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A STUDY ON “EMPLOYEE REFERRAL PROGRAM”

COMPREHENSIVE SEMINAR REPORT

SUBMITTED BY

ANITHA.K

USN: 1SI11MBA03

UNDER THE GUIDANCE OF

INTERNAL GUIDE

PROF. SUMATHI.R

FACULTY MEMBER

PGDMS & RC, SIT,

TUMKUR.

POST GRADUATE DEPARTMENT OF

MANAGEMENT STUDIES

SIDDAGANGA INSTITUTE OF TECHNOLOGY

(AN AUTONOMOUS INSTITUTE AFFILIATED TO VISVESWARAYA

TECHNOLOGICAL UNIVERSITY, BELGAUM AND ACCREDITED BY NATIONAL

BOARD OF ACCREDITATION, NEW DELHI.)

TUMKUR-572103

2012-13

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TABLE OF CONTENTS

Sl No. CONTENTS PG. NO.

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INTRODUCTION

DEFNITION

BRIEF NOTE ON EMPLOYEE REFERRAL PROGRAM

SIGNIFICANT OF EMPLOYEE

REFERRAL PROGRAM

CASE STUDY:

ACCENTURE

IBM

ROUND ONE NETWORK

ADVANTAGES

DISADVANTAGES

CONCLUSION

LEARNING OUTCOME

BIBLIOGRAPHY

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EMPLOY EE REFERRAL   PROGRAM

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INTRODUCTION:

Employee referral is an internal recruitment method employed by organizations to identify potential candidates from their existing employees. An employee referral scheme encourages a company's existing employees to select and recruit the suitable 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 the most cost effective and efficient recruitment method to recruit candidates and as such, employers of all sizes, across all industries are trying to increase the volume of recruits through this channel.

Referral recruitment is the development of a recruitment strategy that is dependent on referrals by existing employees. This approach is usually favoured when the costs of recruiting needs to be reduced. In recessions the amount of time and money invested in referral schemes often increases due to the perceived frivolousness of other methods of recruiting.

Employee referrals provide better than average candidates because employees know your company culture and have an idea about what employees work successfully in your organization. Employee referrals also reflect on the referring employee who wants to be positively regarded in your organization.

Employee referral scheme’s allows existing employees to screen, select and refer the best candidates to the recruitment process

Objective of referral program

This policy aims to bring candidates with requisite qualification and skills to the organization through employees which help in successful placement of the candidate, where the employee will be awarded on the basis of placement

Why employee referral program  In a recent survey, the results on employee referrals are outstanding.   The

results speak for themselves on why having an employee referral program is vital for every company.

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Nearly 40% of all hires are generated by employee referrals.  40% is a large number for one source of hire and it could be even larger with a good employee referral program in place.46% are still working at that company a year later.  This is good news from companies, as the talent from referrals is top notch.

The above numbers should be enough to convince you to have an employee referral program in place, but it’s also the most efficient of all other hiring sources.  It takes roughly 29 days to fill a position through a referral – 55% faster than any other recruiting source.   Not only are employee referral programs efficient, they are a cost saver for the company.

Referring qualified friends, colleagues or even family can create an excellent source of prospective candidates. Employee referral programs are essentially used by organizations to hire great talent while reducing acquisition time and cost, yet prolonging the duration of employment. In short: employees work with great, trusted talent, the company saves money up front through the recruiting process, and likely increases the return from the specific employee.

DEFINITION:

Employee referral is defined as recruitment method in which the current employees are encouraged and rewarded for introducing suitable recruits from among the people they know.

BRIEF NOTE ON EMPLOYEE REFERRAL PROGRAM:

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An effective employee referral program should be an integral part of any employee recruiting process. There are many recruiting sources that can be used perform for your employee recruiting and it is not necessary to limit activities to any single source.

Referrals from existing employees have been shown to be some of the best employees. A study has shown that employees referred by existing employees better and last longer on average. There are many benefits from a well designed and implemented employee referral program in addition to getting better employees.

