SIT PGDMS &RC1A STUDY ON “EMPLOYEE REFERRAL PROGRAM”COMPREHENSIVE SEMINAR REPORTSUBMITTED BYANITHA.KUSN: 1SI11MBA03UNDER THE GUIDANCE OFINTERNAL GUIDEPROF. SUMATHI.RFACULTY MEMBERPGDMS & RC, SIT,TUMKUR.POST GRADUATE DEPARTMENT OF MANAGEMENT STUDIESSIDDAGANGA INSTITUTE OF TECHNOLOGY(AN AUTONOMOUS INSTITUTE AFFILIATED TO VISVESWARAYATECHNOLOGICAL UNIVERSITY, BELGAUM AND ACCREDITED BY NATIONALBOARD OF ACCREDITATION, NEW DELHI.)TUMKUR-5721032012-13
SIT PGDMS &RC2TABLE OF CONTENTSSl No. CONTENTS PG. NO.18.104.22.16878910INTRODUCTIONDEFNITIONBRIEF NOTE ON EMPLOYEEREFERRAL PROGRAMSIGNIFICANT OF EMPLOYEEREFERRAL PROGRAMCASE STUDY:ACCENTUREIBMROUND ONE NETWORKADVANTAGESDISADVANTAGESCONCLUSIONLEARNING OUTCOMEBIBLIOGRAPHY3455-67-910-13141516171717
SIT PGDMS &RC3EMPLOYEE REFERRAL PROGRAMINTRODUCTION:Employee referral is an internal recruitment method employed by organizations toidentify potential candidates from their existing employees. An employee referralscheme encourages a companys existing employees to select and recruit thesuitable candidates from their social networks.As a reward, the employer typically pays the referring employee a referral bonus.Recruiting candidates using employee referral is widely acknowledged as being themost cost effective and efficient recruitment method to recruit candidates and assuch, employers of all sizes, across all industries are trying to increase the volume ofrecruits through this channel.Referral recruitment is the development of a recruitment strategy that is dependenton referrals by existing employees. This approach is usually favoured when the costsof recruiting needs to be reduced. In recessions the amount of time and moneyinvested in referral schemes often increases due to the perceived frivolousness ofother methods of recruiting.Employee referrals provide better than average candidates because employeesknow your company culture and have an idea about what employees worksuccessfully in your organization. Employee referrals also reflect on the referringemployee who wants to be positively regarded in your organization.Employee referral scheme’s allows existing employees to screen, select and referthe best candidates to the recruitment processObjective of referral programThis policy aims to bring candidates with requisite qualification and skills to theorganization through employees which help in successful placement of thecandidate, where the employee will be awarded on the basis of placementWhy employee referral programIn a recent survey, the results on employee referrals are outstanding. Theresults speak for themselves on why having an employee referral program is vitalfor every company.
SIT PGDMS &RC4Nearly 40% of all hires are generated by employee referrals. 40% is a largenumber for one source of hire and it could be even larger with a good employeereferral program in place.46% are still working at that company a year later. Thisis good news from companies, as the talent from referrals is top notch.The above numbers should be enough to convince you to have an employeereferral program in place, but it’s also the most efficient of all other hiringsources. It takes roughly 29 days to fill a position through a referral – 55% fasterthan any other recruiting source. Not only are employee referral programsefficient, they are a cost saver for the company.Referring qualified friends, colleagues or even family can create an excellentsource of prospective candidates. Employee referral programs are essentiallyused by organizations to hire great talent while reducing acquisition time andcost, yet prolonging the duration of employment. In short: employees work withgreat, trusted talent, the company saves money up front through the recruitingprocess, and likely increases the return from the specific employee.DEFINITION:Employee referral is defined as recruitment method in which the current employeesare encouraged and rewarded for introducing suitable recruits from among thepeople they know.
