Improve the ROI of Internships

Aug 27, 2014

imageIt is becoming more difficult for companies to convert interns into full-time hires. Companies need to re-assess how they structure these programs in order to maintain a good return on investment.

The most recent sources of hire survey by CareerXroads found that of the interns who companies wanted to hire at the end of internship programs in 2013, only 32 percent accept their offers. In the words of the survey’s director, Gerry Crispin, “I’m not sure training two thirds of my interns for someone else is good ROI.”

This low offer-acceptance rate may present a unique opportunity for companies to differentiate themselves, and to benefit from the new generational factors that influence an interns’ decision to join a company full time.

Focusing on Feedback and Technology

Past research has shown that companies that offer better compensation are better at converting full-time hires from their internship programs. Recent research, however, suggests that there are two new priorities for students and recent graduates entering the workforce: the importance of giving feedback, and of an appropriate approach to technology.

The importance of these factors is apparent in the results of the latest LinkedIn survey of 3.5 million members: the companies that are most successful at making full time hires from internship programs are technology firms, and large accounting and consulting firms with well developed intern training programs (see graphic above, click to enlarge).

Today’s interns are digital natives, who have grown up with a “bitesize culture.” To quote the recently published Generation Z study by Happen Ltd., this new generation of interns “will gravitate to people and institutions showing the ability to care for them, almost in loco parentis.” As such, the best internship programs will:

  • Clearly break down project priorities
  • Have a continuous dialogue, with frequent reviews
  • Emphasize work that involves using technology, particularly through projects that involve research and analysis.

Social Media Policy and Home Devices

To engage with the new generation of interns, companies must also review the devices that interns are given access to and expected to use. Surveys have shown that four out of five college students want to choose their own device for their jobs. The majority of young people expect access to corporate information and networks from their home computers, as well as from mobile devices.

Interns are also increasingly concerned with social media policies. A recent Cisco report found that 56 percent say they either will not accept a job from a company that bans social media or they will find a way around the policy.

The devices and access that are given to interns send a signal about your company’s attitude to technology — something that is increasingly important to young people. Surveys have found that up to three fourths of today’s interns want a career working with/involving cutting edge technology, with 65 percent believing that tech careers offer better long-term job prospects.

The Impact of Retention

Understand what makes interns stay longer. Improved retention is one of the main benefits of hiring interns relative to other hires.

image (1)After a year, nearly 86 percent of those who have taken part in an internship at the hiring organization are still on the job, compared with about 81 percent of those who didn’t do an internship. This improved first-year retention may be a result of the internship reducing misperceptions about the full-time role. Over five years (see graphic, click to enlarge) this difference is amplified to 55 percent vs 44 percentrespectively — something that may be attributed the the improved cultural fit that an internship can help both identify and foster. These differences have a substantial implication for a cost-benefit calculation of an internship program. Consider this simplified example:

  • Your costs of hiring a new employee are $15,000
  • You spend $2,500/year on employee training
  • Their starting salary is $50,000, growing at 10 percent a year
  • The benefit/revenue this employee brings to the company grows annually from $100,000 a year in year one to $200,000 a year in year two

In this example, the difference between costs and benefits means that every intern who converts to a full-time position would save the company almost $40,000/hire (present value) within five years.

These savings may be greater if this example also included additional long-term savings from an internship program, such as decreased costs for college/general recruiting, and from the program converting high-performing candidates.

Hiring for Cultural Fit

Companies have become increasingly aware of these benefits, and 2014 is set to see another dramatic increase in internship programs. Recent surveys suggest that 56 percent of companies are planning to hire more interns, with three in four companies with over 100 employees running such programs with the intention of making full-time hires.

In order for this growing set of companies running internship programs to see the long-term benefit of higher retention, hiring managers need to ensure that they attract the kind of interns that are likely to engage with company. To do this, companies need to effectively project their company culture — before, during, and after the program. In order to achieve this within a typical 10-12 week time frame, companies need to ensure that interns get sufficient interaction with people at the company in and out of work hours.

In the end, the most effective way for companies to improve ROI for internship programs will be to use them as a stepping-stone to identify long-term hires. To do this companies will need to find ways to engage with their future employees at every stage of their candidate experience by bridging the emergent generation gap.

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