New Delhi: Hiring people on the recommendation of one’s own staff, or internal referrals, is fast catching on among Indian companies as a way to cope with rising attrition and a growing scramble for new hires.
“More and more companies are using this mode as an additional source of finding right candidates,” says Sonal Agrawal, chief executive officer, Accord Group India, an executive search firm.
Aricent, formerly Flextronics Software Systems Ltd, a $300 million (Rs1,212 crore) communications software company, hired around 2,000 people in the year ending March. Of these, 1,000 were picked up from college campuses. But, of the other 1,000 mid- and senior-level hires, over one third came from internal referrals.
“We have been recruiting people on our own staff’s recommendations for past some time, but of late, we have stepped up the effort,” says Indrajit Sen, director, talent acquisition, Aricent. This year, the company expects 40% of its new hires to come through referrals.
At consumer products giant Dabur India Ltd, an employee referral programme began three years ago. Hires through internal referrals now average 10% of all hires, up from around 2-3%. “In the next one year, we expect it to rise to 20-25%,” says A. Sudhakar, executive vice-president, human resources.
IBM Daksh Business Process Services Pvt. Ltd, which turned its focus on referrals last year, expects one-third of its fresh recruits coming in through internal recommendations this year. The BPO company has a structured programme with designated referral ambassadors to drive the programme internally.
Similarly, Ranbaxy Laboratories Ltd recently launched a pilot referral policy called “Parichay” in its consumer health-care division. “The idea is to tap into resources available in and around us. We have got quite encouraging response from our employees,” says Bhagwat Yagnik, vice- president, global HR, Ranbaxy.
Others are taking a much more commercial approach to referrals. NDTVJobs.com, a jobs portal run by broadcaster NDTV Ltd, in association with Bangkok-based Yellowjobs.com, recently launched an online referral rewards programme. “The referral model is based on doing away with intermediaries at one level and at another, collaborate with new audiences to tap manpower,” says Sanjay Trehan, chief executive officer, NDTV Convergence Ltd. Under the programme, people could recommend names on NDTV Jobs.com and get rewarded by those who hire them. Reward ranges from Rs5,000 for junior-level employees to Rs1 lakh for top-level recruits.
“If all the jobs that are currently being advertised by NDTVJobs get filled up, referrers stand to make more than Rs10.4 crore,” says Trehan.
The referral model by NDTVJobs.com aims at “tapping passive job seekers”, or people who are already employed and those who are not looking for jobs, such as students, housewives who might know people looking for jobs.
Companies say referrals are not only a cost-effective way of hiring , but could also help foster a stronger commitment with employees.
“Rewards in the form of bonuses and other incentives help in creating a general bonhomie at work. It also helps in team-building, as it gives employees a reason to feel that they are contributing to the growth of the company,” says D.P. Singh, vice-president, strategic HR, IBM Daksh.
Also, referrals increase the possibility of finding a candidate with right skills within a shorter time frame, say some HR managers. Some point out that attrition is lesser in referral cases because those who come aboard already know some of their new colleagues and, hence, find it easier to settle down.
“As the overall recruitment costs are rising because of increased competition and attrition, recruitment through referrals allows companies sometimes better search at low costs,” says Sangeeta Sabharwal, CEO, Kochhar Group, an executive search firm.
While the referral amount ranges anywhere between Rs3,000 and Rs40,000 depending on the positions, most placement agencies charge anywhere around 8.33-33% of the candidate’s annual cost to company. Citing an example, Sudhakar says, “Last year, we hired our vice-president, sales, through direct referral in 30 days’ time. We would have paid around Rs15-20 lakh to a placement firm for the same job and they would have taken at least three months for it.”
Headhunters, in the meantime, are feeling the heat.
“It’s not so much a threat to firms engaged in senior-level searches, since most companies have been recruiting through reference and networking for senior positions,” says Sabharwal. However, the increasing number of recruitment through referrals in the junior and middle levels is impacting recruiters significantly, he says.