Pay-as-you-go recruitment on the rise

SMEs are switching to a pay-as-you-go recruitment model.
SMEs are switching to a pay-as-you-go recruitment model.

There's nowhere to hide a dodgy recruitment call if you're an SME.

In a firm of less than twenty people, that bad hire will haunt the office corridors for a very long time, a daily reminder of a decision made in haste, or with too little information.The big corporate, by contrast, always has the luxury of burying them in the mailroom.

In recent years there has been a move towards "recruitment process outsourcing" (RPO), whereby a client company transfers most if not all of its recruitment and hiring needs to an external provider which handles the thing from go to woe.

The RPO firm assumes greater ownership of both the process and result than a traditional recruiter, and among touted benefits it's claimed to be more cost effective due to economies of both scale and scope.

Which is all very well if you're a Fonterra or a bank. But how do you access such benefits if you're one of the 92 per cent of Kiwi firms with less than 20 employees?

One Auckland-based recruitment firm believes it's come up with an RPO model which can work for SMEs. The not-very catchily named vRPO does serve large corporate clients such as Air New Zealand and ASB, but it's now turned its attention to the smaller business market as well.

Business manager David Gordon joined the firm in January with a specific brief to target the small-to-medium sector.

 The big point of difference with vRPO is the billing model: rather than charging a commission for a successful placement, the company charges by the hour, like any legal or accountancy firm.

"Critics of the traditional recruitment agency model talk about how they find a candidate on a database, push them to a client and then charge a [sizeable] fee," Gordon says.

"With our service if it only takes five hours, then you only pay for that."

vPRO has a pool of around 160 specialist contractors it assigns to do the work. Some are stay-at-home mums, experienced recruiters who offer their expertise on a freelance basis.

Gordon cites a client who was able to save 85 per cent on three recent hires, largely because the recruiter had an excellent network in the particular industry.

"I have to add the caveat that if we are recruiting a really niche skillset then that is going to take a bit more time, so obviously cost can fluctuate. But it can significantly reduce costs." 

Rapidly expanding Auckland-based foodie delivery service My Food Bag has used vRPO for several recent appointments. Co-founder and chief executive Cecilia Robinson says going with a different approach proved successful, and cost effective.

Their "virtual" recruiter Bianca was able to fill five positions for the same cost the company spent on filling one using a traditional employment agency, says Robinson, who believes the RPO concept will be warmly embraced by the small business sector.

"Traditional recruitment approaches are becoming stale, and you can pay a huge amount of money just for one [placement]."

Frog Recruitment is also offering a ''hot off the press'' RPO service for smaller companies, director Jane Kennelly says.

The growing talent shortage is one of the drivers behind the move to pay-as-you-go recruitment offerings, she says.

''How does 'NZ Inc' SME win against the large corporates? This is an attempt to level the playing field.

''In the SME space there has been and is room for a vast improvement in the way the recruitment process is handled.''

Services like Frog Recruitment's Frog Tap can save smaller firms anything from 40 to 60 per cent off standard recruitment fees, she says.

It breaks down the recruitment offering into bite-size pieces - for example, a firm may only want the recruiter to phone-qualify a large pool of applicants and produce a long list for the company to act on, rather than a full recruitment process.

Frog Tap also gives business owners access to Frog's  cloud-based IT systems, which allows them to see where the recruitment process is at.

''That's part of the quantum shift happening now - there needs to be increased visibility around the process,'' Kennelly says.

Nick Simcock is managing director for the Australasian arm of big international RPO firm Futurestep, which works for large clients such as Fonterra.

He sees growing interest in the RPO model among smaller businesses, fuelled by the skills shortage and the shortcomings of traditional recruitment agencies, but says the trend is in the early stages.

"It's embryonic, but there are opportunities in that market," he says.

"Irrespective of whether you're a small or large organisation, ultimately you face the same talent challenge, and this [the RPO approach] is a way to resolve that."