if you can’t prove just one thing, I guarantee you that you don’t need RPO. What am I referring to? It’s simple: Return on investment through increased revenue and/or margin.
Now, why is the executive vice president of an RPO firm telling you that you may not need the very services we provide? Because I’ve seen companies eager to jump into a long-term RPO relationship only to find that, when they assess their situations, they can’t prove the business case for it. I don’t want you wasting time or resources on services that you can’t prove will make you money. What I am here for is to help you determine whether you can prove a business case that validates engaging an RPO provider.
So, what do you need to do?
1. Understand and Be Able to Frame a Business-Critical Problem
RPO needs to be a must-have, not a nice-to-have. The problem it solves needs to be one that is keeping you from making money or causing you to lose it. The problem should be scary, urgent, and have real risk involved if it’s not solved. All of the value-added benefits of RPO are beautiful and will definitely impact your talent acquisition program, but they are not the reason to buy RPO by themselves.
For example, just because people talk badly about you on Glassdoor (they talk badly about everybody, by the way) is not a good enough reason to choose RPO to help improve your candidate experience and employment brand. If 40 percent of candidates you extend offers to are turning them down, now that’s a scary problem. Why? Because you are losing money by wasting time and duplicating 40 percent of your efforts.
Attrition is another life-threatening problem for a business. If 40 percent of your customer service reps are new every year, how good can they actually be? How well are customers being served? What percent of customers are defecting to your competitors because your service reps are not experienced? Gaps in recruitment process efficiency and quality are the critical, cost-impacting issues. They are the issues that you need to build your business case on.
2. Match the Benefits of RPO With the Problem
How exactly will RPO solve the problem? You have to be able to connect the dots, proving what RPO can bring you while comparing those returns against the liability of any other model.
Look at what RPO brings: scalability, agility, access to specialized resources, improved sourcing, candidate attraction strategies, subject matter experts, and the sheer wisdom that comes from having hired thousands of people. Ask yourself if you can match this internally or through contracted workers.
For example, if you are hiring sourcers (and many companies are), but you’ve never had sourcers before, who is going to train them? How are you going to know if they are good or not? What are you going to measure their performance by? You don’t know how to do that.
RPO needs to bridge a gap that you can’t bridge in any other way at the same cost and efficiency. If RPO is right for you, it will be because it solves a revenue-impacting business problem in a way that you can’t do yourself or you shouldn’t be doing yourself.
3. Predict and Model Measurable Results
What are the outcomes going to be? What will the ROI be? How will you measure it?
Let’s say you have an onboarding cost of $8,000 per remote customer service rep, and you lose 30 percent of these people each year. Let’s say you reduce attrition from 200 people to 150. That’s 50 people at $8,000 a piece – or a $400,000 savings.
Now, you can debate and play around with the exact math and number you predict, but the point is, once you can show that you will save or generate a significant amount of money, you’re going to get traction. You have to use logic and math to map out the financial impact. If you have hiring managers in sales interviewing 10 people for a position, and you get that down to five interviews per hire by improving the screening process and presenting better candidates, that’s saving five interviews on each hire. Let’s say it takes an hour and a half to interview and follow up on each candidate. That’s an entire day of work that a sales manager is not devoting to sales. You can pinpoint how many sales this hiring manager is expected to generate and calculate the dollar value of sales they could be generating if your hiring process improved. These are the kinds of issues that you need to be able to predict and model in your business case.
The bottom line to remember is that a business case is not an opinion or a “Gee, wouldn’t it be nice if we could do this or that.” No, a business case is the ability to prove that your strategy is going to yield measurable cost savings or increased revenue. If you can’t prove that, you don’t need RPO. If you aren’t sure and want help figuring it out, contact me. I’d be happy to help you work on it!
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