RPO Evolution: Terry Terhark on Building Sustainable Growth

"The recruitment process outsourcing (RPO) industry continues to grow fast. It is expected to expand by 17 percent each year until 2030." Terry Terhark, founder of NXTThing RPO, said. Terhark, a top RPO expert with 40 years of experience, spoke at the 2024 Annual RPOA Conference. He shared insights from his building successful RPO businesses. He offered a crucial perspective on how providers must shift to capture this opportunity. His journey from founding Selective Staffing to leading NXTThing shows the industry's shift. It has moved from basic, project-based recruiting to strategic talent partnerships. Below, we've provided a recap of his presentation.

The Journey of RPO: From Projects to Partnerships

Recruitment outsourcing has transformed significantly since its early days. Terhark's experience began with Selective Staffing, which he built to $7 million in revenue before selling to AON in 1998. He then co-founded the RightThing, scaling it to 1,200 recruiters and $120 million in revenue before ADP acquired the company. His current venture, NXTThing, launched in 2019. It exemplifies modern RPO operations with 300 to 350 fully remote recruiters.

Companies have long outsourced recruitment through various means. "Since the dawn of time, companies have outsourced recruiting," Terhark explained. "They did it through contingency search or temp firms. Now, the question is how to help companies see that they already outsource to many providers. We offer a more strategic way to do this," said Terhark.

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COVID's Effect on RPO Operations

The pandemic fundamentally changed assumptions about RPO delivery models. Traditional requirements for physical office locations disappeared as remote work proved effective. "If I were to look back pre-COVID as an RPO firm, you could never do that - you had to have a footprint," Terhark notes. "Today, it just does not matter."

This operational shift coincided with elevated expectations for RPO providers. Clients now seek strategic partners, market insights, and tech integration, along with core recruitment services.

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Core Capabilities for Modern RPO

Today's RPO providers must master several skills to meet client demands. Direct sourcing and recruitment expertise remain fundamental, but the toolkit has expanded significantly.

Terhark stressed the need to optimize job boards. "RPO firms must now own job boards. They must manage them daily to ensure clients see results."

Beyond traditional recruiting, modern RPO providers must deliver:

• Recruitment Marketing and Employer Branding: Companies now rely on RPO partners to shape and project their employment value in the market.
• Analytics and Market Intelligence: "Analytics, metrics, statistics are table stakes," Terhark noted. Clients expect deep insights into labor markets and predictive analytics to inform their talent strategies.
• Technology Integration: RPO providers don't need to own proprietary tech. But, they must have strong views on tech stacks and integration.
• Strategic Advisory Services: "Our clients and prospects rely on us more today to advise and consult with them, and to share what we see with other clients," Terhark explained.

The Shift to Blended Solutions

"Talking about a blended solution is different," Terhark said. "It's not the same as outsourcing your whole function." This shift opens new opportunities for RPO providers. It also reduces initial resistance to engagement.

Hear all of Terry's insights on the Time to Hire Podcast

Technology's Changing Role

While AI dominates industry talks, Terhark had a measured view on its role. "I tend to be one who believes that the role of the recruiter will never be replaced by AI," he said. "To me, it's that elegant blend of art and science which truly makes the difference in recruiting."

However, this position doesn't diminish technology's importance. RPO providers must have clear technology strategies. They must help clients navigate the complex recruiting tools and AI solutions. Terhark noted that some clients, like Goldman Sachs, practice caution about AI due to legal risks.

Future Growth and Value Creation

Looking ahead, Terhark identified several key trends that will shape RPO's future:

• Clients will demand better tech and AI from their RPO partners.
• RPO services continue to become more strategic and value-focused. Because of this, providers can now set prices based on value instead of just costs.
• RPO firms that integrate tech may see higher valuations, like software providers.

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Keys to Success

For RPO providers wanting to seize these opportunities, Terhark had key advice:

• "Differentiate on quality," Terhark advised. "That's the quality of your recruiter, the relationship, and the process." This foundation supports all other success factors. NXTThing's growth since 2019 traces back to relationships. Terhark said that almost every deal won has been because of them. Even multi-million dollar, multi-year deals often close without formal RFPs.
• "Know your market position and direction. Ensure the sales team follows that," Terhark emphasized. This clarity helps attract the right clients and talent.
• Value-Based Pricing: It's better to play at the top of the market - with the best recruiters, clients, and pricing - than to start at the bottom and try to move up. You gain more flexibility and opportunities.

Looking Forward

The recruitment process outsourcing industry stands at a pivotal moment. Terhark's journey from 1990s project-based models to today's tech-driven partnerships shows RPO leaders the way forward. His experience shows that mixing human skill with technology leads to lasting benefits in competition.

The basics remain the same. Quality recruiting, strong relationships, and deep market knowledge drive success. Yet, the tools, capabilities, and expectations continue to develop. RPO providers must excel at recruiting. They must also meet new demands for analytics, tech integration, and strategic consulting.

The next chapter of RPO brings unprecedented opportunities. RPO providers will likely see 17 percent annual growth through 2030. Those who excel in combining personal service with technology will lead the industry's future. For those ready to embrace this shift, the potential for value creation is huge. But, they must keep their focus on quality and relationships.

We encourage you to visit the RPO Academy to learn more about creating a future-ready RPO company.