SIT PGDMS &RC5BRIEF NOTE ON EMPLOYEE REFERRAL PROGRAM:An effective employee referral program should be an integral part of anyemployee recruiting process. There are many recruiting sources that can be usedperform for your employee recruiting and it is not necessary to limit activities toany single source.Referrals from existing employees have been shown to be some of the bestemployees. A study has shown that employees referred by existing employeesbetter and last longer on average. There are many benefits from a well designedand implemented employee referral program in addition to getting betteremployees.The first area of improvement is significantly reduced costs per hire for bring onnew employees. Employee recruiting is expensive. Running ads, posting on-lineand using head hunters all cost money. In many cases multiple sources will beused to build a candidate pool and the costs add up.But giving existing employees a referral bonus can be much more cost effective.There is only one payment. Calculate an amount that is both attractive to youremployees and cost effective for the business. A good recommendation is 20-25% of the normal cost per hire number.The second benefit of a good program is the program can be a significant moralebooster for existing employees. They are much happier when the money spenton recruiting "stays in the family" instead of being spent on outside sources.Existing employees appreciate the opportunity to make more money whilehelping the company at the same time.SIGNIFICANCE OF EMPLOYEE REFERRAL PROGRAMEmployee referrals have been accepted as the “number one source of hire”and often the highest calibre, too. And new studies show this trend will likelycontinue, as organizations rely more heavily on their referral programs.The majority of organizations report not only having an employee referralprogram but also focusing on referrals as a key component of their overallrecruitment strategy.In addition to incentives, however, it’s also critical to design a program thatworks best for your team and communicate it in a way that users canunderstand. If you don’t, your program is likely to remain stagnant or failaltogether.
SIT PGDMS &RC6Building a successful employee referral programHere are a few important keys to success to help launch and promote the employeereferral program1. Keep the process simpleThe more time consuming the process becomes to get a referral into and throughyour recruiting process, the less likely employees will participate. the followingquestions has to be enquired designing or refining the referral program:Do employees know where to submit employee referrals?Is the submission of referrals quick and easy?Is the employee kept up-to-date on their referred applicant’s process?Is the employee quickly compensated for the referral?2. Solicit supervisor participationEmployee referral programs are stronger when supervisors and managers areactively engaged and supportive. When supervisors are on board they have a moredirect influence encouraging employees to add to the company’s pool of talent.3. Communicate the Benefits for EmployeesMany employees are uncomfortable pitching their organization to a potential referral;afraid they will sound like a salesman . Remind employees its not about the sale, itsabout the relationship. Humans naturally desire to feel that they belong and arewanted. Most people are flattered when they are recognized for their skills or talentsand asked to join the organization.By building an organization with top-notch people, employees benefits from:Enhanced collaboration.Quality hires that mean fewer burdens on existing team members.Ensuring the organization is successful, resulting in more opportunities foremployees.Awards to employees range in the value based on the type ofposition and how specialized the position is.
SIT PGDMS &RC7CASE STUDYAccentures best practice in referral recruitment.This business case study of Accenture serves to illustrate the impact of referralrecruitment.It highlights some of the best practices in referral recruitment that theorganization should consider adopting. Accenture did win some prestigiousawards like the ERE award for its most innovative employee referral program.While employee referral programs have always been a top source for high-qualityhires, they can be adapted to become the most effective low-cost/high-qualitysource.The deployment of existing staff to recruit new employees is, if properlyimplemented, a powerful recruitment tool. Especially in a tight labour market,where recruitment of new employees is difficult and costly.A few facts and figures:Number one source of candidates, both quantity and qualityIn Accenture the employee referral program has grown the percentage of hiresattributed to employee referral from 14% to 33% in the year 2008-09 . The quality ofreferrals also improved significantlyCost savingHuge cost saving in Accenture like EUR 600,000 in 3 months (instead ofprofessional recruitment agencies).Job satisfaction and commitmentIn Accenture employee referral program has positive effects on job satisfaction andcommitment of old and new employees.AwarenessEmployee awareness of the referral program has jumped from 20% to 99%, anastounding performance
