Annual recruitment costs are often an HR manager’s single biggest budget line item. Some companies have turned to preferred supplier agreements to improve the effectiveness of their recruitment dollar. Teresa Russell talks to four companies that have realised more than just the predictable fiscal benefits from their preferred supplier agreements.
Annual recruitment costs are often an HR manager’s single biggest budget line item. Some companies have turned to preferred supplier agreements to improve the effectiveness of their recruitment dollar. Teresa Russell talks to four companies that have realised more than just the predictable fiscal benefits from their preferred supplier agreements
Many things bring an organisation to the realisation that the time is right to appoint a preferred recruitment, search or labour supplier. Each of the following companies have established preferred supplier agreements. Their HR managers explain the processes and the practicalities that were involved in implementing a preferred supplier agreement and discuss the benefits to their businesses.
Smorgon Steel
A publicly listed Australian company with more than 5,000 employees, Smorgon Steel uses contract labour in order to provide the right skills at the right price and in the right place. According to Andrew Ashbridge, group general manager human resources, Smorgon Steel’s preferred supplier arrangement ensures labour costs remain as flexible as possible. A little under two years ago, the company went to tender to find a preferred supplier for labour hire. It established a two level structure comprising a steering committee and a task committee. The latter was responsible for establishing measures with which to assess the bids, including price and service levels. The tender was sent to companies that had previously supplied labour to its different divisions.
“We targeted savings of 10 per cent of the total cost of contract hire and are running on target,” says Ashbridge. But it hasn’t all been smooth sailing. “There’s always a bedding down process when you change suppliers. The difficulty can be within both the supplier and the client,” he admits. Ashbridge advocates creating a business plan to manage the rollout when moving suppliers. “That way, you learn from experience and you can accelerate the implementation as you go along,” he says.
According to Ashbridge, the personal relationship you have with a recruitment consultant is crucial at every level. At Smorgon Steel, it is not just HR that deals with the recruiters – line managers do too. “If there is open, honest and speedy communication, problems are resolved quickly. If a particular consultant leaves the supplier organisation, the processes and systems you have in place should go beyond the individual,” he says.
Ashbridge says that it is vital to run the tender process openly and to stick to your plans. “You must have a clear view of what it is you are looking for in terms of price and service, then have a rigorous system to deliver your objectives.
“Don’t be distracted by the bidders’ messages. All the add-ons are only good if you really need them,” he warns. Ashbridge also says it is important to get engagement from your own staff and to sell the benefits before implementing the changes.
Alstom Australia
The Transport Sector of Alstom Australia is a design engineering project management business and assets maintainer. Its 1,800 staff are currently employed in projects as diverse as building Sydney’s new Lane Cove (road) tunnel and maintaining Victoria’s trains and rail infrastructure. As a result, its recruitment is project driven, with staff usually employed on a fixed term basis, usually for the length of a project.
“We used to advertise ourselves. Then, if we got into any trouble, we’d go to three or four recruiters. Some would want an exclusive arrangement, but couldn’t provide us with the breadth of engineering skills that we required. There was certainly a variation in service and quality between recruitment companies,” says Johnson.
There has been a financial benefit as well as a service benefit that has come from using a preferred supplier agreement, he says. “My line managers are thrilled with the process because it is efficient and fast. We have also found a great recruiter in software and design control engineering – a talent we previously found difficult to recruit,” he says.
Johnson also agrees that the personal relationship between himself, his line managers and the recruitment consultant is important. “I wouldn’t terminate the agreement if our account manager left, but if the service level dropped as a result, I would,” he says.
Any preferred supplier agreement must be cost effective, according to Johnson. “They need to specialise in the field you are recruiting for and they must come to understand your business.”
Philips Electronics
Prior to centralising the HR function six years ago, Philips Electronics’ recruitment function within each division operated independently. Charlotte Lord, human resources manager, says the company’s 430 employees in Australia predominantly work in sales, marketing, health care, warehousing and support.
Before tenders were issued to find a preferred recruitment supplier, Philips managers were surveyed about the quality of recruitment consultants that had been used in the past. “We wanted to find out who was good out of the thousands of recruitment consultants that were around, because both the quality of service and the applicants they put forward were very variable between suppliers. Some consultants didn’t even do a face-to-face interview with an applicant before sending them to us,” she asserts.
