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Ep 24: Paul Sharpe and Miles Lloyd on Contingent to RPO: Creating Predictable Agency Revenue

• Recruitment Process Outsourcing Association (RPOA) • Episode 24

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In this episode, recruitment industry veterans Paul Sharpe and Miles Lloyd join Lamees Abourahma to share strategic insights on transitioning from contingency recruitment to RPO models. They outline a framework for developing talent solutions that create predictable revenue streams while delivering greater client value. The experts highlight customer segmentation strategies, service proposition development, and the Kano analysis method for testing market fit. This episode helps agency owners build sustainable recurring revenue through properly structured RPO offerings that elevate their business beyond traditional recruitment models.

The conversation covers:
- The definition and business case for RPO solutions
- A systematic approach to customer segmentation
- Building and testing service propositions
- Pricing strategies that maximize profitability
- Technology requirements for successful implementation

The guests:

Paul Sharpe, Co-Founder, NorthStar People

Miles Lloyd, Co-Founder, NorthStar People

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Lamees Abourahma  
Well, we are in for a real treat, because we have teamed up with a couple of experts who are now using their extensive RPO knowledge to support recruitment agency leaders in building sustainable recurring revenue through deployment of talent solutions. So I want to welcome my guests, Paul and miles, I'm excited about the conversation, but before we dive into the discussion, I'd like to ask you to introduce yourselves quickly, starting with Paul and maybe 60 seconds, tell us about yourself and how you both started North Star People, gosh,

Paul Sharpe  
normally you do Age before beauty, but this time you've done beauty before age but anyway, I'll crack on and introduce myself. So Paul sharp, been in recruitment industry for over 25 years. Started life working for a deco so that's where I learned, I guess, my, my the trade, and learnt all about recruitment. Stayed at a deco for quite a long time. I've worked in house during the recruitment for BAE Systems, which is brilliant experience, by the way, going in house and then went back to a deco. I loved it so much. But working in the IT digital and data space for over eight years as a CEO and running a team of 200 people building out a talent talent solutions business and then setting up in business with Miles, I've always worked in that corporate talent solution space, so this has always been a massive passion of mine, and miles and I, we've known each other for a number of years, gosh, probably about 10, 1015, years. And we met one night Chester in in November, it was dark, it was miserable, it was cold, it was raining. We were both a little bit fed up, if I'm going to be honest with you, of the recruitment industry, and we thought we'd meet up for a beer put the world to rights. And from that conversation, we had the spark. And I guess the idea of doing some some work together took us a little bit of time to formulate that idea, and equally, we just wanted to make sure it was right for both parties. And yeah, from from that night over a beer in Manchester, north star was born miles.

Miles Lloyd  
I'll keep it fairly brief. I'm a sales person. At heart. My background is solution. Sales started off in financial services, then it and then, like many people, got sold into the recruitment industry by a recruiter before I knew I was doing it contract recruitment. But, you know, went on a bit of a quick journey, and was very fortunate three years into my journey in the recruitment industry, I got very, very, very well trained and coached into how to do talent solution sales. And I was, I was going out selling RPO before it was called RPO, and we had some really big sort of successes there. I've spent most of the last 20 years working as an independent consultant. I'm just very, very passionate about helping organizations and helping the leaders of those recruitment organizations be the best they can possibly be. And I think you know, certainly you know, and I'm not going to steal my own thunder for some of the, some of the stuff that's to come. But, you know, getting into this exciting world of recurring revenue is really where it's at for organizations. And as Paul rightfully said, that was the real catalyst for us to come together. We we've realized there was a common mission here to get, you know, the industry, particularly in the UK, that doesn't necessarily have the best of reputations in terms of being seen as a professional service. You know, there's a lot of brilliant recruiters and recruitment businesses in the UK, but there's very little barriers to entry. So there's a little bit of a reputation, you know, issue there within with recruiters in the UK, but what we're doing is to really change that mindset and to hopefully get business to see recruitment as a as a proper professional B to B solution. And that's the mission, where that brought us together, and that's what we're doing now.

Lamees Abourahma
Well, welcome both. I think I heard from both of you big passion for the industry, for recruiting, and a compliment between the professional, the technical and practical experience with TA and RPO and sales experience. So we've got both perspectives covered now the today's webinar title from contingent, contingency and RPO. Let's start with some definitions before we we dive into the how and so forth. Now, most people on the this call understand contingent, contingency and for clarification adjective, the adjective contingent can be used to describe something. That can occur only when something else happens first. Meaning, in the staffing world, contingency means the business making money is contingent on filling roles, right? And that is a problem, because roles can get canceled, they change, they can be put on hold. You can do all the work and not get paid for it, and that is what drives us into RPO. So Paul, I'm going to start with you. Help us understand what does RPO mean.