SIT PGDMS &RC8Smart reward scheme instead of higher rewardsIn Accenture Employees receive a small reward for a successful referral and EUR500 is donated to charity. They also offer an opportunity for employees who makesuccessful referrals to participate in a drawing for exciting world trips. In addition,employees also receive EUR 100 whenever one of their referred candidates isinvited in for an interview. Obviously, any candidate invited for an interview is ofsufficient quality to merit at least some reward and recognition.Employee scorecardEmployees have their own individual online website that allows them to track theprogress of their referred candidates throughout the hiring process (this increasesemployee involvement and transparency).The scorecard also lists the employees personal referral success rate. By allowingthe employee to see how well theyre doing in their referralsV.I.P. status referralsEmployee referrals are marked as very important and urgent by the applicationprocess so that they can be prioritized and fast-tracked during the hiring process.Referral cardsReferral cards can have a major impact on referral program success. Most referralcards are "paper" and are handed out individually. Accenture has taken the practiceone step further, allowing employees to send electronic referral cards to people intheir network. The e-cards contain a code that allows them to get credit if theindividual submits an application.Good administrationGood administration of referrals makes the difference to increase employeeinvolvement and transparency.CourageEven though its an intangible factor, its critical to referral program success. Its easyfor executives to discourage talk about hiring and winning awards during tougheconomic times, but the managers at Accenture had the courage to continue thedevelopment of this important program and to also follow through on the awardsprocess.
SIT PGDMS &RC9ERE award winner 2009- AccentureIt has been an amazing year in recruiting and talent management, despite severeeconomic hardships, budget cuts, and widespread hiring freezes. One of thechallenges in the fast-moving profession of recruiting is how to keep up with thelatest evolutions in best practiceERE Media holds a yearly global competition aimed at identifying the very best “nextpractices” in recruiting. Each year, ERE receives hundreds of applications in eightrecruiting program categories from well-known organizations like Microsoft, IBM,Ernst & Young, Intuit, Accenture, GE, Yahoo!, and from less well-known but equallyinnovative organizations like DaVita, the American Cancer Society, and Tata.The applications year 2009 were so powerful that choosing a winner in severalcategories was a challenge.The eight recruiting program categories in ERE are as followsBest college recruiting programMost innovative departmentBest careers websiteBest employee referral programBest employer brandBest strategic use of technologyBest on boarding programBest military talent programWhile employee referral programs have always been a top source for high-qualityhires, during economic downturns, they can be adapted to become the mosteffective low-cost/high-quality source.Accenture’s latest employee referral program is unique because it began life as apilot program in The Netherlands. Based on the program’s results, it now serves as amodel for future rollouts around the globe. The new program radically simplifies theprogram’s terms and conditions and dedicates resources to marketing the programinternally on a regular basis.Since inception, just a year ago, the program has grown the percentage of hiresattributed to employee referral from 14% to 32%. Employee awareness of thereferral program has jumped from 20% to 99%, an astounding feat .The quality ofreferrals also improved significantly.
SIT PGDMS &RC10IBM"Sampark” which means “reaching out”, epitomizes the essence of the EmployeeReferral Program at IBM Daksh. Aimed at creating a work environment that includesone’s friend, Sampark is a very powerful tool in the hands of the employees toengineer their work environment and has played a very critical role in building theculture that IBM Daksh is known for today.Sampark helps creating an environment where in not only to get the opportunity inorder to work with your friends but also get rewarded for doing so. It is a keyresourcing channel for the organization.The Sampark program encourages all IBM employees at IBM Daksh Business/IBMIndia to refer their friends, relatives and former colleagues as prospectiveemployees. Once an applicant joins, the referee is rewarded.The program has a two layer execution strategy. The first layer is a central team inTAU whose core focus is to drive the Sampark initiative within the organization. Thesecond layer is that of Sampark Ambassadors who work in specific projects. Theyspearhead the program in their respective projects as an additional responsibility.IBM Daksh Employee Referral Bonus Policy1. ObjectiveThe Employee Referral Bonus Program (ERBP) is designed to supplementIBM GPSs normal recruiting activity and enhance the pool of diverse,qualified candidates available for hire into IBM GPS.The primary purpose for this program is to identify those highly skilledindividuals who may not ordinarily apply to open positions through traditionalchannels. It provides a system by which employees can be involved in theidentification of candidates for positions and recognized for their effortsthereby. It extends IBMs capability for experienced hiring to meet the growingcritical skill gaps. Through the Employee Referral Bonus Program, an effort ismade to monetarily recognize IBMers referral efforts in bringing newemployees into the organization.