The first area of improvement is significantly reduced costs per hire for bring on new employees. Employee recruiting is expensive. Running ads, posting on-line and using head hunters all cost money. In many cases multiple sources will be used 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 your employees 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 morale booster for existing employees. They are much happier when the money spent on recruiting "stays in the family" instead of being spent on outside sources. Existing employees appreciate the opportunity to make more money while helping the company at the same time.

SIGNIFICANCE OF EMPLOYEE REFERRAL PROGRAM Employee referrals have been accepted as the “number one source of hire”

and often the highest calibre, too. And new studies show this trend will likely continue, as organizations rely more heavily on their referral programs.

The majority of organizations report not only having an employee referral program but also focusing on referrals as a key component of their overall recruitment strategy.

In addition to incentives, however, it’s also critical to design a program that works best for your team and communicate it in a way that users can understand. If you don’t, your program is likely to remain stagnant or fail altogether.

Building a successful employee referral program

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Here are a few important keys to success to help launch and promote the employee referral program 

1. Keep the process simpleThe more time consuming the process becomes to get a referral into and through your recruiting process, the less likely employees will participate. the following questions 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 participation

Employee referral programs are stronger when supervisors and managers are actively engaged and supportive. When supervisors are on board they have a more direct influence encouraging employees to add to the company’s pool of talent.

3. Communicate the Benefits for Employees

Many employees are uncomfortable pitching their organization to a potential referral; afraid they will sound like a salesman . Remind employees its not about the sale, its about the relationship. Humans naturally desire to feel that they belong and are wanted. Most people are flattered when they are recognized for their skills or talents and 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 for

employees. Awards to employees range in the value based on the type of

position and how specialized the position is.

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CASE STUDY

Accenture's best practice in referral recruitment.

This business case study of Accenture serves to illustrate the impact of referral recruitment.

It highlights some of the best practices in referral recruitment that the organization should consider adopting. Accenture did win some prestigious awards like the ERE award for its most innovative employee referral program.

While employee referral programs have always been a top source for high-quality hires, they can be adapted to become the most effective low-cost/high-quality source.

The deployment of existing staff to recruit new employees is, if properly implemented, 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 quality

In Accenture the employee referral program has grown the percentage of hires attributed to employee referral from 14% to 33% in the year 2008-09 . The quality of referrals also improved significantly

Cost savingHuge cost saving in Accenture like EUR 600,000 in 3 months (instead of professional recruitment agencies).

Job satisfaction and commitmentIn Accenture employee referral program has positive effects on job satisfaction and commitment of old and new employees.

AwarenessEmployee awareness of the referral program has jumped from 20% to 99%, an astounding performance

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Smart reward scheme instead of higher rewards In Accenture Employees receive a small reward for a successful referral and EUR 500 is donated to charity. They also offer an opportunity for employees who make successful referrals to participate in a drawing for exciting world trips. In addition, employees also receive EUR 100 whenever one of their referred candidates is invited in for an interview. Obviously, any candidate invited for an interview is of sufficient quality to merit at least some reward and recognition.

Employee scorecardEmployees have their own individual online website that allows them to track the progress of their referred candidates throughout the hiring process (this increases employee involvement and transparency). The scorecard also lists the employee's personal referral success rate. By allowing the employee to see how well they're doing in their referrals

V.I.P. status referralsEmployee referrals are marked as very important and urgent by the application process 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 referral cards are "paper" and are handed out individually. Accenture has taken the practice one step further, allowing employees to send electronic referral cards to people in their network. The e-cards contain a code that allows them to get credit if the individual submits an application.

Good administrationGood administration of referrals makes the difference to increase employee involvement and transparency.

CourageEven though it's an intangible factor, it's critical to referral program success. It's easy for executives to discourage talk about hiring and winning awards during tough economic times, but the managers at Accenture had the courage to continue the development of this important program and to also follow through on the awards process.