Paul Sharpe 
I ​​think the lingo is quite important, because it does mean different things to different people in the industry. A long time, a lot of people have got a different understanding of what different abbreviations mean. I don't think there's a right and a wrong. You know, is it is it a trunk, or is it boot? Is it trash, or is it rubbish? Is it a but, or is it bum? Is it a bar? Is it a pub? Is it a cookie or a biscuit. So all these different things, we're all looking at the same thing, but sometimes it just means something slightly different. So I always default back to the staffing industry analyst interpretation, which is RPO for me, is about permanent recruitment. P is about contingent recruitment. And obviously, within the contingent space that would be your contractors and and, you know, your temporary sort of employees. So that, in a nutshell, is it today we're going to be talking about, you know, RPO by definition, so more leaning towards the permanent service, fine of recruitment. But listen the principles of what miles and I do, and what we're going to be talking about today can equally apply to managed service programs, and specifically when we get into the customer segmentation, you know, that's just best good practice. So whilst there's a lot of stuff in here, which we'll include and go through, which is aimed at, how do you get to the end of the road? The end of the road being providing talent solutions. A lot of what we do all on this journey is just about getting out house in order and making sure that you doing a real good job for your customers, as mal talked about. So it's about raising the bar from a service perspective. But yeah, for the purpose of this session, we're going to be talking about RPO in the main but happy to take any question you think that's not permanent recruitment related.

Lamees Abourahma  
All right. Well, thank you for that clarification. But because I agree with you, I've been in the RPO space for many years, and people might, some people might disagree with you and define it differently. But just for clarity, what we're talking about today is permanent hiring. So we heard some of your passion for RPO when you introduced yourself, and this is one of my favorite questions to ask any RPO, because all of them are passionate about RPO. Paul, why are you passionate about RPO?

Paul Sharpe 
I think because I've been in the industry a long time. I've seen, I've seen so much, and, you know, benefited from it and provided certain aspects to customers. So, you know, I've got an emotional attachment to RPO and talent solutions. I think if we take a step back, just for one second, after every tight labor market, RPO has bounced back. It's bounced back quicker and faster than most of the sectors and services. If you look the research that is out there, and a lot of some great research comes out the USA, by the way, you know, people are predicting that the market in 2023 2024 was worth around 9 billion. Everybody's predicting double digit growth, some a little bit more than others. There is a company called Polaris research that published a piece of research last year, and they predict that the market is going to go from 9 billion to 32 billion in eight and about half years now. So whichever way you look at it, whether it's the Polaris research. Everybody is saying this is a market that's going to boom. 

If you look back after every tight labor market in every geography, talent solutions bounces back quick. And if you think about it, it makes sense, right? Because in a tight labor market, ta teams, the internal ta teams, they've been stripped back to the bone. If you look at the research, they're all saying the same thing. They're very, very concerned about the capacity in the TA once hiring starts to increase more than what it has done in 2024 I don't think everybody's predicting 2025 is going to be massively different, but it's only going to have to grow a little bit to put pressure on the those ta teams. And in the short time we've been back from the holiday season, you know, miles and I, we've had a few handful of conversations where agencies have actually been approached by organizations. In, worried about capacity in in the TA teams, and they're starting to ask about more talent solution. So the passion for me is born about the experience of being, I guess, around through every one of these tight labor markets. 

I think if you also just take a step back as well, I think if you're a recruiter, and you haven't come across a situation where one of the big providers has come in and taken your work away. You're very lucky. Six years ago, I had a big piece of work with a company called Invesco. We're a global company, and one of the very big providers, and was Robert came in and they pitched to the customer about running all their, their their talent, talent requirements. And before I knew it, they'd out. They signed an agreement, and they'd outsource all their recruitment to this third party. This, this one of the big, the big five providers in the world. I had to give up half a million pounds worth of gross margin, which was huge, and it was for one reason. I hadn't been asking the customer what they wanted. I was sat very comfortable, fairly healthy, contract book, lots of Perm requirements, but I wasn't being proactive. You only have to go through that once or twice. I've still got the mental scars. It's still like worries me that I didn't do my job properly at that time and cost the company a lot of money. So I'm passionate because about the opportunity, about what history tells us, what everybody's telling us is going to happen going forward in the market, but I'm also passionate because I've been there and I've lost business to some of the providers because I will air game and because I didn't have a plan for that customer, and I'm a bit ashamed by that from being really honest with you.

