2014
Why interns?
FulfilL expectations to achieve corporate objectives
http://internsinasia.com/blog/insight-report/
InsightReport Nยบ2
Contents Introduction
2
What is an internship?
3
Recruitment costs
3
The benefits of hiring from within
4
Advantages of an internship programme
5
Meaningful work and mentoring
6
Should companies pay interns?
8
How to attract the right interns
8
Expectations of interns and how to manage them
8
Broadsight
AIP
Conclusion
11
Simon Osborne Managing Director s.osborne@internsinasia.com
Sainzaya Chuluuntuya Sales & Market Research Manager s.chuluuntuya@internsinasia.com
Valentin Fischer Researcher & Presenter otc@interninasia.com
Clรกudia Capelo Web Marketing Manager c.capelo@internsinasia.com
Contacts
Alexander Kagi Business Research Officer a.kagi@internsinasia.com
1. Introduction The increasing local and global competition for a talented and innovative workforce among companies in every business area urges corporations to steadily improve their recruitment process. Recruitment costs are considerable expenses for every company, independent of its size. Developing an internship programme is a promising way to attract new talent cost effectively in order to ensure the future success of a company. There is a growing demand for internships around the world as the fraction of students steadily increases and employers raise their expectations about their applicants´ skillset. Nowadays students are willing to skip their summer vacation and travel overseas to gain international work experience to increase their employability. China and Southeast Asia are increasingly popular destinations for students to engage in an internship[1]. The internship market in developing countries is not as mature yet as for example in the United States. Due to the growing popularity of Southeast Asia as a destination for interns, suitable placements within companies need to be created in the region. Based upon our experience, internships in Southeast Asian companies if they exist are often not as structured as in developed countries and insufficiently focused on improving the students´ skills. Interns are mostly handling menial tasks which don’t exploit the potential of the students. Many companies in the region are obviously not aware of the benefits interns can provide. This guideline highlights some of the various advantages of implementing an internship programme. The first part shows the benefits of hiring from within and how an internship programme can save recruitment costs, enlarge the applicant pool and improve the company culture. The second part focuses on the structures that should be implemented in a company to run a successful internship programme. Finally the report contains information about the expectations that today’s students have regarding internships.
2. What is an internship? An internship is a form of experiential learning that integrates knowledge and theory learned in the classroom with practical application and skills development in a professional setting. Internships give students the opportunity to gain valuable applied experience and make connections in professional fields they are considering for career paths; and give employers the opportunity to guide and evaluate talent[2]. Internships... - last between one month and one year - include mentoring and professional training - can be part-time or full-time - are sometimes a requirement for obtaining a university degree
3. Recruitment costs The financial costs of replacing an employee can be substantial. A new report carried out by Oxford Economics estimates the logistical costs to find and incorporate a new employee in the UK on average are £5,433 (based on a yearly wage of £25,000). If one includes the output loss until a new worker reaches his optimal productivity, the study estimates, the total costs to range from £16,240 to £35,307, depending on the industry[3]. The recent economic downturn forced corporations to reduce their recruitment budget. Therefore solutions to attract new talent at low costs became even more important. The Saratoga Institute reports that an external hire is on average 1.7 times higher than an internal hire[4] .This considerably increases the human resources costs of a corporation. Rebecca Schalm, a Calgary, Alberta-based practice leader of executive selection and integration at RHR International says that studies show that between 40% and 60% of external hires are not successful, compared to 25% of unsuccessful internal hires[5]. Furthermore voluntary turnover in the US has increased from 7% in 2010 to 8.4% in 2012 according to a report by PWC’s Saratoga Institute[6]. This high failure rate and increased turnover combined with higher costs for external recruiting makes internal recruiting a valuable alternative to reduce recruitment costs for the following reasons.
