Beware False Economy

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Beware False Economy

On February 17, 2011, Posted by , In Blog, With No Comments


The scale of the packaging industry drives many towards preferred supplier lists (PSL’s) and recruitment process outsourcing (RPO) where an external supplier effective manages recruitment via a PSL.  Without this the size of the organisations can lead to a fragmented approach and spiralling costs.  Whilst it is clear that PRO and PSL’s are useful for a proportion of recruitment there is clear evidence that they are failing in certain areas and in fact adding cost.

The packaging sector is dominated by large, often multinational groups.  Further the end users, who may also be recruiting technologists, graphic, 2D and 3D designers are more often than not large groups.  It is easy to understand therefore that some centralised comparison and co-ordination costs and processes can get out of control with legal as well as cost implications.

Of course this has lead to the rising use of PSL’s and RPO and the facts speak for themselves.  There is no doubt that this has reduced recruitment spend.  However recruitment spend is a poor measure of success and whilst it is clear that this approach is working for certain areas of recruitment we have clear evidence of it failing in others.  Further in virtually every case we have the figures for the cost of a long term unfilled vacancy far outweighs the projected recruitment spend saving from the PSL.

Where do PSL’s and RPO absolutely deliver?

As unpalatable as it may be to say there are a whole range of roles characterised by either low levels of skills or expertise and or high availability of suitable candidates.  These roles have effectively become commoditised and are largely the domain of generalist and high street recruiters who compete on price.  In the face of such a lack of differentiation you simply cannot argue against a focus on recruitment cost where PSL’s / RPO will provide the correct balance of vacancies filled and low cost.

When do PSL’s and RPO fall down?

Before I am accused of sour grapes or damning a process with sweeping generalisation I should state for the record that we operate on a number of PSL’s which have been carefully selected and managed to provide effective coverage and adequate expertise to cover the clients needs.  Moreover there is an understanding that if the preferred suppliers don’t provide suitable candidates within a reasonable timeframe it will be opened up to external recruiters.  What is a reasonable timeframe?  My simple answer would be that a recruiter with knowledge of your company, products and markets, given a decent brief and access to the hiring manager to discuss the role should be able to identify candidates within 2-3 weeks.

We have evidence of vacancies open without PSL recruiters providing suitable candidates for 10 weeks and even 10 months.

Frankly a recruiter who hasn’t identified candidates within 2-3 weeks doesn’t know where to look and as a result is costing you money as a result of your unfilled vacancy.


I’m not pretending RPO and PSL’s are going to, or indeed should, disappear; clearly they have value.  However they can prove a false economy if not done properly so I strongly advise functional / divisional managers and directors to actively participate in their creation.


Key Factors:

  1. Understand that certain roles require specialist knowledge.  This is often lost on senior management and without the support of line managers HR and purchasing can’t hope to appreciate the nuances of all of the roles within the business.
  2. Whether creating a PSL internally or using a recruitment process outsourcing company ensure that the supply base includes recruiters with the technical and industry knowledge to cover all roles.  Alternatively accept that the PSL will cover the commodity roles and leave the lower volume specialist roles outside the scope of the PSL.  RPO providers will tell you that they know recruitment and have got it covered; challenge this assertion and ask them to prove it by demonstrating they have a supply base which can produce suitable specialist candidates.
  3. Don’t be too focused on slashing the number of suppliers on the PSL.  If you want to cover all roles with PSL suppliers accept that it may be a longer list and that some recruiters on the list may only be used a few times per year.  I remember a senior purchasing director for a multinational company reversing a supplier rationalisation process he felt had gone too far saying “ I think we are sophisticated enough to handle 6 or 8 suppliers rather than 2 or 3; especially if the 2 or 3 cant do a good enough job across a category.
  4. Ensure you have a mechanism that allows the use of non-PSL suppliers where PSL suppliers have not been able to identify candidates in say 3-4 weeks.  Don’t quibble about slightly higher fees – the cost of an unfilled vacancy for months on end will far outweigh them.  Realistically if you go to an external supplier you need their help and want them onside; don’t put them off or turn them against you before you start.
  5. Make sure there is still a direct line of communication between the hiring manager and the recruiter.  Rapid and effective communication is essential to successful recruiting.  A clear brief, understanding the role and the “ideal” candidate, interview feedback, addressing candidate concerns and, presenting a job offer are all most successful without the Chinese whispers of indirect communication.


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