SIT PGDMS &RC112. Eligibility & applicabilityAll IBMers on the rolls of IBM Corporation Companies/ Organizations in Indiaincluding people manager are eligible to refer. The referring IBMer must be onthe permanent rolls of the organization with a valid employee ID includingFixed Term Hire (FTH) / Interns & Part time hires.The following employees/ types of employees can refer but are not entitledfor a Referral Bonus payout Executive Bands (Band D and above employees) Members of the TTBU & Leadership Acquisition team Referrers/Referee (eligible for payment) cannot participate in any hiringactivities associated with the referred candidate.interviews, interviewing the candidate and hiring decision. Candidate hired in direct Reporting line of the referee (if the referredCandidate is the Direct Reporting line of the referee, at the time ofjoining, they will not be eligible for the ERBP).Employees are not eligible to receive a referral bonus if the candidate is hireddirectly into their reporting line. Reporting relationship is determined by IBMGPS HRMS.3. ScopeThis program is aimed at inviting referrals only for permanent / regular - full timehires, fixed term hires and interns positions only.Candidates not eligible under the ERP:The following persons will be considered as Referred Candidates however noreferral bonus payout will be made to the referee. (All these roles are as defined byIBM Management) IBM Regular employees rejoining IBM within 12 months of separating fromIBM, Sub contracted employees SSPs, Contractors or Vendors, Consultants and owners of other independent contractor firms currently oncontract with IBM, Persons employed by Vendors, Consultants, or other independentcontractors who are currently performing dedicated work for IBM or anyIBM GPS India Delivery teams on behalf of their employer at any IBM GPS IndiaDelivery locations, employees of clients or business partners with whom thereferrer has a direct business relationship in the course of his/her employmentin IBM
SIT PGDMS &RC124. POLICY DETAILSERP advice will be made to payroll for the eligible referrers after the referredcandidate has been employed at IBM for a minimum of 90 Days. Payouts will bemade as a part of the payroll disbursement and will be subject to all applicabletaxes.The referee and referral must be active employees of IBM and neither of themshould have resignation initiated status on system or an AOD case as on 15thof the payout month.Recoveries of Incorrect payouts: Incorrect & duplicate payouts are recoverablein full including the applicable tax amount. 100% of the referral payout will be paid to the referee in the payroll postcompletion of 90 Days by the referral in the organization. The paymenttimelines will follow below mentioned guidelinesEvery employee joining IBM through the ERP program will need to undergo abackground check as per the usual IBM process where referrer will be entitledto the ERP only for cases where the referred employee has successfully clearedthe background check. In cases where the referred employee has not clearedthe background check but the ERP has been paid to the referee, the ERP willbe recovered from the referee in subsequent payroll.In the event that the referred employee is absconding from work, any Referralpayment applicable will be withheld until the employee resumed work. If thereferred employee does not resume work, referrer shall be deemed to havewaived his/her right to the Referral Payment.IBM retains the right to reject referrals, if, in IBMs sole judgment, too manycandidates have been referred by the same Referring IBMer.