Lamees Abourahma
IWell,  have to tell I've heard comparable stories from other RPO a members as well, specifically in terms of the value of RPO and coming back from a recession. I did not I wasn't part of RPO during the 2008 nine US recession, but that was one of the it was an opportunity for RPO to grow after that recession, mainly because of the scalability that the RPO solution brings to organizations and employers. So the next question is for Miles, and according to a North Star survey, we know that 76% of agency owners and leaders are looking at RPO solutions as the future. So help us understand why Miles,

Miles Lloyd 
How long have we got? No, there's, there's, look, there's multiple things we could talk about here. You know, I'm just going to do it through, through the lens of current UK market. You know, the conversations that we're having. You know, you're right. 08, 09, 10. You know, the recession in this country was pretty horrific as well. And I think, you know, just recently, a lot of recruiters in the UK have felt, you know, things have been pretty tough for the last sort of 12, 18 months. You know, maybe not quite as bad, maybe just not quite as bad as that financial crisis. But do you know what? In some areas, it's been brutal, and I think there's many agency owners are just sick to death of it and doing this roller coaster and being on this bloody hamster wheel, and they're saying, I can't carry on. We've got to find a different way of doing things. 

But putting that short term frustration to one side, look, let's talk about customers here, and one thing that's guaranteed is, soon as we win a customer, we're going to lose a customer. Okay, they're going to go, you don't have a customer forever. So the reality is, is we need to make sure that we keep hold of them as long as possible, and we maximize the opportunity in a positive, mutually beneficial way with that client over an extended period, you can only, you know, you can. You can be a contingent recruiter all day long. But the reality is, you'd be working in quite often, in a competitive environment. And what differentiates you, what makes you any different, you know? And people always say, Our service is great, but everybody says that, don't they, you know. So for me, you know, what's RPO? All about RPO? If you do it well and do it right, it will mean you can get into clients that maybe you couldn't get into without that solution. So you can use it from an offensive as an American term, for you, an offensive sort of perspective, you know, because if, if you've got your competitors really, really close to a client that you want to get into. Well, unless you're going to go with something different or, you know, drop, drop your trousers on price, which nobody wants to go down that race to the bottom route on cost. Well, let's go with something different, innovative, exciting, so it can be used from an offensive perspective as well. 

But for me. it's all about protecting our customers, keeping the wolf from the door, keeping the competition at bay, you know. So we want to have something that's contracted, something where, you know, we can add a lot more value, where we can actually have an impact for the customer beyond putting a bum on a seat, but actually hit some of their pain points, you know, in terms of cost per hire, time to hire, quality of hire. Talk about, you know, retention levels, maybe, you know, diversity. You know, the DEI piece is really important and critical, and there's something on a on a cultural level. 

You know, RPO isn't about being a bloody good recruiter and basically getting a client tied into an agreement. RPO is much more expansive than that, you know, and it should really get you engaged at a very, very different level with customers. So the business tends to be stickier, you know, and the contracts longer and binding the revenue. It's all about recurring revenue, isn't it? You know, this, this horrible thing of contingent, we never quite know. You know, we can have those amazing, lucky, you know, not lucky. We make our own luck, you know, many, much of the time. But have those amazing sort of periods where everything just goes in, every deal that you touch in in one month or one quarter happens, and you knock it out of the park. 

But you can have the adverse, can't you with contingent, where you do the perfect job, and I say this to recruiting businesses all the time, you can do the best possible job. You can do the most amazing job and be perfect, but still fail, because we're dealing with people and unknown quantities within people, you know, and therefore having something that's professional, that's contractually binding, where you're adding real value delivering a solution. You know, you get that stickiness, you get that engagement. You can keep the competition at bay, not forever. You know, when an RPO doesn't go on for 25, 30, 40, years, the reality is, at some point that relationship is going to stop, but when it does stop, it will stop in a positive way, and you'll actually sit back and reflect and say, yeah, we've, we've done really well for ourselves from a professional point of view with that client, but also financially. 

We've, we've done well as well. And that, and that probably leads on to the most important, important point for me, you know, because you know, when is the 20% fee, not a 20% fee? Well, when we're doing it on a contingent basis, because when everybody says, What's your average fee and those Oh, it's 20% Well, yeah, but that's only the stuff that you've converted. You start factoring all the stuff you haven't converted. And I don't know how it compares to the US, but bloody good contingent recruiter in the UK will fill one in two vacancies. So that 20% fee, in my mind, for all the work and effort we've put in on two jobs, that 20% is covering two jobs. It's 10% if you do it that way, if you're filling one in four, man, it's 5% you know. And what other business do we want? A model where, you know, if you were, if you were producing cars, you know, and every two out of every three cars that came off the end, you had to put in the crusher because they weren't fit for purpose, you wouldn't, you wouldn't have a business. But that's how we run a lot of recruitment businesses, certainly in the UK, you know, no placement, no fee, and we're running at a million miles an hour. And, you know, it's fraught, and it's frantic, and an RPO solution is so radically different to all of that it provides a brilliant environment for an agency to grow more profitability going down to the bottom line, better culture for people to work in. 

