You Pay 20% For Contingency – What Should You Pay For RPO?

Kris Dunn Candidate Pool, Kris Dunn, Recruiting, Sourcing, Working With Recruiters

One area I haven’t had to experience a lot as a recruiting HR pro is RPO (Recruiting Process Outsourcing).  I know enough to know that you can outsource the whole thing, or outsource part of your process to plug a weakness or manpower issue you might have from a recruiting standpoint.

I also know that RPO seems to make the most sense for companies when they’ve got BIG volume plays ofMatrix02 positions critical to their buiness nationally rather than concentrated in a few specific sites.  It also seems to make sense when your time to hire is beyond acceptable levels and you’re willing to buy some quick relief.

What I don’t have is a good feel for how much to pay for RPO.  Here’s a good rundown on the cost of RPO from Manpower’s Rob Jannone ripped from an ERE discussion post:

"The previous two replies are valid in my opinion. There are numerous variables from which the actual costs are derived. That said, over our 10+ yrs as an RPO provider, we find that average CPH is between 6-10% of the candidate’s base salary. The factors considered are geography, degree of difficulty to source, attract and hire, the estimated number of candidates that will need to be contacted to result in a hire, and whether the effort encompasses the full lifecycle of recruiting, or if it is simply sourcing and pre-qualifying prior to turning the candidate over to the client’s in-house talent acquisition team.

Regarding sourcing on a per candidate, or per requisition basis: the typical RPO approach to this would be to look at it as a professional service, and charge on a time and materials basis. Alternatively, some of our clients have requested a per candidate or per requisition cost structures and after sufficient due diligence, we are able to provide QIAs (qualified interested available) candidates for $500-$750, partly based on the assumption that we are looking for 3-5 QIAs per requisition.

All that said, I caution you on the cost-only evaluation of RPO providers. In RPO, you get what you pay for, and I have seen competitors repeatedly "buy the business" by providing the lowest cost, and they find they are unable to deliver, because they are forced to use junior resources in order to achieve profitability, which often results in client dissatisfaction and ultimately, disengagement with the provider."

Interesting and beneficial carve out of the issues by Rob, including the $$ from his point of view.  10% for RPO seemed high, but 6% seemed reasonable, if for only the fact that my perception is that RPO is a volume play.  If I pay 20% for contingency and am willing, as a VP of HR, to give an RPO firm a pack of 100 identical spots to fill, I’d expect the lower number.

Your thoughts and exeperience?  Maybe Kelly can get someone from The Right Thing to validate these numbers and give us additional perspective.  I’ll drop Rob a note and get him to comment as well.

Kris Dunn

Kris Dunn is a Partner and CHRO at Kinetix, a national RPO firm for growth companies headquartered in Atlanta. He’s also the founder Fistful of Talent (founded in 2008) and The HR Capitalist (2007) – and has written over 70 feature columns at Workforce Management magazine. Prior to his investment at Kinetix, Kris served in HR leadership roles at DAXKO, Charter and Cingular. In his spare time, KD hits the road as a speaker and gives the world what it needs – pop culture references linked to Human Capital street smarts.