SIT PGDMS &RC13User GuidanceIBMers should refer candidates who are known through personal or professionalnetwork, and not by using any web/ job portal or any other sourcing channel.This relationship may be a result on account of participation in various socialnetworks which are either formal (examples of formal networks are LinkedIn,Facebook, Twitter, industry and competency associations) or informal(examples of informal networks are former employment with the same company,friends circle, alumni from same educational institution or study circles) .If proven that the candidate and the referrer do not know each other, it will leadto disciplinary action including termination.IBM Employee/ Referee whilereferring candidates must submit a referee declaration (frontline and supportpositions) / resume (for leadership positions only) of the candidate.Referee’s declaration will only be accepted via e-mail if sent from official IBM/IBM GPS India Delivery e-mail Id or personal email id updated on PeopleSoft.Referee Declaration template format as followsReferee is required to provide the following information:Candidate Name: _______________________________________Candidate’s Telephone/mobile number: _____How do I know the candidate? ___________________Referee Name: _______________________________________Referee Emp. ID: _______________________________________Referee Telephone/mobile Number: ___________________
SIT PGDMS &RC14Round One networkRound One is a first of its kind internet platform that connects jobseekers withcompany employees so they can interact and earn job referrals, it aim to create ameritocratic and transparent system which levels the playing field by removing theneed for contacts.Round One Network Pvt Ltd, (www.roundone.in) a Delhi based internet platformstarted by INSEAD MBA Nishant Mathur, completed its beta trial and launchedservices in the year 2012. Round One’s unique model enables jobseekers to registerfor unofficial phone interviews with employees in a company, and earn a job referralfrom them.Employees at over 120 companies, including Accenture, American Express, Bank ofNew York Mellon, Capital IQ, Deloitte, Google, Evalueserve, HP, Infibeam, JMFinancial, McKnsey, Nielsen, Samsung, TATA Motors, and ZS Associates, haveinterviewed and referred candidates through Round One during its beta trial.How the round one works?Firstly job seeker’s sends referral request to an employee of a companyhe/she interested in. If the request is accepted, the candidate has to pay feeand speaks to the employee over the phone. If the employee is satisfied withthe job seeker’s credentials, the employee refers the candidate to the HRdepartment.Secondly job seeker is allowed to connect with the referrer over the phoneonly after the amount is received by round one.Since the referrer would already have screened the job seeker’s profile by thetime they talk, 80% of the job seekers are referred after the conversation. Incase they are not referred, their fee is refunded.Recommendation in round one increases an employee’s chances of getting hired byas much as 10 times. Where Mathur cites a 2010 report by CareerBuilder, whichsays 69% of organisations have a formal employee referral program. It also givesreferees “round one point” which Mathur likens to frequent flier miles. “They aregiven 500 points worth Rs 100 for each personAccording to Mathur, Round One has over 12,000 referrers from 2,000 companies,and 400,000 job seekers registered with its service. They are mostly from the IT,banking, KPO and consultancy sectors. Round One’s customers are typically liesbetween 20-35 years age as mentioned by the company
SIT PGDMS &RC15Round One’s primary method of marketing so far has been social media, especiallyLinkedIn. In the past couple of months, the company has started search engineoptimisation marketing as well. it earns revenue from the one-time registration fee ofRs 100 and the additional fees (from Rs 500 to Rs 900, depending on howexperienced the job seeker is) job seekers pay to interact with referrersThe revenues of round one have been growing at 25% every month. Company isalso exploring a model where it can get companies to sponsor interactions.“Companies benefit from referrals as well and looking for expanding scope of itsservices by adding a networking platform and to connect with students anduniversitiesOther outstanding referral features from other companies:Acumen SolutionsRather than the traditional passive approach, targeted referral percentage goals areset for each department in order to increase healthy internal competition. Theyprovide a toolkit to educate their employees how to more effectively network. Theycelebrate referral successes publicly at all major company events.