You know, there's a lot, there's a lot of people in the UK, because we went on a big, big uptick after COVID. You know, organizations were hiring for fun. All of a sudden everybody was saying, in the UK, 360 recruiters are dead. We just need these big delivery teams. Well, yeah, that's great in a really boring market, but as it collapsed in on itself 18 months ago, and all of a sudden, there's loads of people who actually are frantically trying to be retrained now into how to actually hunt as well as farm. But if you've got an RPO in your organization, you'll, you'll ride out those peaks and troughs. You won't, it won't take it away fully, but it will give you a smoother line, and it will provide an environment where people who are brilliant at the talent work working with the candidates, doing that, resourcing, researching, managing process. They can excel around an RPO model, you know. And quite often, what we see in a lot of recruitment businesses in the UK, particularly some of the SME ones, is they have people doing things that part of their job. They're not really that comfortable at doing they don't really want to do it, you know. So there's lots of there's lots of good reasons, hopefully that that all sort of makes sense and resonates.

Lamees Abourahma
You made a great case Miles for RPO or all but and before I ask you the next question, Paul, anything that Miles missed that you want to add to why do we want to do RPO?

Paul Sharpe
Yeah, no, no, I think Miles has covered it all there. I think the main thing for me is, you know, being a recruitment agency owner is super stressful, and you. You know, you may not be wanting to sell your business. You may just be wanting it to be more sustainable. And you know this is a great way to do it. But when we talk to business owners, the two things they really pull out is that suddenly they're having conversations with their customers that they would never, ever have conversations about. They find it much more meaningful work, much more rewarding. And the people, the people that work for these business owners, suddenly there's more career opportunities. You know, they don't have to do, you know, resourcing. They don't just have to do selling. There's this bit in the middle where you can actually be a resource business partner, and it just changes the dynamics of organizations. If you can, you only have to get one in your business, and then the rest will cascade. But getting that one in your business is so important. But once you've done it once, dead easy

Lamees Abourahma
Talking about doing it once. So now that we bought into the RPO, how do we start? How do we do it?

Paul Sharpe
I'll jump in there because I think it's so important where you start. It's all about the segmenting your customer base, and whatever you do in recruitment, whether you, you know, build an RPO solution or you just run a recruitment business, we always start off looking at the existing customer base. Miles mentioned about customer retention and losing customers, the average retention rate in the industry is 50% so you know, for every two customers, you're going to lose one every year. 

Looking at your customer base is the first thing we do, Miles, and I, we go about three years, and we pull all the customer data for the last three years, and we look at what's happened to those customers, and we map people's customer retention rates. But I'm going to quote you stat here, 20, 27% of recruitment agency owners do not measure client retention. That is shocking. That's not far off a third. So you know, if you haven't got client retention on your monthly board metrics, you know, I'd encourage everybody to re look at that, because you absolutely should do if you think about McKinsey, McKinsey always say that selling to an existing customer is between 70% and 85% more easier than selling to a cold one. So we always start looking at the client base and Miles, and I we've got a customer segmentation exercise. I'll share briefly the formula for doing that. 

You get all your customers going back last three years, you segment it into contract and perm, and you look at what you've had from that customer based around exclusivity, the higher the fees, you know, access to line managers repeat roles, and you put your customer name on a Post It note, and depending upon whether you get five out of those five criteria, you get one. You put it on a different post it note, and you put all the post it notes on the wall, and that's your customers, very basically segmented into what you get from your customer. 

The second thing you do is look at the customer relationship map so you have accept contact, acceptance, trust, loyalty and advocacy. Once you've got those headings and you understand what the definition of each relationship is, then you put the post it notes in each one of those channels. And it's really interesting starting to segment your customer base by doing that. 

And the last thing you do is look at where the customer is going. So this is using the Boston matrix. We create swim lanes. So you've got this big matrix on a wall, you've got the different color post it notes. You've got channels based around the customer relationship and where you're at. And then you've got your swim lanes in terms of the Boston matrix and where the customer's going, and you end up with a big grid on a wall. 

And it's really interesting, because if you haven't got a lot of customer relationships in that top upper quadrant, based around what you're getting, your customer relationships and where the customer's going, the first thing you probably need to do is invest your customer relationships. Don't do RPO because the chances of actually selling to customers is quite hard, especially when it's a brand new service line. Your Brand won't be known for selling and providing RPO services and solutions. 

So the first thing you've got to do is just do a bit of a reality check and make sure you've got enough relationships in that top upper quadrant to go targeting, because that's where you're going to go first, and the second thing, Miles. and I do is, when we're looking at that customer relationship map on the wall, is just start to ask yourselves a question, if those are the top relationships, when did you last do a service review with that customer? Is it in the last six months? The last 12 months? Is it in the last two years? Because, again, according to our data, and we've had over 100 people, 100 business owners complete our data and health check. 32% of agency owners haven't had a formal service review with their top three customers in the top in the last two years. That's shocking. So this customer relationship map, whether you do RPO or not, that is something every agency owner should be all over every year. It's a great exercise to do with your team. It takes about a day to run, to run that exercise, and it's the starting point, because if you've got enough customers in that top upper quadrant, you've got enough customers to start to have conversations with. But it's a scale of economies. If you're thin in that upper quadrant, the probability of converting something is substantially less. So for me, that's where every agency should start, but that should be an annual exercise Miles. Have I missed anything there?