4. The benefits of hiring from within Lower costs: Companies can save money on job advertisement in newspapers or on online platforms and stint on agency recruiting fees. In addition, considerable expenses are the opportunity costs of not having a position filled, which is mostly overlooked. Until the vacancy is filled, productivity is provided by diverting someone else, possibly a person less suitable for the specific task. Or in the worst case, there is no productivity at all. Companies have to spend time reviewing applications and assigning staff to interview external candidates. Internal staff is already prescreened and therefore the process to fill a position is simplified and accelerated. Higher success rate: As mentioned above, internal hires are considerably more successful. The skills and work ethics of workers already employed in a company are better known to the management than potential employees from outside.
InsightReport - Page 2
http://internsinasia.com/blog/insight-report/
InsightReport - Page 3
http://internsinasia.com/blog/insight-report/
Having already experienced the corporate culture, they are more likely to stay in the job once a new position is offered. Furthermore, they already established a business network relating to the company, which can be leveraged in another position. According to a study conducted by the Wharton School external hires were paid 18% more than internal hires yet rendering worse performances during the first two years on the job[7].
Figures 4.1)
Figures 5.1)
Figures 4.2) Company culture: The workforce of a company will be more motivated if internal staff is provided with the opportunity to fill managerial positions rather than hiring external staff for it. Employees get discouraged if they feel prohibited to move up the ladder within their company. This results in lower productivity due to a lack of motivation to excel. Especially for recent graduates, on entering a job, they expect to be considered for promotion later on. If this path is blocked workers are less likely to join the company in the first place and more likely to leave the company, which increases the turnover rate.
5. Advantages of an internship programme The benefits of internships for students are quite obvious and well known. But what are the gains for companies to have an internship programme? The main reason for companies to hire interns are different for large and small companies. Large companies hire interns to find full-time employees, while small companies hire interns to find part-time help for specific projects (see figure 5.1)[8]. There are many benefits for the companies to be considered, ranging from recruiting new talents, adding fresh perspectives, to forcing your employees to do a better job.
InsightReport - Page 4
http://internsinasia.com/blog/insight-report/
Recruiting new talents: A successful internship programme, providing a valuable and memorable experience attracts students from top universities to join a corporation. Interns that had a fruitful internship at a company will share their experience with their friends and refer the programme to other high-performing students. This is a great advertisement at low cost. This is especially attractive for small companies that are less known and therefore experience difficulties in attracting a large talent pool[9]. Having the chance to see many different interns performing within your company makes it easier to identify new talents for future hire. The recruitment and training costs are lower and therefore interns reach the break even point considering the return on investment rather quickly due to lower recruitment and training costs (see figure 4.1). Optimally a capable intern can be converted to a full time employee after completion of the internship. Fresh perspectives: Interns can exert a positive influence on the company by providing new perspectives. Most of them haven’t had previous work experience which leads them to ask very basic questions on work processes and the business as a whole. This provides a great opportunity to improve workplace efficiency and to review the business model as well as the understanding of the firms´ products from an outside perspective. Bringing fresh ideas into a company is crucial to maintaining momentum and ensuring future success. Improving productivity: Forced to prove themselves in the workplace, students are generally highly motivated to do a variety of tasks. The company’s established workforce might be positively affected by this change in the work environment. Employees will improve their performance by serving as a good example and assisting interns who are trying hard to do a good job. Furthermore an internship programme offers a perfect platform to test an employee’s leadership skills by giving him or her the responsibility to lead interns on tangible projects or even act as a mentor. The mentoring will provide a mutually beneficial collaboration between the interns and the supervisor. A survey among US students and employers showed that an overwhelming fraction from both parties say that the internship experience was positive (see figure 5.2)[10].
InsightReport - Page 5
http://internsinasia.com/blog/insight-report/
Young people grew up using the latest technologies allowing them to play a crucial role in the development of a company. Especially during economic downturns companies tend to cut back on recruitment programs. However, at this point in time flexibility and adaptability are key to ensuring the future of the company. Instead of stop hiring fresh talents, businesses should rather get rid of expensive fainéants.
