What is the ideal way for SME’s to manage their hiring needs?
Note: Read more articles from my blog - Business of Recruitment
Businesses of all sizes need to have dogged focus on revenue generation and business growth. They also need to perform certain non-revenue generating activities, like recruitment. If non-revenue generating activities are not performed well, business growth can be hampered in the long run. Hence, resources available to businesses have to be judicially divided between revenue generating and non-revenue generating activities. It is a thin line. SME’s in particular struggle to manage both, because, they do not have the luxury of a plethora of resources available at their disposal. So, in their dogged quest of revenue generation and business growth, the non-revenue generating activities tend to take a back seat in most SME’s. Larger businesses; because of the multitude of resources available at their disposal; have the bandwidth to equally focus on and manage both. Larger businesses clearly hold the advantage here. Let’s take a practical example of managing recruitment activities, to validate the above theory and talk about solutions to this disadvantage that SME’s are faced with.
Recruitment is a non-revenue generating activity that needs to be performed well. Every business understands the repercussions of a bad hire. Successful recruitment requires diligent performance of a set of activities. These activities are not complex by any stretch of imagination:
- Tapping into multiple candidate sources. This is similar to marketing. Just like an experienced marketer; who taps into multiple sources for ideal results; for successful recruitment too businesses need to tap into multiple candidate sources. Sourcing is a time consuming activity.
- An effective screening process. Without effective screening the businesses will waste precious time interviewing unfit candidates. Screening is another time consuming activity.
- Employer branding and candidate communication. Businesses need to be constantly in touch with candidates and find ways to project and employer brand in order to stand out from the crowd. This is yet another time consuming activity.
There are no short-cuts to the above set of activities. Whenever a business intends to hire, all of the above have to be carried out diligently.
Traditional methods of managing recruitment
Traditionally, businesses have performed recruitment activities through an in-house team. This team manages most openings. Overflows or niche hires are passed down to recruitment consultants. Large cash reserves and frequent hiring needs justify the need of a dedicated recruitment team, in large businesses.
Should an SME cultivate an in-house team? Maintaining an in-house team comes with the baggage of fixed costs, whether the business is hiring or not. The volume of hires is significantly lesser in SME’s. They do not have large enough cash reserves to sustain the in-house team during periods of no hires. But, there are SME’s who do cultivate in-house teams. They do so at the risk of slashing profit margins.
Those SME’s who choose not to cultivate an in-house team, either make their HR generalists and hiring managers multi-task or majorly depend on recruitment consultants. Making HR generalists and hiring managers perform recruitment activities, in addition to their full-time job, usually results in process failure that can have serious consequences. Because recruitment in itself is a time consuming full-time job, it is logically not possible for the HR generalist and hiring manager to perform the recruitment activities, discussed above, with entirety and diligence. On the other hand, depending on recruitment consultants for majority of their hiring needs results in ballooning costs sooner, than later, and the SME is forced to cut down on using recruitment consultants.
For an SME, choosing whether to cultivate an in-house team or not, is a double edged sword. It is nothing more than choosing between lesser of the two evils.
What other alternatives available to an SME?
There has been a flurry of RPO’s, in the past 5 years or so. Outsourcing recruitment is a beautiful concept for businesses, especially SME’s. It allows businesses to have their own recruitment team, without taking on any permanent liabilities. Isn’t that an attractive proposition? RPO’s in India have successfully been able to win business from the west because of the significant cost advantage they provide to businesses in developed economies. Unfortunately, these RPO’s have not structured themselves to suit businesses located in India. Furthermore, they are especially not viable to growing SME’s in India. They come with a huge fixed cost baggage. Even though, RPO’s promise to give SME’s their own recruitment team at zero permanent liability, the existence of a fixed cost is an SME killer. SME’s do not hire all the time.
What better options are available to SME’s?
Although old generation of RPO’s have not structured themselves suitablly for SME’s in India, I will still stick with what I mentioned above: “Outsourcing recruitment is a beautiful concept for businesses, especially SME’s.” Because, there is an emerging trend of new generation RPO’s developing a *transaction based model. Transaction based RPO’s is what SME’s need. They are an ideal solution for SME’s to manage recruitment; own recruitment team, zero permanent liability and zero fixed cost! Currently, there are not many RPO’s of this type, but, once an SME is able to find one it will be a breath of fresh air for SME owners and senior management. Transaction based RPO’s will give them the following advantages:
- Their own recruitment department that guarantees results through a ‘contractual guarantee’.
- No fixed costs. Although they have their own recruitment department, they will not be charged for it when they are not hiring.
- Transaction based RPO’s cost up to 100% lower than other methods of managing recruitment.
- The limited resources will be consumed by one less non-revenue generating activity. They can invest more in their business giving them an opportunity to grow faster.
- Their recruitment activities will be performed by experts, giving them a level playing field amongst the biggies in the hunt for talent.
*I will be covering transaction based RPO’s in a future blog, as it is a separate topic in itself. In the meantime, if you are keen to know more about it, feel free to contact me. I am open to dialogue with anyone out there.
Note: I have written this blog from personal experience. The firm that I work with, JobsXS, provides transactional RPO solutions to growing SME’s. Through such a model we will not only be able to meet SME hiring needs effectively and efficiently, we will also end up playing a crucial role in helping SME’s grow faster.
Strategic Business Consultant
Note: Read more articles from my blog - Business of Recruitment