ERE award winner 2009- Accenture

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It has been an amazing year in recruiting and talent management, despite severe economic hardships, budget cuts, and widespread hiring freezes. One of the challenges in the fast-moving profession of recruiting is how to keep up with the latest evolutions in best practice

ERE Media holds a yearly global competition aimed at identifying the very best “next practices” in recruiting. Each year, ERE receives hundreds of applications in eight recruiting program categories from well-known organizations like Microsoft, IBM, Ernst & Young, Intuit, Accenture, GE, Yahoo!, and from less well-known but equally innovative organizations like DaVita, the American Cancer Society, and Tata.

The applications year 2009 were so powerful that choosing a winner in several categories was a challenge.

The eight recruiting program categories in ERE are as follows

Best college recruiting program Most innovative department Best careers website Best employee referral program Best employer brand Best strategic use of technology Best on boarding program Best military talent program

While employee referral programs have always been a top source for high-quality hires, during economic downturns, they can be adapted to become the most effective low-cost/high-quality source.

Accenture’s latest employee referral program is unique because it began life as a pilot program in The Netherlands. Based on the program’s results, it now serves as a model for future rollouts around the globe. The new program radically simplifies the program’s terms and conditions and dedicates resources to marketing the program internally on a regular basis.

Since inception, just a year ago, the program has grown the percentage of hires attributed to employee referral from 14% to 32%. Employee awareness of the referral program has jumped from 20% to 99%, an astounding feat .The quality of referrals also improved significantly.

IBM

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"Sampark” which means “reaching out”, epitomizes the essence of the Employee Referral Program at IBM Daksh. Aimed at creating a work environment that includes one’s friend, Sampark is a very powerful tool in the hands of the employees to engineer their work environment and has played a very critical role in building the culture that IBM Daksh is known for today.

Sampark helps creating an environment where in not only to get the opportunity in order to work with your friends but also get rewarded for doing so. It is a key resourcing channel for the organization.

The Sampark program encourages all IBM employees at IBM Daksh Business/IBM India to refer their friends, relatives and former colleagues as prospective employees. Once an applicant joins, the referee is rewarded.

The program has a two layer execution strategy. The first layer is a central team in TAU whose core focus is to drive the Sampark initiative within the organization. The second layer is that of Sampark Ambassadors who work in specific projects. They spearhead the program in their respective projects as an additional responsibility.

IBM Daksh Employee Referral Bonus Policy1. Objective

The Employee Referral Bonus Program (ERBP) is designed to supplement IBM GPS's 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 skilled individuals who may not ordinarily apply to open positions through traditional channels. It provides a system by which employees can be involved in the identification of candidates for positions and recognized for their efforts thereby. It extends IBM's capability for experienced hiring to meet the growing critical skill gaps. Through the Employee Referral Bonus Program, an effort is made to monetarily recognize IBMers referral efforts in bringing new employees into the organization.

2. Eligibility & applicability

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All IBMers on the rolls of IBM Corporation Companies/ Organizations in India including people manager are eligible to refer. The referring IBMer must be on the permanent rolls of the organization with a valid employee ID including Fixed Term Hire (FTH) / Interns & Part time hires.

The following employees/ types of employees can refer but are not entitled for 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 hiring

activities associated with the referred candidate.

interviews, interviewing the candidate and hiring decision. Candidate hired in direct Reporting line of the referee (if the referred

Candidate is the Direct Reporting line of the referee, at the time of joining, they will not be eligible for the ERBP).

Employees are not eligible to receive a referral bonus if the candidate is hired directly into their reporting line. Reporting relationship is determined by IBM GPS HRMS.