Interns need at least one mentor dedicating part of his time to instruct the intern and answer questions that will arise. Lachnit estimates 20% to 30% of a mentor’s time will be taken up with actively teaching an intern[14]. Regular feedback sessions are an important tool to assess the progress of the intern itself and the projects he or she is working on.”It’s really wrong to strand an intern without someone who’s invested in what they’re doing for that time that they’re with you,” says Lachnit. To ensure the investment pays off, interns need to stay long enough in a company. Their productivity will increase over time as they acquire more knowledge and improve their skills. Therefore companies have to make sure that interns don’t leave too early. A replacement has to be found early enough to ensure continuation of the business activities the intern was involved in, otherwise projects might get stalled and the previous time invested is wasted. It is important for organizations to evaluate their internship programme on a regular basis to get the most out of it. To summarize and structure the features of an internship programme we designed a hierarchy of needs regarding interns based on the framework of Maslow’s hierarchy of needs (see figure 6.1). Overall it is crucial for the firm to provide a programme that interns will enjoy. This way former interns will share their positive experiences and create a high-value image for the company and its internship. This again naturally attracts high performing individuals who want to work for the “best of the best”.
“They really like feedback, they want to be included.” (Kitty McGrath, executive director of graduate and undergraduate career management at Arizona State University’s W.P. Carey School of Business)[15].
Figures 5.2) “Keeping a stream of potential hires moving through the firm is the biggest benefit Stowe & Depon gets from the arrangements.” (Michael Stowe, a partner at Westborough accounting firm Stowe & Degon LLC)[11]
6. Meaningful work and mentoring Before starting an internship programme, companies need to clarify their intentions behind it to make it successful. Businesses must understand how an intern will fit in the company’s processes and work culture. Carroll Lachnit, the executive editor of Workforce Management, an Irvine, California-based HR magazine says that if a company starts an internship programme because it is shorthanded and wants someone who does the scoutwork it might turn out to be a really unpleasant internship experience for everyone[12]. The main thing that interns should take away from their internship is to get hands on experience in an area they are interested in. Interns are seeking challenging opportunities to apply their academic knowledge and expand their skillset. “Keep an open mind about an intern’s talents and abilities,” recommends Cari Sommer, the co-founder of Urban Interns, a website that matches small businesses with interns and other part-time assistants[13]. Interns are motivated and curious, instead of discouraging them and giving them only menial tasks, a company should support their initiatives to fully exploit their potential. This requires a certain commitment from the companies to allocate resources in order to develop an intern. InsightReport - Page 6
http://internsinasia.com/blog/insight-report/
Figures 6.1) InsightReport - Page 7
http://internsinasia.com/blog/insight-report/
7. Should companies pay interns? This is an actively debated subject among companies. Apart from various legal regulations for different countries which might force or prohibit companies from paying interns, there are some arguments in favour of paying interns. - Paying interns can make your programme more attractive and enlarge the attracted pool of applicants.
Instead of engaging in a precious learning process, that should be part of every internship, they are afraid of ending up completing the internship without any further acquired knowledge which is detrimental for both parties. As internships are one of the least costly ways to find talent and educate it, this huge potential should not go to waste. Handling meaningless tasks could scare them off to work for the respective company or the specific task later on. Hence, in order to secure future talent to work for the company, it is important to provide students with meaningful tasks, that will help them gain a sense of value as they contribute to the overall success of the firm. A study about undergraduate internship expectations revealed the following insights about the importance of internship aspects. Skill development is considered the most relevant, while a recognizable company name isn’t that important for students (see figure 9.1)[16].
- Paid interns will likely be more motivated because it shows them that they provide value to the firm and don’t see it as a volunteering opportunity. - Offering paid internships enable economically disadvantaged students to participate in the programme and therefore diminishes social discrimination. Aside from monetary incentives, non monetary benefits such as opportunities of getting employed later on as well as providing access to corporate networks and participating in free seminars in areas interns are interested are very attractive features to students. An argument that is in favour of unpaid internships might be that the company would only attract applicants who are genuinely motivated and interested in the job positions generated by the company.
