Why HR managers vouch for the referral system

Abhinav Singh / Bangalore

The employee referral system is the preferred source of recruitment for many IT organisations. An increasing number of companies are planning to increase their intakes through employee referrals between 48 percent to 60 percent. Employees are encouraged to hunt for talent and they are being suitably rewarded if their referred candidate is inducted. Ask any HR manager and he/she is sure to vouch for this mode of recruitment. Candidates hired through referrals stay longer and assimilate faster than those recruited through other methods, including through the Internet and headhunters. Furthermore, the referral programme saves 60 percent to 70 percent of the recruitment cost as it does not involve the cost of engaging head hunters or placing advertisements.

Quality candidates

Organisations believe that candidates selected through the referral system stand high on quality and perform better as they are in an organisation which includes their friends and known colleagues. Referrals have worked wonders for many IT companies. By referring a good candidate an employee reinstates the faith and pride which he has in the company. Chances are that a candidate referred by an employee is most likely to be finally selected. Greg D Souza, vice president of Human Resource, vMoksha Technologies explains, “Employees refer a prospective candidate only when they are happy with their own organisation. For us the first phase of screening is already over as they refer candidates whom they are confident are likely to perform well. Employees also acquaint the referred candidates about our work culture and by the time they come to us for selection, they know the aims and goals of our company.”

It has been observed that referred employees stay longer with the organisation as they are in a friendly environment. Sabu Thomas, vice president—human resources, Netkraft, adds, “Unlike recruitment through consultants, we are getting a person who knows people in our organisation. The referral system has been able to significantly check the attrition rate in our organisation.”

Cost savings

Recruiting candidates through the referral system leads to huge savings for companies who spend large amounts on advertisements and placement agencies. Companies like vMoksha Technologies and Tavant Technologies acknowledge that have saved a large sum of their recruitment budget by inducting candidates through employee referrals. The monetary incentive depends on the post for which the candidate is selected. Souza says, “The cost of hiring a referral candidate works out to be 60 percent to 70 percent cheaper than that of going through an external agency and recruitment advertisement.”

Faster recruitment cycles

Referred candidates have a shorter recruitment cycle than candidates recruited through other modes (either directly or through a placement agent). Tavant Technology for instance has a dedicated person who is in-charge of keeping a tab on these recommended

candidates. Most referred candidates are likely to take up an offer from a company where he has a known colleagues rather than joining an unknown organisation. Souza says, “An employee can strongly convince a candidate into joining an organisation and that really eases our job.”

Need for incentives

Employee referral schemes are very popular in most Indian IT companies. There are monetary and intangible benefits for employees in case the referred candidate is finally selected. vMoksha awards its employees with cash awards of Rs 10,000 and Rs 20,000 if the referred candidate gets selected in the interview. MindTree Consulting, for instance, has an employee referral scheme ‘Each one bring one’.

Netkraft, which has a strong employee referral scheme, not only pays its employees monetarily but gives them gift coupons as incentives. An employee at Netkraft also gets a bonus if his referred candidate succeeds in the final selection procedure. Employee referral schemes are open to all employees in the organisation. Regular requirements are posted on the intranet and posters are stuck on notice boards so that employees are aware of the different positions vacant in the organisation.

To ensure a successful referral system it is important to suitably award those employees who are bringing suitable candidates to the organisation. This is a strong motivating factor. Madan Mohan Nagaldinne, vice president of human resources, Tavant Technologies explains, “An efficient referral system depends upon an efficient internal system. It needs to be looked into how efficiently the HR department processes the resumes of the referred candidates and how much the employees are benefiting from the referral system.”

Organisations need diversity

While most organisations prefer the referral system, a few also feel the need to maintain heterogeneity in their workforce—to ensure diversity within their organisation. Says Thomas, “Sometimes referred candidates are from the same background and the same institute as existing employees like to refer candidates from their ex-institution or company. This brings in a lot of uniformity. To overcome this we have to recruit people even from outside to bring in heterogeneity and diversity in our workforce, which is productive for the company as a whole.” Besides this, there are certain skill sets, which an organisation likes to acquire directly and not through referral schemes. An organisation wanting to have the best of breed candidates would like to poach for them from top organisations, which sometimes becomes difficult through the referral system.

Here to stay

Most IT organisations are either planning to increase the intake of candidates through their employee referral schemes or making an effort to maintain the percentage of candidates selected through this mode. Considered as a win-win situation for all— the organisation, the employee and the new inductee—the employee referral system is certainly here to stay.

abhinav@expresscomputeronline.com