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Employee Referral Push Expands at Growing Texas IT Firm Improving Enterprises

by Jan 28, 2013, 1:25 am ET

Screen Shot 2013-01-25 at 1.15.22 PMA year ago, a company called Improving Enterprises was a finalist in the 2012 ERE Recruiting Excellence Awards. The software developer with then-148 employees had managed to get about 90% of employees from referrals and related programs, like its many onsite get-togethers. Most interestingly, it believed that people who were referred, but who didn’t join the company, had resulted in more than $3 million in additional revenue in the last two years. This calculation includes such things as whether the candidate ended up referring business to Improving Enterprises even though they weren’t hired. More on that $3 million figure in a minute.

Anyhow, that’s all kinda hard to top. The four-person recruiting team led by Gabriela Garza-Ramos told me on a call Friday that, a year later, it has.

Improving (as it’s often called informally within the company) now has 170 employees, and four offices nationwide, one through an acquisition. It says it’s now hiring a higher percentage of people from referrals than a year prior.

One reason for this continued success, Garza-Ramos says, is that she had the in-house IT staff build a better referral system. (I asked why she didn’t opt for one of the gazillion new vendors sprouting up in the referral area; she reminded me that this is a tech firm; indeed, calculations and reports and metrics are in the company’s DNA, including the CEO’s, who has degrees in computer science.) Using SharePoint, it built a tool for keeping track of who has been contacted and when, including not just the candidate but the employee who referred that candidate.

This week, it’s kicking off a new “Two by Tuesday”; the word is spread on Tuesday of key job openings, and people compete with each other as they refer friends and contacts. The company is averaging about 100 referrals per Two by Tuesday.

Improving Enterprises is holding user-group events; imagine, for example, 25 .NET people getting together for food and drinks. Those foods and drinks are paid for by the host. In 2012, 3,000 people attended these events.

The company is hiring more people — more than you see here, because multiple people could be hired to fit one job description. I hear it may make more acquisitions in 2013. Also, Garza-Ramos may hire another recruiter. “We need more bandwith,” she says, “even with the referrals.” Finding bodies is one thing, she says. It’s another to find IT skills, communications skills, the right attitude, and a willingness to go to different client locations; in such a spread-out state, that can take a while in the car.

Back to that $3 million figure I mentioned above — business brought in solely based on people not hired. I asked Improving Enterprises if are there any updates to it, and in a few minutes it came up with figures: $1.2 million was generated from the “not-hired” in 2010; $1.8 million in 2011, and a fresh $3.2 million in 2012.

This is basically new contracts awarded because someone left the hiring process with a good feeling, or at least good enough to tell his or her company that Improving Enterprises is a vendor worth looking at.

This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  • Keith Halperin

    Thanks Todd. Aren’t there companies with products and services to set up and manage the ER process like what Improving created on its own?

    Thanks,
    Keith

  • Todd Raphael

    Quite a few!

  • http://www.linkedin.com/in/jacobsmadsen Jacob Madsen

    What a story and what examples, loved reading every word of this.
    WOW and simply goes to show that there is more than words can describe power and opportunities in this. If they can so should more or less any company/org with approx 200 employees.

  • http://www.zao.com Ziv Eliraz

    With all due respect… our advice regarding taking upon yourself to build your own homegrown referrals platform is “don’t try this at home”… This case study is certainly the exception and not the rule (hence they rightfully deserve an award!). However, companies with 90% referrals and their own budget and know-how to build a referral platform are the extreme outliers, not the rule – so it’s very misleading to use them as a role model and an outright mistake to try and replicate.

    We’ve been working with many companies on referrals, and I can tell you that very few companies have the resources to develop their own platforms – and I’m not talking about 200 employee companies, but ones that are much larger…. It’s not just about money either – even if HR had the budget to develop their own platform, that simply doesn’t make sense compared to a vendor (yes, like us…) that builds a platform based on years of shared experiences of many, many clients…

    Builder beware ;)

  • Fareed Ansari

    90% of new employees from referral is approaching the cloning zone. 50% referral rate assures diversity necessary for new growth. 33% referral rate may be optimum split, with 33% direct (traditional) hires, and 33% contractor/virtual hires.

