HR leaders are relying on employees to play matchmaker, giving them points to find the perfect fit in the company. But how effective is the programme? Susheela Menon reports.  

In a market where the right kind of talent is most sought after, companies are testing and trying various modes of recruitment.

Employee referral schemes are becoming increasingly popular as effective recruitment tools though they sometimes throw up challenges that the HR fraternity is actively dealing with. Are referral programmes worth all the effort?

Fast and efficient

Celeste How, senior director of HR, Four Seasons Hotel, Singapore, says that referral schemes are the best modes of recruitment for the hotel as it helps evade the process of weeding out candidates from the masses so efforts can be channelled into more structured and comprehensive interviews. She says that referrals are the hotel's most important source of recruitment. "We do not actively engage in open job placements through advertising as it is harder to sieve suitable candidates," How says, adding that word of mouth is always better.

She explains that once the company identifies potential employees, each is put through a "rigorous" four-step interview process culminating in a meeting with the hotel's general manager. "We recruit an average of five to six staff per month from employee referrals."

How believes that such schemes generally work across the board for all positions but "the four-step interview process is still mandatory for all".

How says that Four Seasons assesses its recruitment strategies through staff retention figures, and the company's staff turnover has been consistent and "significantly lower than the industry average".

John Holding, vice-president (HR), Nortel Asia, says that a referral programme is an excellent tool to help find talent quickly in the market at all levels. "The key is to ensure that whether referred or not, all potential employees are subject to the same degree of rigour as they move through the selection process." He adds that Nortel's programme has done well for the organisation.

"Employees recommend people whom they know will contribute to Nortel as a whole." He says that approximately 30% of Nortel's new hires are recruited through the company's HUNTER (Help Unearth New Talent Employee Referral) programme, but the percentage varies from region to region. "For example, most of our graduate employees are sourced directly from universities and not through this programme. However, they do recommend people once they join Nortel."

Jaclyn Lee, senior vice-president, Group HR, Certis Cisco Security, says that referral schemes offer a cost-effective means of attracting applicants and help companies avoid advertising or agency fees.

"Referral candidates often come to the company with more realistic expectations and can provide a better cultural fit," she says, adding that Certis Cisco has recruited approximately 1,000 employees through its referral scheme, which was introduced in December 2005.

"We are convinced that referral schemes are effective, especially for non-management positions that focus on mass volume recruitment."

Lee also says that referral schemes can be effective for certain levels and types of positions, depending on business needs. "Other recruitment tools, such as online ads, print advertising, head-hunters, may be more effective in terms of both recruitment and employer branding, which referral schemes may be unable to address."

Rules of the game

Lack of diversity in the workplace or unclear rules may botch up the success of any referral scheme a company may have. There are also cases where new hires are mistaken in their assumptions regarding the company and its management. How do HR leaders tackle such problems within the scheme?

"You need to keep the reward high enough to motivate employees to want to recommend somebody who will contribute to the organisation, but not so high that it turns them into full-time recruiters," Holding says. He adds that many of Nortel's employees are referring talents not because of the reward but "because they know what Nortel needs and what Nortel can offer its employees".

Lee thinks one of the greatest concerns is that heavy reliance on employee referrals could limit diversity in the workplace. She also adds that there is a chance employees might abuse the scheme by advertising for candidates and passing them off as their referrals. "We constantly review the scheme to cater to changes in business needs," she says. "For example, we may tweak the scheme to encourage referrals from a certain industry or put in additional requirements as needed by the business."

Holding says that all potential employees are evaluated objectively regardless of how they are introduced to Nortel, so that diversity is maintained. "For us, diversity is about systematically tapping into the power of Nortel's workforce that lives and works in over 100 countries around the world. We believe that a wealth of innovative ideas will arise from a diverse workforce, and those ideas will transform into action and success for our customers and employees."

He adds that talents who are referred will need to go through the same selection process as everyone else so that the company ensures that it brings in a diverse group of people with fresh and new ideas that will add value to it.

How explains that Four Seasons has a strong culture of promoting from within and each Four Seasons employee undergoes six-monthly reviews where career plans are discussed and put in place. With 76 properties and over 30,000 employees worldwide, the company has a talent pool to draw upon and it does so by posting opportunities across the company. "We don't have an issue with lack of diversity, as there are opportunities for cross-country and cross-departmental exposures or attachments if an employee expresses a desire for that. This is healthy and a great motivational factor."

Lee says that Certis Cisco publishes the rules of the scheme and the respective award for each type of position in various staff communication channels. "The recruitment team also conducts talks on the referral scheme during appropriate internal staff forums." She adds that besides this, all potential candidates are channelled to the company's Corporate HR Department for recruitment processing and this gives new employees an opportunity to clarify doubts before they are hired for their positions.