Miles Lloyd
No, I think that's all so pretty cool.

Paul Sharpe 
Cool.

Lamees Abourahma
I have a couple of thoughts about what you just shared. One of them I recently was listening to a podcast, and it was talking about the guests were from one of the big consulting companies. And at some point of their evolution, they went through a disruption where they were losing business for small, smaller business that they would not take to other competition. And they had to re look into themselves and basically do what you suggested, ask their customers and look at how else they can serve them. This is where they found the opportunity. The other thing that you also mentioned with the customer segmentation, I would say that's a one of the common stories I've heard through the years to how businesses get into RPO, their customers, there is the opportunity, and their customers take them into that different business model, if you will, recruiting models. So thank you for bringing that up. So my question back to Paul, is other than customer segmentation. What should recruiting leaders consider, or need to consider first and why before they get into RPO?

Paul Sharpe
Once you segmented your customers, gosh, it's about building out the service proposition or the minimal viable products, as we call it. So what, once you've you've got your customer base, is then starting to think about what your customers may value, things they may appreciate, things you've probably done in the past. You know most recruiters have probably done elements of RPO. So if I talk about, has anybody ever met the market, a lot of recruiters will go, Yep, I've done that. Well, that's one part of the service that you might put in to RPO proposition. If I say, have you done some benchmark salary benchmarking, people will a lot of people will say, Yeah, I've done bits of that. So you start to look at the service proposition, and again, we put this into five channels. So you've got your strategy, you've got your traction, you've got your sourcing, you've got your selection, and then you've got your onboarding. So start to break down in each one of those channels. What is it that you've done? What does the service look like, and what do you think your customer might value now, before anybody says anything,.

A recruitment agency is part of the sourcing channel, and an agency does that much of a process, which is that law. So we have to shift our mindsets from thinking, what do we want to provide as a recruiter versus what the customer might value? And once you've broken that down into those channels, and they are, they aren't the only channels, by the way, some people use different channels, but those are the ones that I use. And once you've done that, and you've brainstormed what the services might look like, then you've then got something which resembles a service offering. 

Now the danger here, and this is what where most recruiters go wrong, is they assume that is what the customer wants. I am always pleasantly surprised that when I go and talk to a customer and say, This is the service proposition of an RPO, they will frequently say to me, I don't want that, or there's something missing here. So there is a missing gap here, and this plays into the Kano analysis, which which Miles is going to talk about shortly, but you raise a really valid point. I've sold RPO services very recently to the likes of Insight Investment, which most people will know is part of Bank of New York, Mellon, to Collinsons, who do you know the airport lounges around the world? So those are some of the two well known brands. But I could wrap up another 10 or 15.

The one thing when you're starting off in selling RPO solutions, Miles and I mentioned this earlier, your brand isn't known for selling RPO services, so this relationship piece and trying to think about what the customer would really value is really important, because you frequently get one chance to sell these, and if you get it wrong and miss the dartboard, you probably won't get a second chance. So the next piece for me is a round of Cano analysis. And Miles is our Kano King, by the way, he knows Kano Kano analysis inside out so miles. Do you just want to talk about how we then take the MVP and run it through the Kano analysis and the why and how we test it with customers?

Miles Lloyd
Yes, but, just an important thing that I just want to talk about, and it's really important for the audience. It's absolutely critical, actually, to get this across. Wanting to do and deciding to do an RPO isn't an easy, simple decision. Yeah, you're not. This isn't dressing up recruitment in some emperor's new clothes, you know, giving it a different name. And I think one of the things, and Paul, I know it will resonate with you, but one of the things that Paul and I have seen time and time and time again, people have approached us and said, yeah, we've got an RPO, but it's not working. Or we've done one a few years ago, and we really want to start doing but when we when we sort of scratch at the surface, it's like it wasn't an RPO. You just, you're just recruiting, you know, you're doing that narrow thing in the middle, and you've sort of maybe put a couple of bells and whistles on the outside, but it's not a proper RPO. 

For me, going right back to the starting point, is we need to be really clear as an organization, right? Are we going to do talent based solutions, yes or no, if we are, is it permanent recruitment? Is it non permanent recruitment? Is it both? Why do we want to do them? What? What part is this going to play in our journey as an organization? What proportion of our revenue do we expect to see as a result of having success. You know, what does success look like, first 12 months, next 12 months, so on and so forth. Because the challenge is, is this won't be hugely expensive for any organization to do the big cost, other than maybe, you know, look, if people like us, we'd love to come in and work and work with organizations to help them on their journey. You know, other people are available, as well as North Star, which is particularly good at it. 

