Social Networks, Referrals Are India Inc’s Hiring Hotspots

Social Networks, Referrals Are India Inc’s Hiring Hotspots

Employee referrals and direct hiring channels such as LinkedIn, Facebook, Twitter and company websites, considered fads at one time, now contribute 70% to 90% of hires for companies.

The once-dominant HR consultants now hire only for critical and niche roles, adding just up to 20% of the overall pool of hires and resulting in huge cost savings for organisations.

“Due to the slowdown, companies have turned more aggressively towards internal and cost effective channels. It works better as they can wait for a good fit, unlike in a booming market,” says Shiv Agrawal, MD, ABC Consultants. Sectors where these channels are used more often are information technology, IT-enabled services, telecom, BFSI and start-ups. And the benefits work both ways.

Employees too are motivated to refer others due to cash incentives, rewards in kind, the satisfaction of getting someone a job and the opportunity to work with like-minded people. The trend has picked up over the past two to three years, post the Lehman Brothers collapse, as companies began looking for cost-effective, efficient avenues for hiring.

If Aircel gets more than 90% of its hires through referrals, LinkendIn, Facebook, direct walk-ins and unsolicited emails, Cognizant gets 80% to 85% of recruits, Crisil 75% to 80% and EXL, 73% through non-consultant channels. Companies like Aircel report saving up to 70% in recruitment costs annually.

“Most companies have institutionalised the process for hiring across levels. People mostly scout for talent through their links with business heads across organisations on LinkedIn, for instance, and ask for referrals amongst their contacts,” says Mohinish Sinha, leader, leadership and talent practice, Hay Group, India.

“Employee referrals work faster than consultants,” says Aircel’s chief human resource officer, Sandeep Gandhi. The turnaround time for closing a position is lesser in case of referrals as recruiters don’t need to spend time convincing the candidate, he adds. 

Aircel has hired around seven candidates for positions of GM and above in the past three to six months and has reduced its dependence on HR consultants for filling vacant positions to 7% from 30% in 2010. Of the 90 positions that get filled every month, 45 are through referrals.

Across organisations, the incentives for referring candidates are lucrative. Aircel offers a cash reward of Rs 10,000 per hire. EXL (with 43% coming through referrals) gives a cash reward of Rs 4000-15,000, gold and silver coins and cars.

Cognizant’s referral programme, called ‘Bring Another You’, contributes 40% of the total pool of employees, and offers cash prizes of .`5000-50,000, paid vacation, cars and even double referral money for niche, hardto-find skills.

At Cognizant, recruitment through referrals has increased by 10% to 15% in the past three years. “Referrals help shorten the due diligence process as compared to other modes; retain the organisational culture as most referred candidates have a fair amount of background knowledge about the company, and get people with the right skills and experience in a relatively shorter time,” says Sriram Rajagopal, vice president, human resources, Cognizant.

Referrals provide higher joining rates, better performance ratings and higher interview-to-offer conversions as compared to other channels of recruitment, he adds. “The conversion rate for offers made through our employee referral programme is 10% to 15% more than those made through recruitment firms,” says Rajagopal.

Besides a more focused use of recruiter and management time, candidates – especially at senior levels stay on longer – than those who join through other recruitment modes, he says.

Other direct channels such as company websites and walk-ins too have been effective in bringing down the dependence on HR consultants for recruitment. At EXL, they provide 29% of candidates. “For the past three years, we have been able to sustain a very high level of direct hiring,” says Madhavi Dahanukar, SVP & head of HR, global business delivery & center head, Pune for EXL.

Rating agency Crisil gets almost 35% of its hires through postings on its company website, more than the 30% it gets through referrals. The company has designed an interface and an automated CV screening process.

“If the design is not efficient, recruiters could get lost in the sea of resumes,” says G Ravishankar, president, HR. Despite the relative success of direct hiring methods, it’s not the end of the road for staffing and placement firms.

“Direct channels have their limitations. Employee referral is a limited pool of resource, and while social or professional networks have grown phenomenally, at some level, crowded networks don’t work effectively,” says K Sudarshan, managing partner, EMA Partners International, India.

While direct channels are more effective at the entry and middle levels, at the senior level, “people do not communicate about opportunities easily to strangers, but are more comfortable with search firms,” he adds.

The market is currently facing a low tide with companies using internal hiring sources to the fullest but when the tide turns, fishing in a small pond (referrals and direct channels) will not work much, says Manish Sabharwal, chairman, TeamLease. “Most people, especially at the top, are passive job seekers and it needs a lot of ground work to convince them for a switch.”

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