3/4/2011

India Inc Looks Within for the Right P

Publication: The Economic Times Mumbai;Date: Mar 4, 2011;Section: Career & Business;Page: 8

STANDING ALONE: EASING OUT

DEPENDENCE ON AGENCIES
India Inc Looks Within for the Right People
Referrals, internal job postings become the preferred mode
of employment as companies discover they can ensure cost
savings, better matches & employee loyalty
DEVINA SENGUPTA & MAHIMA PURI BANGALORE | NEW DELHI

India Inc is actively practising a vital it lesson learned during the economic slowdown: they dont 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 Cognizants
lateral hiring. vis--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 byproduct, referrals have led to better camaraderie within the organisation, 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 employers 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 Accentures HR head Prithvi Shergill.
Referrals from within the organisation, alumni associations and exemployees are easier on the companys 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 Biocons 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 companys 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 yearanda-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

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India Inc Looks Within for the Right P

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.
Internal Scan
Companies are relying less on agencies now. Heres a look at routes theyre taking
LG

Nearly 70% of hiring done through recruitment firms three years ago. Now just 30% done through this route

Placement consultants
used only for filling top management positions
COGNIZANT

Hiring through referrals up by 15% in three years

Referrals constitute
40% of Cognizants lateral hiring

Recruitment firms supply 10% of lateral hires

Candidates who join the company through referrals found to stay longer, especially at senior levels

Referrals have led to better camaraderie

BIOCON

Savings per employee during the hiring process at 51% per employee by giving agencies a skip
PEPSI

53% of employees come from internal job postings

Of external postings, 87% hired through search partners, 4% through employee referrals and 11% through
portals
WIPRO

Doubled referral incentive to Rs 40,000 in December 2010

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INFOSYS

Dependence on consultancies has gone down by 35%-40% since 2007-08.

DABUR

Has seen a 20% decline in numbers from hiring vendors

Referral programmes
for junior employees started just over a year ago * Firm has hired 408 employees through referral programmes, of
which 30 belong to the management cadre

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