But, um, you know, the reality is, is it's time. Who's going to own this? You know, within the organization, this isn't a part time job, you know. So it's a long, elongated process, and I'll come on to sales later on. But, you know, this is a long burn sales process. We might get lucky, but it's long burn sales so this is all about investment of time, energy, having focus, and actually saying, Are we ready for this right now? Sounds really exciting. You know, one of the things UK recruit is really good at is getting excited and animated about shiny new thing. They're like magpies or something over there. Let's go and have that something over there. Let's go and have that this. This will fail unless you give it absolute focus and attention, done well and done right. 

And being ready is important. And part of the journey that Paul and I do with organizations we talk with is we do an initial assessment, and there's been a number of organizations in the last two years that we've said you're not quite ready to do this, guys, and these are the reasons why, and this is what you need to go and do. And then three months, six months, whatever. Yes, let's then have the conversation. But at the moment you you've just got stuff missing that isn't isn't it? It means we're likely to not have the success that you want to have. But the time element, that's so that's really important. I can't stress more on the ownership piece. This has to be driven from the top through an organization. 

So let's, let's go back to what Paul was was talking about. So we've created, as an organization, this wonderful, minimal viable product. We've got all these bells and whistles, and we're really excited about it, because, hey, we know best, don't we, so we know what everybody's going to going to want and like, well, you know, fortunately, Japanese guy can't remember his name, came up with Kano analysis, and Kano analysis is brilliant. I got, I got, I got coached into doing this many, many years ago, decades ago, in fact. And, and it was a real game changer for me, because what it what it allows us to do is take a virtual concept of a product value proposition, whatever, go to our customers, and through the use of questioning, find out whether actually what we think is a good idea is actually a good idea for them, and what, and but, but it does more than that, because what it does, it says, if we were to do it this way, what would you think? And if we didn't do that, how would that make you feel? And it actually allows us to then, you know, you imagine you've got all of these elements of an RPO solution that you want to deploy, you know, strategy, sourcing, attraction, selection, onboarding, yada yada yada. So you've built up this product virtually. 

We test every element of it, and what it actually does is it gets everybody to get involved. And clients love it. By the way, they really appreciate getting involved in this, because it's about developing a solution with them, for them, maybe, but they'll say, they'll give the feedback we get, basically allows us to say, right, this has to be in the product, but it's a but it's a given. So it's not going to excite people, because they just expect it to be there. It's as simple as that. You know, it's like having a car, you know? It has to have windows. It doesn't have windows. Nobody's going to ability buy it. Are there. It's as simple as that. So, so it's a given. So, so the Kano analysis allows us to understand what the must haves are, what the nice to haves are, what the exciters and delighters are. So the stuff that's going to make people sit up, they see it, you know, online, or they read something, they're like, Wow, I need this. I need to find out more. 

But what it also does is it actually throws out the stuff that's going to detract from the proposition. So when we've run this kind of analysis process with organizations on their virtual products, it's brilliant, because usually, most organizations get it about 85% right, but there's little stuff in there that we've missed, or there's things that we didn't think important that actually are really critical, and occasionally, there's also things that we've missed, because part of that Kano process gets clients say, is there anything else that you were thinking we should have been talking about? And we're not, you know, but one of the biggest pluses about this kind of analysis, time and again, this happens usually within that group, you go to, because you'll take this and you'll engage known and friendly, warm clients with this. And we've had this in live situations where customers turn around to a client said we didn't realize you could do this. This is really interesting where, when's this going to be ready? Because we want to talk to talk to you about this. Actually we've we're doing this, or we were looking at doing this, but now you've prompted us to move it forward. 

It is a great way to actually start engaging with customers and lift yourselves out of that pit with the millions of others that just do all the same old stuff. It really, really is so I can't, I can't advocate it enough that kind of analysis. It's absolutely game changing, and it saves you so much time and money because you don't want to take a product to market and get it wrong. It's a disaster. Paul. 

Paul Sharpe 
Just to add there that when you when you've done that customer segmentation, we look at that upper quadrant in terms of analysis. So that's the reason why there's got to be some critical mass there. Because you would need, what, 20 to 30 customers ideally, to be able to go out and have this conversation with slides.

Miles Lloyd 
It's like everything, you need a good sample size to be sure, 100% Yeah.

Lamees Abourahma  
Well, that is terrific. I did not know about Kano analysis. And thank you for the enlightening I have many notes and from the conversation the My next question is for miles and Paul, feel free to jump in. Now that you have built your services and test it, refined it, talk us into through the next step.

