Cash and Prizes Are Yours...If the Referral Is Right!

By Gail Repsher Emery, Staff WriterPat Mercado didn't believe the call that came from SRA International Inc.'s Fairfax, Va., headquarters July 12. You won $50,000, a friend told her. "I said, 'Yeah, sure, I better get off the phone because the [chief operating officer] should be calling me.' I didn't believe him," said Mercado, San Diego-area manager for the systems integrator.The $50,000, drawn in a company lottery, was the grand prize in SRA's annual employee referral program. Employee referral programs have emerged as a prominent recruiting tool in many information technology companies, human resources managers and experts said. The programs reward employees with cash and prizes worth hundreds or thousands of dollars if their referrals are hired and remain on the job a specific period of time. In exchange, employers get new workers who've been pre-screened for their skills and fit within the organization's culture at a price far less than they'd pay a recruiting firm. Recruiters can charge up to 30 percent of the new hire's annual salary, far more than a home computer or Palm Pilot. Five years ago, employee referral programs weren't heavily promoted, said Marjorie Bynum, vice president for work force development at the Information Technology Association of America in Arlington, Va., a trade group that represents companies in the IT industry.But in a time of record low unemployment and job creation in the technology sector, "You're going to begin seeing more of it," she said. "Now, they're much more important and useful, because companies are having a heck of hard time ... yielding skilled workers."According to a 1999 survey of 279 members of the Society for Human Resource Management, the top five recruiting methods for IT workers are Sunday newspaper advertisements, Internet job postings, employee referral programs, daily newspaper advertisements and search agencies.Companies that extensively promote their employee referral programs and make it easy for employees to participate are netting increasing numbers of new hires from them. At SRA, 22 percent of new hires in fiscal year 2000 came from the employee referral program. Director of Recruiting Kerri Koss Morehart said she expects that figure to jump to about 35 percent in fiscal year 2001.More than 40 percent of new hires in PricewaterhouseCoopers consulting practice came from the employee referral program in fiscal year 2000, said Caryn Perelli, director of human resources for the New York firm's Washington consulting group. SRA and PricewaterhouseCoopers started their employee referral programs in the 1980s to thank employees for referring their friends and colleagues. Back then, there was not a lot of buzz around the office about employee referrals, and the financial incentives for making them were not nearly as great. Thanks to extensive promotion, employee referrals have become a vital part of the firms' recruiting strategies and their company cultures as well. "You can't expect everyone to be a recruiter, but you can expect them to get good referrals if you give them the tools to do it," said Morehart, who has spoken about the programs to standing-room-only crowds at several human resources conferences.Those tools include regular reminders about the program via paycheck stuffers and e-mails, notification about job openings and the ability to track the status of referrals online.PricewaterhouseCoopers started its program 13 years ago, offering $2,000 for each successful referral. Like SRA, the consulting and accounting firm in recent years has increased its bonuses, included other prizes and begun promoting and tracking the program extensively. "In the last five years, we've had to get a lot more formal about how this works, quite frankly because we're a really large organization," Perelli said.Programs that are fun tend to be most successful, said Paul Villella, president and chief executive officer of HireStrategy, a recruiting firm in Reston, Va. Morehart took a tongue-in-cheek approach when she launched an all-out promotion of SRA's employee referral program in 1998. The campaign capitalized on tech workers' tendency to job hop. Aptly named "Make the Jump," it got SRA employees jumping to make referrals and new hires excited about jumping to the Fairfax company. Today, SRA's rewards range from $700 to $2,000 per hire, prizes are awarded for the highest number of successful referrals in each quarter, and several grand prizes ? such as a week-long cruise for four and Mercado's $50,000 ? are awarded at a highly anticipated ice cream social at year's end.The success of the programs can be gauged not only by the number of hires they net but also by how long the new employees stay, Morehart said. Workers recruited through the employee referral program stay longer than those found through any other method."This is the best source for retention," she said. "They have a built-in network, and they've been pre-screened for fit in the company culture. When they come in, it's like they've been here a while."Tim Atkin had an immediate network within SRA after a former colleague at the Labor Department recruited him 18 months ago. "I've loved it," Atkin said. As director of the Critical Infrastructure Protection Program, Atkin helps government clients protect their computer systems.Atkin had been hesitant to make the leap from government to the private sector, comparing it to jumping off a cliff. "It helped to have someone who was already at the company to make sure you're getting the true story," he said. "As you are jumping off the cliff, it's almost like a parachute. Everything I heard as I was interviewing was confirmed by the person I knew here. It wasn't a marketing shtick." The success of the 3-year-old employee referral program at GTSI Corp. in Chantilly, Va., has helped the company reduce its annual employee turnover from about 45 percent five years ago to 22 percent today, said Bridget Atkinson, senior director of human resources.Like Morehart, Atkinson found that employees hired through employee referrals stay longer than those hired through agencies, college recruiting or career fairs. "There's a better match even from the start," Atkinson said.The company's financial turnaround has also helped, she said. Three years ago, the company was losing money. In the last two years it has turned a profit, management has stabilized, and employees are more enthusiastic about making referrals."People refer good people. They are excited about working here," Atkinson said. "The company is doing well, and the program quite frankly is lucrative. It's a win-win for both parties."Employee Chris Kiernan agreed."Particularly in the past year, the company has really melded. Processes are definite, the management team is in coordination and the vision is clear," said Kiernan, senior director of civilian sales."If you feel good about something, you're going to be a lot more enthusiastic about talking to people about joining your team," he said.Mercado's windfall literally put a new roof on her house, but that's not why she made the referral. "I knew this person and knew she had certain skills I could use. That's always been my motivation: [recruiting] people I know who I would want to work with again," Mercado said.Workers at other companies said they feel the same way. "My first priority was to identify the technical person, because I knew it was going to help us in our mission. The money behind it was added incentive to be persistent in making it all take place," said Kiernan, who found a sorely needed systems engineer for GTSI.Kiernan got a substantial bonus, but his company would have paid a recruiter at least twice as much to find the same employee. Kiernan also got companywide recognition for his efforts."We had been in a search for an individual like this for more than nine months," said Kiernan. "In fact, when we got confirmation, [chairman and CEO] Dendy Young gave me a high five. It's a little out of character."