IT Value

Gone but Not Forgotten

Big companies are using alumni-management software for recruiting, business development, and brand building.
David McCannApril 19, 2011

For a number of years after online job boards came along in the late 1990s, a big part of their appeal to employers was their low cost for executive recruiting compared with using headhunters. But now that they’ve proliferated to the point of being very “noisy” — the number of résumés to sift through is daunting — the cost of using them is rising.

One resulting trend is the increased use of social-media platforms to keep in touch with company alumni, with an eye toward possibly rehiring them or getting candidate referrals from them. Rehires and referrals are the two least-expensive ways to line up talent, human-resources professionals say.

Some companies use LinkedIn or Facebook groups to bring alumni together, but a handful of software-as-a-service vendors have emerged in the past year or two with products specifically designed for that purpose. Two of the best known are SelectMinds and Conenza, says Tom Eid, a social-media analyst at Gartner.

“Some of the larger HR-systems vendors also provide this sort of capability,” says Eid. “But that ties you to that system. The benefit of SelectMinds and Conenza is that they’re autonomous, you can access them quickly, and they don’t require a huge investment.” Also, they give users a higher degree of control over content and messaging than is typical with more mainstream social-media platforms.

Gartner estimates that no more than 5% of “enterprise” businesses (those with at least 1,000 employees) are using alumni-management software. That’s the primary market the vendors are targeting, since smaller companies with fewer alumni would derive less benefit. For SelectMinds, for example, the client list includes JPMorgan, IBM, Lockheed Martin, ADP, and Schlumberger.

Using an alumni network as a means of hiring former employees, or those referred by them, costs far less than other recruiting methods. Outside recruiters, for example, charge up to one-third of a new hire’s first-year cash compensation. According to Anne Berkowitch, CEO of SelectMinds, hiring ex-employees or referrals is 50% to 60% cheaper than the average for new hires. The strategy also produces higher-quality candidates because they come prevetted.

Catherine Coluzzi, global alumni relations director for the JPMorgan arm of JPMorgan Chase, declines to quantify the company’s return on investment from using SelectMinds as a recruiting tool, which it’s been doing for the past year. But she notes that there are other positive impacts besides lower recruiting costs.

For example, rehired employees need far less time to acclimate to the company’s environment and culture, meaning they can quickly begin contributing, says Coluzzi. Also, returning alumni tend to stay with the company longer, since they made a conscious decision to join an organization whose culture they were already familiar with. Berkowitch says the retention rate for returnees is about twice as high as for others.

But JPMorgan actually is hiring more people referred by former employees than the alumni themselves. About 60% of hires credited to the alumni program were referrals. “Alums are great at referring people, because they know the company culture and because their reputation is on the line when they refer somebody,” says Coluzzi.

For two years before JPMorgan started using SelectMinds for recruiting, it was using the software for other purposes. One was to boost its brand. Former employees of a number of the large financial-services firms the company bought over the years had their own alumni networks going, but they were mostly happy to join JPMorgan’s in order to broaden their networks.

Another advantage has come in the form of business development. JPMorgan is able to leverage its relationships with alumni working at other firms who may see value in being a JPMorgan client, or may refer their own clients to the firm. “Those relationships help us be closer to those clients, anticipate their needs better, and do more business with them,” says Coluzzi.