Workplace Issues

Investing in Interns Can Produce More Than Interim Benefits

How businesses can use internships – paid and unpaid – to boost short-term productivity and lay a foundation for long-term growth.
Bonnie EvansJuly 2, 2012

Internship programs can be a relatively inexpensive (and sometimes free) way for businesses, especially small-to-midsize ones, to hand off the dirty work they need to get done, such as data entry and filing. But recent high-profile lawsuits from unpaid interns against Hearst and Fox may have businesses second-guessing the whole business of employing interns.

In order for an organization to use unpaid interns properly, the program must meet the Labor Dept.’s new guidelines of the Fair Labor Standards Act. Most importantly, the unpaid internship must be for the benefit of the intern, not the business. Also, the work performed by the intern cannot displace a regular employee. If, however, companies can adhere to these guidelines, engaging and possibly even paying interns may afford an opportunity to avoid hiring full-time employees (and incurring the expenses that come with them) in this still-recovering economy.

Internships that follow the first rule — that they are educational — can benefit the business as well as the intern. Rather than have their interns make coffee and make deliveries, as Searchlight and Hearst allegedly did, The Pohly Co., a media consultancy and custom publisher, gives its unpaid interns “real, professional-level work,” says associate editorial director Karen English. The internships are a two-way street, she says: Pohly interns earn college credits in journalism and marketing, and Pohly not only gets work done for free but also lays the groundwork for a future entry-level workforce. Pohly’s pool of interns, English says, is the first place the company looks to for new hires, as they’ve already demonstrated the ability to do the job.

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Some schools value internship programs more than others, says English. It is the student’s responsibility to provide the school’s requirements and paperwork to the business in order to receive academic credit. The business must meet those requirements, whether that means hours worked or tasks performed. But English says that in her experience, it’s rare for schools to follow up on the legitimacy of the business or the internship program, which can lead to the aforementioned problems at Hearst and Fox.

That said, now may be an ideal time for students and recent graduates, as well as businesses, to benefit from internship programs, paid or unpaid. According to the latest Labor Dept. job report, only 69,000 new U.S. jobs were created last May. Combine that with the fact that 41% of young adults between the ages of 25 and 29 are moving back to their parents’ home due to economic stress (the so-called Boomerang Generation), and you have a perfect match between businesses that are nervous about investing in human capital and a desperate workforce.

Grant Cardone, author of If You’re Not First, You’re Last, and host of Turnaround King, a reality show in which he rescues failing businesses, likens unpaid interns to people auditioning for shows such as America’s Got Talent. He believes internships are a great way to get a start, providing the interns work as if they’re competing for a grand prize. “It’s an opportunity to really shine,” he says.

Cardone believes internships are actually best when they’re unpaid, arguing that people who are willing to work for free are driven to work harder and learn more than people who are minimally paid. English agrees, saying that because Pohly’s internships are unpaid, “[students] have made a commitment.” The internship experience should be educational, not financial, says Cardone. The learning experience an intern can get from him, he says, is worth “more than I could ever pay them.”

While Cardone believes low-paid internships create a “whiner mentality” that gets in the way of hard work and learning, organic-beverage producer Honest Tea believes paying interns inspires them, and says that unpaid internships are contrary to its organizational philosophy. Honest Tea is one of the fastest-growing companies on the “Inc. 500” list, with 215% growth in the past three years and $71.7 million in revenue. Its Road Warrior internship program is highly competitive, says vice president of human resources Debra Schwartz. “Interns have to have the passion for entrepreneurialism, for marketing, for building a brand,” she says. Road Warriors go to new markets and build the brand by handing out samples on street corners and providing educational information on organic products.

Honest Tea says that by paying its interns it deepens its pool of potential talent by including people who can’t afford to work for free. If the company ignores those people, Schwartz says, “we’re missing out on their talent and they’re missing out on the opportunity to learn what an entrepreneurial company is all about. Our program is not just about having interns for the summer but about feeding our staffing pipeline. About 90% of our Road Warriors have come back in some capacity.”

Honest Tea, which is owned by Coca-Cola, has never run an advertising campaign. Schwartz attributes this to the work the Road Warriors do in spreading the word promoting the product.

“What we gain in talent certainly pays for the investment,” Schwartz says. “Interns are fully indoctrinated into our world: what we stand for, our mission, our full product lines, and our core consumer. They are true ambassadors.” And to Honest Tea, that’s worth paying for.

Bonnie Evans is a CFO intern. She is paid.