3. ScopeThis program is aimed at inviting referrals only for permanent / regular - full time hires, fixed term hires and interns positions only.Candidates not eligible under the ERP:The following persons will be considered as Referred Candidates however no referral bonus payout will be made to the referee. (All these roles are as defined by IBM Management)

IBM Regular employees rejoining IBM within 12 months of separating from IBM,

Sub contracted employees SSPs, Contractors or Vendors, Consultants and owners of other independent contractor firms currently on

contract with IBM, Persons employed by Vendors, Consultants, or other independent

contractors who are currently performing dedicated work for IBM or any

IBM GPS India Delivery teams on behalf of their employer at any IBM GPS India Delivery locations, employees of clients or business partners with whom the referrer has a direct business relationship in the course of his/her employment in IBM

4. POLICY DETAILS  

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ERP advice will be made to payroll for the eligible referrers after the referred candidate has been employed at IBM for a minimum of 90 Days. Payouts will be made as a part of the payroll disbursement and will be subject to all applicable taxes.

The referee and referral must be active employees of IBM and neither of them should have resignation initiated status on system or an AOD case as on 15th of the payout month.

Recoveries of Incorrect payouts: Incorrect & duplicate payouts are recoverable in full including the applicable tax amount.

100% of the referral payout will be paid to the referee in the payroll post completion of 90 Days by the referral in the organization. The payment timelines will follow below mentioned guidelines

Every employee joining IBM through the ERP program will need to undergo a background check as per the usual IBM process where referrer will be entitled to the ERP only for cases where the referred employee has successfully cleared the background check. In cases where the referred employee has not cleared the background check but the ERP has been paid to the referee, the ERP will be recovered from the referee in subsequent payroll.

In the event that the referred employee is absconding from work, any Referral payment applicable will be withheld until the employee resumed work. If the referred employee does not resume work, referrer shall be deemed to have waived his/her right to the Referral Payment.

IBM retains the right to reject referrals, if, in IBM's sole judgment, too many candidates have been referred by the same Referring IBMer.

User Guidance

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IBMers should refer candidates who are known through personal or professional network, 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 social networks 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 lead to disciplinary action including termination.IBM Employee/ Referee while referring candidates must submit a referee declaration (frontline and support positions) / 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: ___________________

Round One network

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Round One is a first of its kind internet platform that connects jobseekers with company employees so they can interact and earn job referrals, it aim to create a meritocratic and transparent system which levels the playing field by removing the need for 'contacts'. 

Round One Network Pvt Ltd, (www.roundone.in) a Delhi based internet platform started by INSEAD MBA Nishant Mathur, completed its beta trial and launched services in the year 2012. Round One’s unique model enables jobseekers to register for unofficial phone interviews with employees in a company, and earn a job referral from them.

Employees at over 120 companies, including Accenture, American Express, Bank of New York Mellon, Capital IQ, Deloitte, Google, Evalueserve, HP, Infibeam, JM Financial, McKnsey, Nielsen, Samsung, TATA Motors, and ZS Associates, have interviewed 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 company

he/she interested in. If the request is accepted, the candidate has to pay fee and speaks to the employee over the phone. If the employee is satisfied with the job seeker’s credentials, the employee refers the candidate to the HR department.

Secondly job seeker is allowed to connect with the referrer over the phone only after the amount is received by round one. Since the referrer would already have screened the job seeker’s profile by the time they talk, 80% of the job seekers are referred after the conversation. In case they are not referred, their fee is refunded.

Recommendation in round one increases an employee’s chances of getting hired by as much as 10 times. Where Mathur cites a 2010 report by CareerBuilder, which says 69% of organisations have a formal employee referral program. It also gives referees “round one point” which Mathur likens to frequent flier miles. “They are given 500 points worth Rs 100 for each person

According 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 lies between 20-35 years age as mentioned by the company

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Round One’s primary method of marketing so far has been social media, especially LinkedIn. In the past couple of months, the company has started search engine optimisation marketing as well. it earns revenue from the one-time registration fee of Rs 100 and the additional fees (from Rs 500 to Rs 900, depending on how experienced the job seeker is) job seekers pay to interact with referrers

The revenues of round one have been growing at 25% every month. Company is also exploring a model where it can get companies to sponsor interactions. “Companies benefit from referrals as well and looking for expanding scope of its services by adding a networking platform and to connect with students and universities

Other outstanding referral features from other companies:

Acumen Solutions

Rather than the traditional passive approach, targeted referral percentage goals are set for each department in order to increase healthy internal competition. They provide a toolkit to educate their employees how to more effectively network. They celebrate referral successes publicly at all major company events.

