The case for employee referrals

With 35 to 40 percent of recruitment happening through employee referral programmes in some organisations, the process is becoming a popular method of hiring, says Atanu Kumar Das.

Employee Referral Programmes (RPs) are the preferred hiring process for quite a few IT organisations. On an average, 35 to 40 percent of recruitment that happens is through RPs (excluding the campus recruitment process). Hiring through referrals is considered more advantageous than other recruitment options— placement agents, media advertisements or direct recruitment—as it cultivates greater cultural bonding at the earliest. Some voice concern and believe that this system might breed nepotism. RPs therefore have to be designed and managed well.

States Pramod Sadarjoshi, Director & Head, HR, CSC India, “An employee referral programme is a very effective tool. It not only ensures the throughput of the best-of-breed talent, but also sends out a very empowering signal to employees about their engagement with the company. When there is a war for talent going on in the industry, having ambassadors within the company to facilitate the pipeline of good talent is a great strength for an organisation. The most significant feature of an RP is that it provides an effective filtering process with respect to the background of the candidates. Therefore, it is important to have an effective referral programme.”

Indrajit Sen, Director, Recruitment, HR, Flextronics Software Systems, believes that it is important to have RPs as they help an organisation get the right candidates. “We have 35 percent of recruitment happening via RP presently...this number sometimes goes up to 40 percent. I believe the need of the hour is for every company today to have proper referral programmes,” says Sen.

Referral programmes play a major role in bringing faster cultural bonding. One of the biggest reasons for attrition, particularly within 90 to 120 days of joining the organisation, is the inability of an individual to adjust to the new culture. In a typical referral programme, the present employee helps in working on the cultural aspect, both before and after the recruitment. The new joiner has a buddy sitting inside who can guide him.

Favouritism and nepotism

It is important for an organisation to ensure that nepotism or favouritism does not happen, and that such aspects do not make inroads into the recruitment process as ultimately an organisation will suffer if the employee turns out to be below-average.

Some companies refuse to accept that the employee referral system could breed favouritism. “Conceptually, there is potential for favouritism or nepotism to happen. However, at CSC we have a clearly articulated policy which does not permit employees to refer direct relatives (i.e. siblings, spouse). We also ensure that there is no reporting relationship whatsoever between the referrer and the candidate so as to avoid any conflict of interest. The other step we take as a practice is that we don’t go overboard in hiring through one referrer or source only. Our RP is based on the company’s vision and values statement, which fosters meritocracy and openness,” explains Sadarjoshi.

Aravinda Dahiya, General Manager, HR, QAI India says, “One would not think that nepotism happens. Business today has reached a stage where it can stay the best and deliver the best only by attracting the best. Organis-ations are fully cognisant of this fact, and referred applicants go through the normal selection process. For critical functions and positions, organisations cannot afford to and do not take a risk or compromise.”

According to Sunil Kutty, HR Manager, Ensim India, favouritism or nepotism is a reality but this could also happen with people hired from other sources too. Employee referral programmes cannot alone burn on the stake for this.

Harish Bhattiprolu, Director, Sales, Kenexa Technologies, points out that it has been observed that administering the referral policy is a delicate initiative. A strong administration and selection process can lessen the risks of favouritism and prejudice. Nepotism is a consequence of sloppy management, and hence if such problems are seen then there are greater evils lurking.

Getting the right process in place

When there is a war for talent going on in the industry, having ambassadors within the company to facilitate the pipeline of good talent is a great strength for an organisation Pramod Sadarjoshi Director & Head, HR CSC India

In the course of preparing an accurate sourcing strategy, it is very important to consider the various channels available to recruit from. While candidate sourcing is evaluated, a course-correction would be needed from time to time. It has been observed that internal referral of talent in a large organisation would lead to a low but steady percentage of valid hires.

“In smaller organisations that have initiated aggressive hiring, internal referrals can be high in the initial period of hiring and then steadily reduce itself to a consistent source. It is important for organisations to discern that the initial ramping figures of internal referral sources are not sustainable. Hence, a creative mix of sourcing is always to be derived which can be dynamic while being controlled,” explains Bhattiprolu. He adds that in this attempt at quick ramping when internal referral is high, it is always to be administered with caution. An organisation is a healthy mix of talent, not cookie-cutting the existing talent. New ideas are always stimulating, and organisations want sustained workforce in numbers.

Scarcity of talented resources is forcing the HR to re-look at innovative ways to do people sourcing. RPs have been around for sometime though. “Such initiatives need more attention, nurturing and sensitive managing at the transactional level. The danger of stereotyping hires could hurt creativity if the HR does not maintain a healthy balance of hiring from multiple sources. More so, it needs to define the hiring criteria, and ensure a simple process for having prospective candidate interviewed by people other than the referrer. It needs to make sure that the quality of the people recruited vis-a-vis the requirement of the job is well mapped,” states Kutty.

J Kalyanraman, Vice- president, Human Capital Management, HCL Comnet, believes that there is a tendency for people to bring in similar types into the organisation. “A lot depends on the managerial team and the organisation’s people process to be able to build up on the individual once he is in. In a good recruitment process there will be a certain ratio of referrals, other lateral hires, and fresh pass-outs. The ideal ratio would depend on the organisation’s ability to spend time in moulding each one of these groups,” he adds.

Marketing the programmes

Companies feel that the marketing of referral programmes is crucial as it enhances the credentials of the programme. “This is very critical. Unless you market the programme, it will not take off. Also, there is a certain amount of expectation about the selection of people. When that does not happen there is a disbelief in the process. Marketing would help in building up this process,” remarks Kalyanraman.

Sadarjoshi feels there are two ways of looking at it. In current times, the old adage, ‘Money makes the mare go,’ is quite applicable. Accordingly, this is an established practice to incentivise employees. Keeping this in mind, it is important to market this product in order to have its consistent use across the organisation. Therefore, sustained efforts of the organisation to market it should yield the required results.

Elaborates Sadarjoshi: “However, there is another way of looking at it, which questions the very basis of an incentivised referral programme. The questions are—should companies actually have to give incentives to their own employees to do something good for their own organisation? Does the company have to dangle monetary temptations to its employees for demonstrating good corporate behaviour? Are employees not motivated enough and emotionally attached to the organisation to refer candidates without monetary expectations? I think it is important to consider this angle too, which essentially questions the correlation of good employer practices.”

Dahiya of QAI feels that the employment opportunities offered by an organisation need to be marketed much more vigorously than a product or service if one has to win the war for talent and emerge as an employer of choice. The referral programme is all about organisational branding and should communicate all that the organisation stands for—the opportunities, the work environment, the mission and the values. When you invite people to join you on the journey, you want them to know it is going to be great walking together. It is important to highlight the best that the organisation stands for just as one would do with a product or service.

Road ahead

Bhattiprolu of Kenexa feels that a referral scheme can be creative. The internal and external referrals (whatever their source may be) must be processed with care.

It is finally important to get the correct hires. The source is only a start, the decision to select is made by the process and participants. Hence, external referrals must be welcomed. The policy and rewards must be designed with equal care. Investing in RP consistently generates one of the highest returns on investment in terms of both cost and quality per hire.

Not surprisingly then, employee referral programmes are here to stay.

atanu@expresscomputeronline.com