  • Todd Raphael

    In this case, “Improving” doesn’t have 90% of new employees come via referrals — it’s really that 90% of total employees on the staff have come through referrals. In its early days, closer to 100% of new hires came from referrals as it was putting the company together and now it’s a lower amount. But, your point is still a good one.

  • http://www.linkedin.com/in/jacobsmadsen Jacob Madsen

    @Ziv
    Indeed an extreme outlier example and to replicate probably both impossible and perhaps not to be advised to be done to that level.
    For me this a story of inspiration and aspiration, not saying referral to be to that percentage but aspirationally around 50% or so. Much can and is done in respect to.driving up referrals and I suspect we will see this increase over the coming years wth rates of around 60% not being uncommon.

  • Keith Halperin

    @ Todd: good to hear.

    @ Fareed: Interesting and plausible figures. Where did you get them from?

    @Everyone,: Anecdotally, ISTM that an ER rate of 40% or more is quite doable for larger companies if:
    1) The companies don’t suck so badly that only the desperate would want to work for them
    2) The powers-that-be aren’t so clueless as to *regard it as an employee’s “duty” and either don’t compensate it or do so at an almost insulting level, while often using 3PRs for hires.

    As an aside, companies should get active buy-in from the internal recruiters, so that an ER hire counts as much as any other internal hire, and not regarded like an external 3PR hire. Otherwise, we’ll basically regard it with indifference if not opposition, because it doesn’t “help” us and may actually “hurt” us.

    Cheers,
    Keith “Looking to Help Set Up EmployeeReferral Con” Halperin
    keithsrj@sbcglobal.net

    *perhaps they should also ask employees (particularly in sales) to provide sales leads as uncompensated “duty”, too?

  • http://www.SeanRehder.com Sean Rehder

    I think people are over estimating the difficulty on the “tech side” of building out an employee referral system/application. In my experience, the hardest part is finding a “human” resource to actually drive/own the program.

    The only company I’ve seen really dedicate themselves (outside this article, and I’m sure they are others out there) is Facebook. Sitting down and getting names..and then acting on that information seems a no brainer…but few seem to do it in an ongoing/systematic way.

    Want to kick start an employee referral program? Have your recruiters connect on Linkedin to all your employees…and then mine your now connected co-worker’s networks.

    Some people hide their networks on Linkedin, but most don’t.

    You can then filter your searches by their network and then by companies, skills, locations, etc. Then, include your co-worker in that active outward engagement for targeted talent.

    This way, you don’t have to wait for referrals…your recruiting team can be the “call to action” or kick-start the program.

  • Howard Adamsky

    “Finding bodies is one thing, she says.”

    Finding bodies?

    I wonder if I am the only person to find this phrase offensive.

    Fascinating.

  • http://www.zao.com Ziv Eliraz

    @Sean – it’s not that simple as connecting to you employees. If you can’t motivate them to act, you’ll be missing out on what’s in their head, that doesn’t go on linked in. Their linkedin connections are a great start, but without their input on how they actually FEEL about these people and their work performance, it’s just a list of contacts. Not to mention the contacts people have that are off linkedin (facebook, email, twitter, etc)

    Having a tech platform doesn’t replace the human element, it just makes the process *easy*

    The biggest problem companies have with managing their referral programs is that it’s not as easy as interfacing with a job board or an agency.

    A tech platform (or at least a good one…) makes engaging your employees and your extended, trusted business network, as easy as uploading a job description to a job board.

  • Keith Halperin

    @ Ziv Well-said.
    I’m just speaking for myself, but I think there’d be great value in a company that (in addition to effectively creating and managing the technical aspects of an ER program) could also provide consultants to help the company set up or improve their ER program, or outsource it completely if that were best for the client. Furthermore, I think this create-, implement-, manage-, or outsource-operation could be effectively done not only for employers’ current openings but also to create pipelines for future/ongoing positions, which many companies would like to do, but rarely have the bandwidth or resources.

    Cheers,

    Keith

  • Melissa Meeker

    From my perspective, focusing on the technology tool is less important (she said this is ONE reason) than what she says ‘feeds’ it. She has marketing programs, both internally (2 by Tuesday) and external (user groups) that are bringing in the contacts and referrals. Having exposure to around 3,000 technical people each year through a variety of programs is what to focus on.