Hopefully it doesn't come as any surprise that at Loxo, we’re always looking for ways to help recruitment agencies innovate and grow.
That’s why we were thrilled to speak with Paul Sharpe — a veteran in the recruitment industry with over 20 years of experience — on a recent episode of Becoming a Hiring Machine. --> If you haven't listened to Paul's episode yet, you should definitely check it out!
In the episode, Paul shares invaluable insights on how agencies can transform their business models by offering Recruitment Process Outsourcing (RPO) solutions. It's also a masterclass in how to position yourself as a true strategic partner to clients, rather than just checking a box for them.
In this article, we'll break down a bit of Paul's philosophy and share some tips on how recruiters can embrace RPO today.
The problem: recruiters working for free
Paul highlighted a startling statistic:
Recruiters work on average between 8 to 10 months for free each year.
This is due to the low fill rates in contingent recruitment, where only 20-30% of roles are typically filled — whether because roles get cancelled, put on hold, changed, etc.
This inefficiency is driving up costs and limiting growth potential for many agencies.
What is Recruitment Process Outsourcing (RPO)?
RPO is a comprehensive approach to talent acquisition where an organization outsources all or part of its recruitment processes to an external provider. Unlike traditional recruitment agencies that typically focus on filling individual positions, RPO providers take on a more strategic and holistic role in managing a company’s entire recruitment function.
Key aspects of RPO include:
- End-to-end process management: RPO covers the entire recruitment cycle, from workforce planning and job profiling to onboarding new hires.
- Strategic partnership: RPO providers work closely with their clients to understand their long-term talent needs and business objectives.
- Employer branding: RPO often includes managing and enhancing the client’s employer brand to attract top talent.
- Technology integration: RPO providers typically use advanced recruitment technologies, including Applicant Tracking Systems (ATS) and Customer Relationship Management (CRM) tools.
- Data-driven approach: RPO services often include detailed analytics and reporting on recruitment metrics and performance.
- Cost efficiency: By streamlining processes and leveraging economies of scale, RPO can often reduce overall recruitment costs.
- Scalability: RPO solutions can be scaled up or down based on the client’s hiring needs.
- Talent pooling: Building and managing talent pools for future hiring needs is often a core component of RPO services.
- Compliance management: Ensuring all recruitment processes comply with relevant laws and regulations.
RPO is about solving specific problems for clients, whether that’s reducing time-to-hire, improving quality of hires, reducing costs, or addressing skills shortages.
When you take a step back, a shift from the traditional model to an RPO model represents a shift from transactional recruitment to a more strategic, long-term approach to talent acquisition.
The solution: embracing RPO
RPO offers a way for agencies to provide more value to clients while ensuring they’re compensated for their work.
Interested in adopting this model? Here are key takeaways from our conversation with Paul:
Understand your current client base
Segment your clients using criteria like current value, relationship status, and future potential. Focus on existing relationships first — it’s 70-85% easier to sell to current clients.
Develop a Minimum Viable Product (MVP)
Break down your offering into five buckets: strategy, attraction, sourcing, selection, and onboarding. Think beyond traditional recruitment services to add more value.
Validate your offering
Use the Kano analysis method to get client feedback on your proposed services. This process not only refines your offering but can uncover new business opportunities.
Understand client pain points
RPO must solve a specific problem for the client (e.g., cost reduction, faster hiring, improved quality). Tailor your messaging to different stakeholders within the client organization.
Conduct a thorough discovery audit to gather detailed data on the client’s current recruitment processes and costs, then use this information to build a compelling business case.
Price your services correctly
Move away from percentage-based fees to a bottom-up pricing model. Aim for 30-35% gross margin minimum on RPO services.
Leverage technology
A superior Applicant Tracking System (ATS) is crucial for managing and reporting on RPO services. If you want to take it a step further, a Talent Intelligence Platform that was actually designed for the nuances of RPO is even better. (Just sayin'.)
The impact of RPO
Implementing RPO solutions can transform your agency by:
- Creating recurring revenue streams
- Elevating your relationships with clients
- Differentiating your services in a crowded market
- Improving efficiency and profitability
At Loxo, we’re excited about the potential of RPO to revolutionize the recruitment industry. Our advanced Talent Intelligence solutions are designed to support agencies as they make this transition, providing the technology backbone needed to deliver high-quality RPO services.
But remember, as Paul emphasized: the key to success in RPO is changing your mindset. It’s about becoming a strategic partner to your clients, always keeping their best interests at the forefront while building a more sustainable and profitable business model for yourself.
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