8. How to attract the right interns To attract interns, companies can either advertise their programmes on internship platforms, on their own websites or seek collaborations with universities. An alternative way is to outsource the matching process to an internship service provider. There is a growing number of such service providers looking for partner companies with meaningful internship programmes. These companies reach a lot of students all over the world, since they have a strong web presence and are sometimes tied up with universities. They prescreen applicants to find the right placement by matching the requirements and needs of the host companies with the skills of the applicants in a cost effective manner.
9. Expectations of interns and how to manage them What do interns really want to get out of an internship experience? What is driving students from all over the world to engage in an internship? “I expect them to give me real work to do and not just sit there and do nothing.” (Jay, recently graduated BBA student from the Mahidol University International College, Thailand) The wish to engage in meaningful work and actually contribute to the company is one of the major aspects that interns seek for in an internship. Apparently, it is one of the students’ most prevalent fears to be stuck doing meaningless jobs that do not really add value to the company and their own development. Moreover, tasks like copying, serving coffee and such also fail to benefit the interns. InsightReport - Page 8
http://internsinasia.com/blog/insight-report/
Figures 9.1) “To learn new things and understand how theoretic concepts apply in the real world.” (Aman, 4th year BBA student at the Mahidol University International College, Thailand) Students also expressed the desire to learn more about the operations, structure and concepts used in a real world job. Many years have been spent on acquiring theoretical knowledge, and for most students the internship is their first valid work experience. Therefore, many would like to know how to finally apply their knowledge in a company, how to adapt to the environment and how everyday operations make use or do not make use of theoretical knowledge learned in university. Interns would like to be treated just like one of the employees with additional assistance and training. The importance of treating interns equally to current employees is tremendous, since it gives the interns a feel for the actual tasks and work they might be engaged in later on. “I want to find out about my own abilities, skills and what I need to train more for my future career. This way I can evaluate myself after the internship and reckon whether I am ready for a certain career path and if it is even the right career for me to pursue.” (Noel, a 3rd year Economics student at the University of St. Gallen, Switzerland) Moreover, evaluating job compatibility is one of the major reasons for doing an internship. Many students have expressed their indecisiveness about which career path to choose. This shows that students are still quite insecure and unsure during their last year at University or even after gradInsightReport - Page 9
http://internsinasia.com/blog/insight-report/
uation as to which profession suits them. An outstanding internship programme on behalf of the company can herewith successfully acquire indecisive students and leverage their talent to the company’s benefit. How? By placing them into the positions where they can fully realize their potential. “Anything that teaches me and enhances my skills is a good internship for me” (Mingyi, recently graduated from the University of Southern California, Los Angeles). In the end the interns do not care about doing a specific task in a certain industry as much as just learning something new and useful. An internship is all about, learning new skills, gaining real world experience and broadening one´s horizon. Since most students still do not know what they would like to do in the future, it is not the most important aspect to give them a specific task during the internship. Much instead supervisors should include them in everyday business operations as much as possible, treat them as equals and provide extensive guidance and mentoring. This way the interns benefit as much as the firms might find valuable talented employees at almost no cost compared to expensive assessment centers, interview rounds and so on. Moreover, it is undoubtedly the best way to see an individual’s real work performance for an extended length of time rather than assess him within a couple of days and hire him. However, it is important to not overload the intern with pressure, responsibilities and tasks. Kwan, a Marketing student at the Mahidol University International College in Thailand, said that he would like to “have responsibilities that fit my abilities and capabilities”. Having responsibilities as an intern is a great thing, in order to see how an intern performs under pressure. Moreover, it inevitably makes the intern more confident and gives him a feel of value and pride. In addition, it enables the intern to deal with tasks and problems his own indepedent way which might add new creative ways of problem solving to the company’s skill portfolio. Interns with high motivation, willpower will strive to learn to excel in an internship ultimately. Attracting and recruiting young talent into the company through an internship programme therefore seems not only very inexpensive, but also extermely efficient and clever and hence is likely to benefit the company in the long run.