Miles Lloyd
Okay, okay, look, I mean, it's all about taking it to market. And this isn't just about having some slick marketing campaign and some nice imagery and some nice brand you're going to have to go and have some meaningful conversations with some probably maybe some different decision makers in organizations that you're working with, you know, and some organizations maybe on this, You know, webinar will be familiar with, you know, structured sales methodologies or whatever. But you're going to have to, you know, winning ones and twos, winning contingent business is fairly straightforward and fairly easy solution sales, which is what this is about. This is a long burn. There's going to be multiple decision makers involved in a process. No organization is going to outsource a chunk of their process to an organization without multiple people being involved in it. You've got decision makers from a quality perspective, a people perspective, an operational perspective, certainly because the numbers that are going to be involved, the financial perspective, you know, and Paul mentioned earlier, and he was spot on with this, you know, you've got to get your ducks lined up here and know when to take this to the client, you know. 

We really advocate a process of mapping customers out, thoroughly, understanding what we've got but what we don't have, who the key critical decision makers are within the organization and making sure that we're aware we talked earlier about pain points. Is pain points and opportunities. Because if we go and position something with an organization around a talent solution, are we going to push all the right buttons with the right people? You know, there's no point in just getting one person on board and one person say, yeah, that's fantastic. That's brilliant, because I can guarantee there's two or three others who may even be more senior than that individual, that we've got the relationship that really are going to sign this thing off and get engaged. So we do quite a lot of coaching with organizations in terms of deploying a structured sales methodology to make sure that we get as much as we can together. So when we push that button and go to client A, B or C with this opportunity, that we that it's the right opportunity at the right time, and we, and we've and we've basically done all of our homework sort of properly, because the danger is, if you go with the perfect solution at the wrong time, it will fail. If you go with the perfect solution to the wrong person, well, don't include the right people, it will fail. And once you've, once you've spoiled your pitch, yeah, this isn't, you can't pick the phone up next week. You know, like, in the same way you would is if you're looking for some fresh jobs to work on, you know, that's sort of you've done for a chunk of time. Credibility is gone a little bit. So getting, getting that sales, sales piece right, and understanding who are the right customers. You know, part of the work we do as well is we do work with understanding most valuable customer traits. So actually, having a Scoring Matrix to saying, is this the right client for us? We the right organization for them? You've got to do as much as you can possibly do to eradicate, mitigate all the risks of this failing, because you do really have one chance. 

But, but, you know, be prepared to be in it for the long haul. You know, and we always say to organizations we work with, look, there might be some quick success, there might be some quick wins, and we'll celebrate those, and we'll look for those. Of course we will, but be prepared not to win a significant piece of business in your first 12 months, you know. And I know that's a horrible thing to say, and now I've switched everybody off, because everybody thought this was going to be the thing that saved, saves their organization, or takes it to the stratospheric level it will do, but be prepared that it might take a little bit of time, and it's not a quick fix for revenue or anything like that. But if you're in it, actually, this will be game changing over a three year cycle with an organization absolutely game changing,

Lamees Abourahma
I love that message. It's something we advocate at the RPOA as well. RPO is not for everyone. You do have to have the right investment and intentionality to do that. Anything else? Paul, before we go into one of the common questions about RPO pricing?

Paul Sharpe 
If it's okay. I want to just go back for one point that Miles touched upon a little bit, which is just that mindset shift. And if you think about RPO, the purpose of RPO is that you're representing the customer's best interests. So if you think of RPO as in your driving candidates, and those candidates are going to go in your CRM, that is not RPO. That's just a Polish recruitment service. So the whole purpose of an RPO is actually you're driving agency usage down, and you are driving internal mobility referrals and direct hires in that order up. So this mindset shift, I think, is really super important, because you when we come on to the pricing, if you haven't got this in your head, you start to revert back to being a recruiter, and I've definitely been guilty of this in my past experience. And then you get frustrated because you're pitching somewhere and they don't want to buy it, and you go, Well, why do you not want to buy it? It's because you haven't got your mindset in the right place. Miles mentioned earlier, we worked with a business owner. He'd made a pitch for RPO, and the HR director had rejected it, and he couldn't understand why, and when we started to just break it down and get under the skin of it, it's just he was thinking about this from a recruitment perspective, not from a. A organizational perspective. So again, just to reiterate, your purpose here as an RPO provider is to reduce agency usage through driving internal mobility referrals and direct hires. And this is how the big providers, this is how they make it stack up from a cost perspective, is they go attacking that supply chain quite aggressively.

Lamees Abourahma
Just like Miles said earlier, there's different stakeholders in this RPO business and selling for selling RPO solutions. So let's get into pricing. This is one of the common questions about when you start an RPO, how do you price RPO? Because it's different than contingency.

