Soft Skills

Why outsource hiring?

Outsourcing of recruitment will happen in a big way when there is a success story to emulate. The recruiting business needs to have a mascot in place, which will be a benchmark for others to follow, writes Gautam Sinha

As India becomes the backoffice hub of the world and BPO becomes a mainstream buzzword, the creation of specialists is the requirement of the day. If one analyses the outsourcing business, these functions are support or non-core, therefore, it is best tackled by a team of specialists who are better equipped to execute it. We now have companies, which provide specialised services in areas ranging from security or housekeeping to IT.

In this context it is interesting to look at the HR field. If one analyses the entire gamut of the function, there are several areas that are “outsourceable” as this is a transaction-heavy function.

1. Compensation management: This includes payroll administration, benefits management, benchmarking, structuring, etc.

2. Policy clarification: This can be handled through call centres or e-mail queries.

3. Recruitment: This would include sourcing, screening (resume sorting and initial testing), scheduling, interviewing, closing (selling to a prospect) and getting the candidate to join. Of all these functions, companies would obviously like to retain control over the interviewing process as that is something which only an internal hiring manager can decide upon, but the other transactions in the process can be outsourced.

This is an attempt to analyse the hiring function in some more detail as an “outsourceable” function.

Before I begin to analyse this trend, let me explain the main difference between recruitment and search. The biggest misconception in the minds of most managers is that recruiting is all about “sourcing”.

If one were to compare the way in which the software revolution spread across India, one will see that it got fuelled by two main issues:

1. As business became more complex and spanned across geographies, many organisations realised that technology was the only option of sustaining productivity and profitability.

2. Companies also realised that even though software or IT was one of the drivers of their growth it was still not the core function of their business (if I make steel why should I have a large and expensive software department within the company!), and therefore they started looking at outsourcing the function.

EDP departments started getting reduced and software service companies started mushrooming.

The recruitment business to me is poised at the same stage currently. Companies will realise that:

• Recruitment although a facilitator is not the core function of the company.
• Maintaining a large recruitment department, providing career paths to recruiters and at the same time incurring costs of technology and advertising does not make sense.
• Being a support function, the focus of the top management is low and therefore efficiency and motivation levels for a person working in the function will not be that high (can’t see where the job will end up). This will eventually lead to a drop in productivity levels of recruiters and therefore render the function more expensive as more people will be required to do “a” particular job.
• The process of releasing an ad and gathering CVs will work for some time and for some number, but as the volume of hires starts increasing, competition for talent increases and timelines to hire starts coming down, the complexity of the task will increase.

The key change would come about when individuals who regard recruiting as a career (and there are not too many of them) prefer to join third-party vendors instead of joining companies and this will be when the function will be well and truly outsourced. This is similar to what happened in software when talented engineers joined third party software vendors and not large companies, even though the latter had a better brand. This would need to get facilitated by salary levels in vendor companies being necessarily higher than the ones in user companies so that professionals make a decision to switch to

the outsourced partner. Ultimately, the success of any outsourced function is totally dependant on the way talent shift occurs. Professionals need to feel that there is more money and better growth prospects if one joins a vendor rather than an ‘integrated concern’, and this can only happen if people see the function as a career in itself and not as a stepping stone to something else.

Three things have to happen simultaneously for the recruitment function to get outsourced:

1. The mindset has to change as companies feel that if they outsource they lose control over the function. They need to understand that this is not true as they will still retain the right of refusal in hiring and outsourcing the function does not mean that the vendor will decide who gets hired.

2. The scale of the vendor industry (placement business) has to increase. Companies need to be capable of hiring 1,500-2,000 professionals in a year so that companies are convinced that these have the reach and expertise to deliver on the numbers. This is absolutely critical as companies have to meet their hiring numbers and therefore need to be convinced that the vendor has atleast the capacity to deliver.

3. The vendor industry needs to develop the process and systems so that scaling of the business does not happen by increasing manpower at their end. If they keep increasing manpower then they will not be able to keep the costs down and therefore margins will get squeezed, which will impact the salary that they can offer. This is absolutely critical as unless the salary that vendors can pay are higher than what companies pay, talent will not reverse flow into vendor companies.

To conclude, outsourcing starts happening in a big way when there is one success story that gets created (this has happened in all functions or businesses). So the recruiting business needs to have a mascot in place, which will be the benchmark for others to follow. If the concept sounds incredible just look around at the

software offshore story, which got sold over a period of the last 10 years!

Gautam Sinha is CEO of TVA Infotech. E-mail: gautam@tvainfotech.com