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Microsoft

Microsoft raises the bar on employee referral related branding with their "Spreadthelove" website. This site allows Microsoft employees to "write up" their own individual story about their career with Microsoft . Employees can then share the web link and "spread the love" with targeted friends, family and potential referrals. Microsoft has increased its process effectiveness by ensuring that every referral is contacted first by an employment specialist, which then introduces them to a recruiter that will manage their experience moving forward.

Tata Consultancy

Adapted a marketing/CRM model for its referral program (i.e., the company offers a 24x7 referral help desk with a toll-free number). Another component allows newly hired candidates who have not yet joined the firm to refer their former colleagues (in order to capitalize on their "top of mind" knowledge of their networks in their previous organization).

They also instituted a "Rapid Hire" process where resumes were collected at referral desks that provide "on the spot" screening followed by preliminary evaluation and instant feedback. They also offer early bird & spot prizes as well as contests between business units to foster a competitive mindset around referrals. The metrics demonstrated (as many other firms have) that referral turnover rates during the first year are significantly lower than traditional 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 the

employer with a source of passive candidates, those workers who are not actively seeking new jobs. This not only expands the employer’s pool of potential candidates but also tends to produce higher-quality candidates.

Candidates referred by employees also tend to be of higher quality because the 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 a position. Referring a string of unqualified candidates reflects poorly on the referring employee’s judgment, which may affect his or her own career prospects.

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The usual monetary bonus paid to a referring employee for a successful referral can be a significant morale booster. It reinforces the tendency to refer high-quality candidates to one’s own company, even when no positions are available. This helps to establish an ongoing recruitment process.

Employee-referral programs can replace more expensive recruitment channels such as newspaper advertising, employment agencies, job fairs and so on.

Employee-referral programs are especially effective in the case of highly specialized positions that might be difficult to fill through conventional channels. People tend to associate with others in their professions, which gives them access to specialized or rare talent.

PITFALLS OF EMPLOYEE-REFERRAL PROGRAMS:

There are some aspects of employee-referral programs that can cause problems for a company. Some are subtle, while others, like lawsuits, can literally slap a business in the face.

Overreliance on an employee-referral program can lead to underrepresentation of certain protected groups in a company’s job-applicant pool. This can add credence to charges of employment discrimination from rejected candidates.

Also, some competing businesses may retaliate against your company for stealing their happily employed workers via employee-referral programs.

Excessive reliance upon an employee-referral program can lead to an inbred organization that lacks breadth of ideas, and it can foster a "stick-together" attitude that masks underlying problems in organizational behavior. Relying too heavily on an employee-referral program can also create cliques within an organization, 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 the company.

Overly restrictive bonus qualifications or excessive qualifications for employee referrals can lead to disillusionment with an employee-referral program. Under such circumstances, an employee-referral program may actually become a source of employee discontent.

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Overall, the benefits of employee-referral programs decisively outweigh the potential pitfalls. A well-designed and highly visible employee-referral program

is a critical part of any company’s recruitment strategy. 

CONCLUSIONS: It’s safe to say that every company/business has its own Employee Referral

Program, whether formal or informal, that they promote to varying degrees at various times.  Larger companies with hundreds of open positions, in some cases, have a full-time employee dedicated to running and optimizing their ERP. Smaller companies that hire a few people a year often rely on their employees to refer candidates for those position

A good referral program will have many benefits, both in cost and the time savings

LEARNING OBJECTIVE:

This topic has made me to learn about employee referral program and how it help the company in recruitment process

Employee referrals provide a win situation to all the parties involved – Employer , Employee and the Candidate

More and more firms are resorting to employee referrals and are reaping the benefits.

BIBILOGRAPHY :

https://india.jobs.accenture.com/ http://www.referralrecruitment.com/home/accenture http://www.ere.net/ business outlook 2013

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