Paul Sharpe
I'll tell you what I reckon about 85% of business owners do. They'll say they're charging in the UK, it might be 20% in the US, it might be 40% and then they'll say, Well, I'm getting exclusivity now and it's an RPO deal. So I'll knock off a couple of percentage points and give them a bit of a discount. That is absolutely the wrong way to do it. And I'll tell you the reason why, if you've had the proper, meaningful conversation with your customer, you will have been engaging in and debating data. So this baselining the baseline data is really important. So understanding what the customer hires for. You know the levels of roles, the salaries associated with those roles. You can group them, by the way, into either job titles or grades or positions, understanding how many roles they fill through internal mobility, referrals, direct hire, an agency, those four channels, is really important. And I'll tell you the reason why doing this baseline data, and we call it a discovery audit, so going and understanding exactly what the landscape looks like, and understanding what where the hot spots are, where the bottlenecks are, where the opportunities are, where you can re engineer the processes, how you get data from one place to another? Have they got any technology in there? Do they need some technology? How much do they spend on marketing? How much do they spend on LinkedIn or job boards? All these questions are really important for two reasons in the pricing. 

There's two purposes. First purpose, by asking the right questions, is to help the customer build the business case. If you build the business case for the customer, when it does go to the finance stakeholder, you've got to be on the front foot. Now it's not say they might not challenge it, because finance people, you know, they pretty rigorous with numbers, right? But if you've built the business case, you're on the front foot. The second thing is that if you've done that, you've asked all the questions, you've got all the baseline data. You understand what the service looks like, you understand how many people you need, how much involvement of the business owner, how many resources needed for that? That account, how many you know resource business partners? 

Once you've done all that, you can work out the cost of delivery. So we're doing this bottom up. You'll then get a cost of delivery, and then you can put your gross margin on top. And the reason we do it that way is because if you follow that methodology, all that gross margin is going to drop to the bottom line. So in Europe, agencies convert around 15% of their gross margin, or net fee income, to their bottom line. By doing it in this way, you should be doubling the amount of gross margin you drop into the profit line. So this is all about doubling the profitability of the revenue that you are making through RPO by pricing this from the bottom up, right down to making sure you've included any implementation fees or any legal contracts that may need to be drawn up. So once you've got the granularity, you've got the baseline data, you understand what you're doing. You price it from the bottom up, put your margin on top and make sure it's a healthy margin, because most agencies will be looking for somewhere between 35 and 50% gross margin, and that's the amount you'll be converting to the bottom line. So it's a great way to make more money if you're doing it the right way around. Well,

Lamees Abourahma 
I need to ask one question about technology, and then we'll take audience questions, because we are coming at the end of the hour. RPO is about people process technology. what do business owners need to know about the technology aspect for an RPO business?

Miles Lloyd
You know, look, tech is going to be really important. Here. You know, as I said earlier, this isn't about recruiting in a different way. You know, we're going to need something that sits right in the middle of everything, so there's visibility and transparency, so we can see the flow we're getting the data out of there. We can see where the bottle decks are, so on and so forth. I think one of the most important things though, about tech, we're not and again, this just this, I can only speak from, you know, UK perspective, and what we've seen quite often, some of these agencies that said they're doing an RPO. You know, we sort of talk about what technology you're using. Are we using our our CRM, but that's a CRM. It needs to be an applicant tracking system, and it's your CRM in your business. Well, I don't know many organizations that going to be too happy about that, because they're paying you a lot of money and everything sitting with you. All the talent pools are sitting with you. Well, how's that an RPO? So you know, getting the tech right is really important. And you're going to whether it's a MSP or an RPO, it's going to be different tech, yes, but it's where is, where it sits, where it gets deployed. Who owns it? Because, you know, at the end of any journey, you know, we want to have success, but over time, you know, client might change their mind. They may decide they want to in source rather than outsource. It's really important that you know that tech is in the right place, but the granuality of it we are there to help everybody be successful. It's to make sure that the relevant parties within all organizations have sight of everything, and particularly if you've got a second tier supply chain, you know, Paul talk rightfully, you know, this is about getting it right from a direct hire point of view, from an internal mobility point of view, including referrals internally as well. 

But the reality is, is we can't be successful all the time on those routes, and we may need agencies to come in at the bottom, bottom end of this and and feed through. So, so you're going to need to get the right piece of tech in place. The great news is nowadays, if this was a number of years ago, very expensive, you know, difficult to sort of implement, you know, just, just a bloody nightmare. Now there's some great tech out there that software as a service. So you're not having to go and invest in huge amounts of tech. It's not going to be cumbersome. It's not going to be difficult. You know, there's a lot of good providers out there with with with talent, tech that you can really plug and play and clients are going to love, and it can tie into their careers. Pages, you know, manage that as a channel as well, in through the ATS. So, yeah, text everything. If you haven't got the right tech, forget it. It ain't happening.