Apart from the financial benefits of using a preferred supplier agreement, Lord says there have been some other benefits as well. “We communicate very clear job descriptions and core competencies to one contact person. The standardised approach we get back – a consistent format for CVs, thorough interview and reference checking, as well as a single invoice really smooth the whole recruitment process,” she says.
Philips negotiated a sliding scale of rates, depending on the level of the position and whether a search or a straightforward recruitment function was needed to fill a particular position. The rates are commercial in confidence, but Lord says that financial savings were realised by fixing the rates at the time of awarding the preferred supplier agreement.
Lord agrees that the relationship with the recruitment consultant is crucial. “That’s why recruitment agencies have such fickle client bases – if a consultant leaves, they often take clients with them,” she asserts.
CUSCAL
Tanja Van Heerden, senior human resources consultant with the Credit Union Services Corporation (CUSCAL), which has taken its preferred supplier arrangement one step further by having a full-time recruitment coordinator from the consultancy onsite at all times. She says this has allowed for a far-more streamlined process, and having one person who is responsible for coordinating all recruitment across the business has led to a much high level of consistency. “That has been a huge benefit for us,” she says.
The representative has drawn up a collection of standard templates for such things as shortlisting candidates, interviewing and reference checking, which has allowed line managers to be coached by the HR team to become significantly more effective recruiters themselves.
The recruiter also manages CUSCAL’s other supplier arrangements. CUSCAL has an onsite vendor agreement, which in turn assists the financial services company to negotiate preferred supplier agreements with other agencies and then manage those relationships for specialist positions such as IT personnel. The chief advantage of this is that the HR department’s internal customers, the line managers, still only have the single point of contact with the business for recruitment.
“It’s a much more strategic recruitment strategy that has allowed us to say with a lot of confidence that we are in line with best practice,” says Van Heerden. “What our internal customers have seen is a consistent approach.”
From the HR perspective, it has promoted the department’s image within the business. “We’re seen as having a much more proactive, consultative approach with regards to recruitment. The department is also gaining a lot of kudos simply from having one point of contact for recruitment.”
With approximately 350 staff, CUSCAL can be recruiting for anything between four and 20 roles at any one time. By completely outsourcing responsibility for this, and with the business understanding to whom they need to turn for recruiting, the HR department is able to work on the myriad other things that is expected of it.
And in having a professional recruiter on board doing the job all the time, some advantages have stemmed from that as well. “We’ve learnt from her experience as a recruiter as well. While we may have recruited from an HR perspective, she has brought people into the business that have that cultural link as well. We’ve most certainly learnt a lot from her, tools and measuring instruments. We’ve really been able to share a lot of knowledge across the two businesses,” says Van Heerden.
Measuring ROI
All four HR managers interviewed agree that it is difficult to measure return on investment. Ashbridge says you have to look at the business case in terms of cost savings and improved service delivery.
“We use contract labour when the work needs to be done and are a far more flexible business as a result. We don’t look at it in terms of return on investment,” Ashbridge says.
Lord believes that using recruitment consultants is her company’s only option, as they don’t have the resources to do recruitment in-house. “We assess a recruitment as successful if that person stays with the company for at least 12 months and is working well,” she says.
Johnson says there are some savings that can’t be costed which have flowed from his company’s preferred supplier agreement with a recruitment consultant.
“I don’t have to worry about conflict between two recruitment companies over a particular applicant. And I now don’t have time wasting calls from recruiters looking for my business,” he quips.
Setting up a Preferred Supplier Agreement
A preferred supplier agreement should save a company time and money, provide fast turnaround times when recruitment or labour hire are required and, most importantly, meet or exceed expectations in terms of the quality staff recruited. Therefore, the terms of the agreement should refer to all of these criteria.
A tender should clearly establish the profile of the service you want to achieve, having been agreed to by all stakeholders in the organisation.
Bids should be evaluated in terms of value for money, ability to service your account (both geographically and in terms of resources), the tenderer’s cultural fit with your organisation and its record of specialisation in the areas you require. And of course, always check the supplier’s references as carefully as you would with any other recruitment.
