BANGALORE | NEW DELHI:India Inc is actively practicing a vital it lesson learned during the economic slowdown; they don’t have to depend on outside agencies for finding the right person for the right job; it can just as well be done in-house or through referrals. The payoffs:A better match, more conversion rates from interview to job offers, better employee loyalty, office camaraderie and above all, cost savings.
Fourth largest IT employer Cognizant Technologies has increased hiring through referrals by 15% in the past three years. Today, referrals constitute a good 40% of Cognizant’s lateral hiring. vis-a-vis a 10% of the same level from recruitment firms. “Our dependence on recruitment firms has gone down by a similar proportion,” says Satish Jeyaraman, AVP Human Resources (HR) for Cognizant Technologies. Only niche skill sets and some middle level employees are hired from agencies. The $4.5-billion company has found candidates who join through the referral programme stay on longer, especially at senior levels, than those who join through other recruitment modes. And as another by-product, referrals have led to better camaraderie within the organisa-tion, says Jeyaraman. Firms like LG, which were once heavily dependent on recruitment firms, have also changed their strategy. Three years ago, 70% to 75% of hiring was done with the help of consultants, but last year, their share dropped to about 30%, says HR & MS head Umesh Dhal.
The company now uses placement consultants, that too, executive search firms, only in case of crucial top management positions. Dhal attributes the change to the IT revolution. “Candidates get access to the company website and other means of recruitment sitting at home. It makes the process simpler for both the company and potential hires,” he says.
“From an employer’s perspective, it helps in finding the right person with the right skills and building a stronger commitment with employees while for the employees, the incentive on referrals is appreciated as they support in talent acquisition,” says Accenture’s HR head Prithvi Shergill. Referrals from within the organisation, alumni associations and ex-employees are easier on the company’s coffers too when compared with recruitment fees. Companies also save on retention fees given to a consultancy, which is typically a third of the cost to company for the selected candidate.
Biotechnology firm Biocon’s savings per employee during the hiring process go up to 51% per employee, by not hiring from agencies. And if the employee is senior, then savings are at 67%. Besides the monetary aspect, conversion ratios too are higher when employees are brought on board directly.
Recruitment firms have often not given detailed job descriptions to candidates, says Adil Malia, HR head of Essar. This leads to a mismatch, which is eliminated by company officials dealing with the candidate directly.
FMCG player Pepsi hires from internal job postings as well as those on social channels, portals and websites. Up to 53% of the company’s employees come from internal job postings, while 47% are external, says India head of talent acquisition, Nagina Singh. Out of the external postings, 87% of employees are hired through search partners, 4% through employee referrals and 11% through sources like portals.
The referral programme, started four years ago, was successful in getting Dabur its senior managers. There has subsequently been a 20% decline in numbers coming from hiring vendors, says A Sudhakar, HR head. A year-and-a-half ago, the company started referral programmes for junior employees too. Up until now, the firm has hired 408 employees through referral programmes, of which 30 belong to the management cadres. The desperation to get candidates has led to an increase in employee referral incentives.
In 2010, Wipro doubled its referral amount to Rs 40,000. Infosys too said its dependency on consultancies has gone down by 35% to 40%, and 61% of its 5,212 lateral hires were from internal references.
However, staffing firms and search agencies do not believe business has been hit in any way. Staffing firms and those who place candidates between 3-8 years of work experience are facing reduced demand, says Srinivas Nanduri, partner board and leadership hiring at search firm Maxima Global Executive Search International. The innumerable small recruitment firms that open shop without understanding job requirements are to blame, he adds.
“There is no regulation, and their inability of meet numbers and get the right candidates has a domino impact on the entire staffing industry,” he adds. However, he says, search firms are growing at 25% every year because there are companies that would rather have agencies figuring out the best matches for them.
Staffing firms refute any decrease in business too. Volumes have increased by 45% in 2010 from the previous year, claims Manpower Consultants, expecting a similar growth this year. “There has been a 20% dip in the operating margins of the company and this is because of the recession, during which companies were cutting costs,” says Namr Kishore, head of marketing for the firm. Now, with aggressive hiring back across sectors, staffing firms believe their industry is back on track.