How to define the success metrics of outsourcing

How to define the success metrics of outsourcing

Defining metrics of success can sometimes be overlooked in the greater context of weighing up the benefits of an outsourced recruitment (RPO) solution. Outsourcing is a big change and one that comes with its associated risks. 

When a company is on the fence about outsourcing their recruitment it’s important to understand how you define success, especially when considering the return on investment that outsourcing offers. We recommend that businesses consider their options by looking at these main factors: 

Financial savings

Before you can judge the impact of an RPO, you need to know where your business currently stands in its hiring practices and success. One way to determine this is by calculating your current cost-per-hire. Once you have identified the current costs in their entirety and assessed current business performance via key metrics, you can begin comparing it to the solution offered by an RPO provider. The costs of the RPO solution should be documented in a way that is as close to a comparison to your current state as possible, aligning the pricing model with the current state (cost-per-hire model versus monthly fees as an example) and identifying savings. 

Additional costs to consider are interview-to-hire times. Assuming you have a target of interviewing three candidates before making a hire, any interview over that number can be considered as an additional cost in hiring manager interview time. 

Another significant financial consideration is the cost of onboarding. This factors in the time it takes from offer to start and subsequent induction/orientation, as well as the costs of the team involved in those processes. Finally, evaluate the cost of your turnover time. If there is clear data that turnover was caused due to a poor fit for the role within the first 90 days, the cost of this replacement and lost productivity can also be considered. 

Once these financial costs have been determined, you can compare the cost of an RPO solution. Resource Solutions, as an example, has created an RPO calculator that can prospectively identify the costs and savings to be achieved from enlisting an RPO provider, for all or part of the recruitment process. 

Non-financial performance

The success of your business can be measured by more than just dollars in and out. Hard dollar costs should be compared in conjunction with RPO benefits of improved business outcomes. For example, reduced time-to-hire means productivity can be achieved sooner, which is a direct impact on the bottom line. A more aligned employer brand and targeted talent attraction strategy translate to a reduction in hiring costs. 

Success should include meeting the business objective as well as a substantial improvement on key recruitment metrics, business performance, hiring manager and candidate satisfaction, and financials. Expectations around future state SLAs and KPIs, reporting criteria, and cadence should be documented. Most RPO providers have streamlined data collation and reporting tools and will be able to provide benchmarking data. 

This visibility, reporting, analytics and focus on process improvement is a key RPO benefit. We also recommend correlating the KPIs with a business outcome that can be expected to ensure they are aligned. 

For more advice on how to define success metrics, download our guide to Building a Business case for Outsourcing your Recruitment whitepaper.