10. Conclusion As can be seen, an internship programme represents only a minuscule amount of risk or disadvantages for a company. However, the advantages of running a meaningful and desirable internship programme outweigh the costs by far. In the age of diversity where students with university degrees abound, it becomes essential to evaluate the applicants thoroughly in person over a period of time in order to distinguish true talents from mediocre applicants. An internship programme will definitely improve a company’s recruiting policy and increase its productivity in the long run. Especially in emerging countries, firms can benefit from an internship programme by attracting qualified students from other parts of the world, who are seeking international work experience before or after graduation. Since there aren’t many firms in the region with an established programme, now is the prime time for visionary companies to get a head start by implementing well-structured internship programmes.
“I’d rather do an unpaid internship doing meaningful, interesting and value-adding tasks, than receiving pay for doing nothing or only meaningless work. If I want to earn money I apply for a job, not an internship.” (Vicky, English literature student at the Colby-Sawyer College in New Hampshire, USA) The interviewed individuals showed great motivation and interest in actually learning something during an internship rather than receiving a salary. Herefrom, it can be derived that the internship constitutes mainly a learning and orientation process in the eyes of students rather than a way to earn money. When looking at the overall cost of academic education in universitites, compared to the on-the-job learning experience, as in participating in an unpaid internship, the internship wins by far. As earning money in an internship is only an additional benefit, since most students do internships to find out what they are interested in and want to learn more for their future career, the internship can clearly be seen as part of students’ education. Furthermore, interns would like to build a network and get in touch with individuals within the industry that can help them find a job later on. Many students seek an internship at a company where they would likely be motivated to work for later on, therefore, an internship can be seen as a thorough recruitment process for a firm.
InsightReport - Page 10
http://internsinasia.com/blog/insight-report/
InsightReport - Page 11
http://internsinasia.com/blog/insight-report/
11. Sources [1]http://www.businessweek.com/articles/2013-04-01/the-china-internship-business-is-booming [2]http://www.naceweb.org/advocacy/position-statements/united-states-internships.aspx#sthash.xF7nOQoW.dpuf [3]The Cost of Brain Drain, Understanding the financial impact of staff turnover, Oxford Economics, February 2014 [4]http://business.time.com/2012/08/15/the-power-within-why-internal-recruiting-hiring-areon-the-rise/ [5]http://www.hreonline.com/HRE/view/story.jhtml?id=286776476 [6]http://www.pwc.com/en_US/us/hr-management/publications/assets/pwc-saratoga-human-capital-effectiveness-report.pdf [7]http://www.forbes.com/sites/susanadams/2012/04/05/why-promoting-from-within-usuallybeats-hiring-from-outside/ [8]http://www.internships.com/eyeoftheintern/news/idc-news/internships-survey-2014-internship-trends/ [9]http://www.wbjournal.com/article/20120220/PRINTEDITION/302209986/internships-provide-benefits-for-students-and-employers [10]http://www.internships.com/eyeoftheintern/news/idc-news/internships-survey-2014-internship-trends/ [11]http://www.wbjournal.com/article/20120220/PRINTEDITION/302209986/internships-provide-benefits-for-students-and-employers [12]http://www.inc.com/guides/2010/04/managing-interns_pagen_2.html [13]http://www.inc.com/guides/2010/04/managing-interns.html [14]http://www.inc.com/guides/2010/04/managing-interns.html [15]http://www.businessweek.com/stories/2007-02-25/internships-reality-vs-dot-expectationsbusinessweek-business-news-stock-market-and-financial-advice [16]M. K. Burns, J. M. Aitkenhead, C. M. Frederick, S. Huddy, Undergraduate Internship Expectations: Strategic Encouragement of Student Involvement; Student Pulse 2013, Col. 5 No. 12-3014 words. InsightReport - Page 12
http://internsinasia.com/blog/insight-report/
Disclaimer Š Copyright 2014, Broadsight. All rights reserved. All materials, content and forms contained on this document are the intellectual property of Broadsight Magazine and may not be copied, reproduced, distributed or displayed without Broadsight’s express written permission. Broadsight does not warrant, either expressly or implied, the accuracy, timelines, or appropriateness of the information contained in this document. Broadsight disclaims any responsibility associated with relying on the information provided on this document. Broadsight also disclaims all liability for any material contained in other documents linked to Broadsight documents.