Holding says that Nortel trusts that its new hires join the company not just because of the opportunities it offers but also because they believe it is a "great company to work in".

"We also ensure that questions and, or misconceptions regarding the organisation are duly addressed during the selection process of a new hire." Holding says that the company encourages questions about Nortel and that it has a very clear "employee value proposition".

He says, "Our employees have a clear understanding of who they work for and what we value," and adds that this understanding is reinforced through the induction process, leadership training and performance management. "It is underpinned by our corporate values which are also fundamental to the work our employees do and the way they interact with each other."

How explains that Four Seasons has an open communication plan in place across the company and news that affects any employee is transmitted and filtered across to all through a series of meetings, including communications meeting for department heads, direct line meetings for line staff and intra-departmental meetings.

All about strategy

The efficiency of any programme depends on how a company implements it. Employee referral schemes are no different. Their success is determined by the effort and ideas that go into implementing them.

How says that Four Seasons has an incentive scheme in place. "For every referral, an employee is rewarded S$10, regardless of whether the referred candidate makes it in the preliminary interview. When a candidate has successfully completed the required probation period and is confirmed in his/her position, the employee who refers the candidate is rewarded a further S$350 for normal vacancies and S$500 for critical vacancies." She adds that incentives work better as the onus is on the employee to refer people they deem suitable for the position. "Great emphasis is placed on identifying candidates who possess the innate qualities of friendliness and helpfulness, and who have genuine interest to serve, which is what our industry is all about," How says, adding that the hotel provides a comprehensive training plan to equip its employees with the necessary skills and knowledge to perform at their optimum level.

Holding explains that Nortel's employee referral scheme comes with a set of eligibility criteria and set reward amounts. "We publicise the HUNTER programme around the offices to our employees through the use of posters at the bulletin boards, employee newsletters and regular team meetings, and encourage them to recommend people they know."

Lee says that Certis Cisco has employed a multi-pronged approach. "Our comprehensive staff recommendation scheme covers various positions in Certis Cisco." Lee adds that the rules and the respective award for each type of position are explained clearly in the application forms and published in the company's Corporate Human Resources (CHR) portal. "New employees are also briefed accordingly during their induction programme." She also says that besides this, a "hot job" list is also sent to all staff via the company's internal e-mail system to keep them posted of the positions available and encourage them to participate in the scheme.

Bringing it home

Lee says that companies can assess the effectiveness of their recruitment strategies by evaluating their staff attrition rate and measuring their recruitment costs. She says that Certis Cisco has tracked the effectiveness of its schemes by measuring the attrition rate of staff that is employed via the scheme vis-à-vis the cost incurred for the referral scheme. "This is then compared against similar positions for which we have used other recruitment channels and the costs incurred."

"Some companies have their recruitment strategies benchmarked against the metrics devised by global HR advisory groups such as the Hackett Group," Holding says, and adds that he is of the view that by using these and other metrics, a company can tell if its recruitment strategies are up to world-class standards.

"I believe that one of the best ways to assess the effectiveness of recruitment strategies is tracking the time taken to fill up a vacant role: the shorter this is the more effective your recruitment machine must be." He says that this is not to say that the quality of new hires will be compromised. "Both the attrition rate of new hires and their productivity levels must be assessed in order to get the full picture."

Holding points out that in "a best case scenario", no role would ever be vacant, and in an effort to meet this challenge in Nortel, the company views recruitment as one element within the whole talent management ecosystem. "We look beyond just the recruitment process and weave it into our total talent management cycle to minimise and, preferably, eliminate the risk of a critical role ever becoming vacant."

He adds that Nortel places great importance on ensuring that schemes implemented are not only useful but also effective. "We set targets for how we use HUNTER, and we compare overall recruitment costs along with time to fill and other metrics in line with the Hackett benchmarking studies. We have made minor changes to the scheme since its inception to make sure that it suits the circumstances at the time it is being used, but, in general, it is much the same as it was. We are glad to say that it has been a great success."

Employee referral schemes have become one of the many tools that companies are using to stay on top in today's aggressive marketplace. As with all programmes and plans, it has quite a few problems that HR leaders are trying to face head-on. Abuse of schemes by employees or diversity issues may hinder effectiveness but with good implementation and management, referrals can actually help a company gather and retain the best talent in the market.

As Holding puts it, if you do not have an effective employee referral scheme in place, you will not be able to have the same access to the talent pool that your competitor does. "In an ever more competitive business world, nobody can afford to do that."