Refer a friend to the company and get rewarded with a car, an iPad, a motor cycle or cash.
Every software company has recognised the importance of employee referral and encourages their employees to bring on board more of their friends. Through this, the recruitment cycle time is cut by 15-20 per cent. Companies also need not do the mundane cross-checking of an individual's credentials in the first round. Retention of the referred candidates was better than those coming from other recruitment means, including job portals. And, it is quite rewarding for employees who refer potential candidates.
Infosys' employees will get an iPad for successful onsite referrals. Incentive at Cognizant Technology Solutions ranges from Rs 5,000 -50,000 per candidate, depending on the level at which the candidate is referred and inducted. At PayPal India, an employee even stands a chance to win a motorcycle.
“Companies use employee referral to identify candidates for a position that is hard to fill up. They also use it as an employee motivation tool with attractive bonus payouts,” says E. Balaji, CEO, Randstad India, a recruitment company.
The last few years have seen higher rewards being offered when finding a candidate for positions that are critical and not easy to fill. Companies have started offering incentives like laptops, tablets, overseas trips and even appraisal points for hard-to-fill positions.
The benefits
Employee referral programmes can help identify a pool of candidates who might not be actively seeking another job . Also, the candidates tend to be of better quality as the employee's reputation may be on the line since they have referred them, he says.
Cognizant calls its employee referral programme “Bring Another You” (BAY). “Every quarter, it has new BAY programme launch, involving referral incentives such as a vacation, a brand new car or double the referral money for niche and hard-to-find skills,” says the company's Vice President, Human Resources, Sriram Rajagopal.
Cognizant's referral programme contributes to over 40 per cent of the company's annual hires. Over the last three years, it has increased its recruitment through employee referrals by 10-15 per cent. As a result, dependency on recruitment firms has gone down by a similar proportion.
The conversion rate for offers made through employee referral programme is 10-15 per cent more than those made through recruitment firms. In addition, it is also a more cost-effective channel and has ensured more focused use of recruiter and management time, says Rajagopal.
An employee referral programme sets in a multiplier effect, with each of the referred candidates becoming potential referral points to recruit other peers from the industry. Each employee is encouraged to refer as many candidates as possible. The incentive payout happens after the candidate comes on board and completes three months in the company. This programme is available globally.
An inside view
According to Nandita Gurjar, Senior Vice President and Group Head, Human Resources, Infosys, the biggest advantage of the employee referral is that the employee acts as a brand ambassador for the company right from the day the candidate expresses his/her interest in joining the organisation. As employees are aware of the work environment and culture of the company, they can help answer queries about these softer aspects to the prospective candidates.
Infosys believe that employees can make a good referral decision as they understand the aspirations of the candidate they refer as well as the requirements / culture of the company. During the financial year 2012, 56 per cent of Infosys' lateral hires across the globe came through employee referrals. In India, 62 per cent of its lateral hires were employed through referral programs, she said.
The quality of profiles referred is also good. As the candidates are more engaged in the selection process, the number of applicants dropping out at any stage in the selection process is lower compared to other sources of recruitment. Employee referral as a process of recruitment is cost effective in comparison to other mediums; this is a win-win for the employees as well as the company, she said. It is not about quantity but quality of people that matters. HCL Technologies says that candidates referred by employees tend to be of better quality because the referring employee typically screens his or her referral, says Naveen Narayanan, Head - Talent Acquisition, HCL Technologies Ltd.
Employees are not only the best brand ambassadors, but also the best equipped to ensure proper fitment between the company and the person they are referring. In other words, employees know and convey the advantages of working at HCL and also refer candidates to us who are talented and fit well into our organisation. HCL has branded its last referral campaign as ‘Share the Joys of Working at HCL'.
An employee referral programme is an optimum way to hire the right quality of talent. It helps us in tapping the passive talent pool in the market and sourcing niche skills as well, feels Priti Rajora, Global Head - Talent Acquisition, Wipro Technologies.
Typically, the levels of attrition come down as we hire more employees through the referral programme. Besides, this is a surrogate metric for employee satisfaction. Wipro has branded its employee referral program as ‘WipLinks', since a long time.
Wipro's employee referral contributes 20-25 per cent of overall hiring. The process is fully automated - right from an employee referring a friend to receiving feedback and referral benefit. Employees can even refer friends just by sending an SMS, says Rajora.
It is not only software companies but also some of the large product development companies who have relied on employee referral to a large extent.
Take the case of PayPal India. Nearly 20 per cent of its recruitment happens through referrals. No one knows what suits PayPal better than our own employees. So far we have been hiring people through employee referrals, social networking and job portals, says Jayanthi Vaidyanathan, Director – Human Resources, PayPal India. Employee referral gives the company access to passive prospects and ensures that they are well informed about the company prior to joining.
Similarly, Zoho Corporation value employee referral as it helps the company and also motivates the employee who refers their friends. It has two categories of referrals - plain forward of a resume and employee vouches for the referred candidate with regards to skills and performance, says S. Sivanandam, Head, HR & Operartions, Zoho, which employs nearly 1,600 in its Chennai campus. Referral contributes nearly 37 per cent of the recruitment, he said.
Disadvantages
While the advantages are many, Balaji of Ma Foi says the primary disadvantage is that it will lead to referral spamming and flood the system with irrelevant resumes as employees are motivated due to the incentives. This creates additional pressure on the HR teams as employees will follow up on the resumes they have sent. Also, HR teams without robust screening processes or experience will find it difficult to identify the right candidates.
Another disadvantage is that in may lead to creation of “groups” or “factions” within the organisation and in the long term lead to a phenomenon called “inbreeding”, where the candidates referred are virtual clones of the existing employees. This could impact the culture of the organisation in a big way.
Says Sivanadam, selection is purely based on merit and at times some employees push very hard to select the candidates they referred and handling them is a real overhead. They get more disappointed than the candidates themselves!