SIT PGDMS &RC16MicrosoftMicrosoft raises the bar on employee referral related branding with their"Spreadthelove" website. This site allows Microsoft employees to "write up" their ownindividual story about their career with Microsoft . Employees can then share the weblink and "spread the love" with targeted friends, family and potential referrals.Microsoft has increased its process effectiveness by ensuring that every referral iscontacted first by an employment specialist, which then introduces them to arecruiter that will manage their experience moving forward.Tata ConsultancyAdapted a marketing/CRM model for its referral program (i.e., the companyoffers a 24x7 referral help desk with a toll-free number). Another componentallows newly hired candidates who have not yet joined the firm to refer theirformer colleagues (in order to capitalize on their "top of mind" knowledge oftheir networks in their previous organization).They also instituted a "Rapid Hire" process where resumes were collected atreferral desks that provide "on the spot" screening followed by preliminaryevaluation and instant feedback. They also offer early bird & spot prizes aswell as contests between business units to foster a competitive mindsetaround referrals. The metrics demonstrated (as many other firms have) thatreferral turnover rates during the first year are significantly lower thantraditional experienced hires (2.9% for referral hires versus 8%).BENEFITS OF EMPLOYEE-REFERRAL PROGRAMS:One benefit of an employee-referral program is that it can provide theemployer with a source of passive candidates, those workers who are notactively seeking new jobs. This not only expands the employer’s pool ofpotential candidates but also tends to produce higher-quality candidates.Candidates referred by employees also tend to be of higher quality becausethe referring employee usually screens his or her referrals closely. After all,his or her reputation is somewhat on the line with every person he refers for aposition. Referring a string of unqualified candidates reflects poorly on thereferring employee’s judgment, which may affect his or her own careerprospects.
SIT PGDMS &RC17The usual monetary bonus paid to a referring employee for a successfulreferral can be a significant morale booster. It reinforces the tendency to referhigh-quality candidates to one’s own company, even when no positions areavailable. This helps to establish an ongoing recruitment process.Employee-referral programs can replace more expensive recruitmentchannels such as newspaper advertising, employment agencies, job fairs andso on.Employee-referral programs are especially effective in the case of highlyspecialized positions that might be difficult to fill through conventionalchannels. People tend to associate with others in their professions, whichgives them access to specialized or rare talent.PITFALLS OF EMPLOYEE-REFERRAL PROGRAMS:There are some aspects of employee-referral programs that can causeproblems for a company. Some are subtle, while others, like lawsuits, canliterally slap a business in the face.Overreliance on an employee-referral program can lead tounderrepresentation of certain protected groups in a company’s job-applicantpool. This can add credence to charges of employment discrimination fromrejected candidates.Also, some competing businesses may retaliate against your company forstealing their happily employed workers via employee-referral programs.Excessive reliance upon an employee-referral program can lead to an inbredorganization that lacks breadth of ideas, and it can foster a "stick-together"attitude that masks underlying problems in organizational behavior. Relyingtoo heavily on an employee-referral program can also create cliques within anorganization, leading to resentment and friction with other employees.Some managers may have biases against employee-referral programs,feeling that referrals are favours done for shiftless in-laws rather than for thecompany.Overly restrictive bonus qualifications or excessive qualifications for employeereferrals can lead to disillusionment with an employee-referral program. Undersuch circumstances, an employee-referral program may actually become asource of employee discontent.Overall, the benefits of employee-referral programs decisively outweigh thepotential pitfalls. A well-designed and highly visible employee-referral programis a critical part of any company’s recruitment strategy.
SIT PGDMS &RC18CONCLUSIONS:It’s safe to say that every company/business has its own Employee ReferralProgram, whether formal or informal, that they promote to varying degrees atvarious times. Larger companies with hundreds of open positions, in somecases, have a full-time employee dedicated to running and optimizing theirERP. Smaller companies that hire a few people a year often rely on theiremployees to refer candidates for those positionA good referral program will have many benefits, both in cost and the timesavingsLEARNING OBJECTIVE:This topic has made me to learn about employee referral program and how ithelp the company in recruitment processEmployee referrals provide a win situation to all the parties involved –Employer , Employee and the CandidateMore and more firms are resorting to employee referrals and are reaping thebenefits.BIBILOGRAPHY :https://india.jobs.accenture.com/http://www.referralrecruitment.com/home/accenturehttp://www.ere.net/business outlook 2013