The Boom in Boomerangs

By Eilene Zimmerman

Jan. 25, 2006

No matter how tough the labor market or prevailing the talent wars, until recently few companies looked at their ex-employees as potential job candidates. But with the recovery slowly in motion, companies are beginning to see the value in their former rising stars. They hope to turn these people into “boomerangs”–employees who come back home.

    Actively seeking out ex-employees, who are cheaper to hire and often more productive than those recruited from scratch, is now a hiring strategy for many forward-thinking companies, particularly in such professional services as accounting and consulting.

    Five years ago, when Anne Berkowitch began talking about ex-employees as a recruitment channel, people were taken back. “People didn’t really understand what we were suggesting,” says Berkowitch, founder and CEO of SelectMinds, an alumni relations management company in New York. They do now. Since SelectMinds’ founding as one of the only firms of its kind, it has grown between 50 percent and 100 percent annually.

    John Challenger, CEO of outplacement firm Challenger, Gray and Christmas, says that especially in the past three years corporate America has seen a rise in boomerangs as well as an increase in formalized programs to support the phenomenon: the corporate alumni network. These social networks for former employees are modeled on university alumni programs and allow human resources to keep track of former employees.

    Networks generally consist of a Web site with a directory of members, a job board and information about networking events and continuing education programs. Challenger says that because people are so often terminated not because they’re not capable, but because of layoffs and business cutbacks, “it makes enormous sense to tap into these ex-employees.”

    Berkowitch estimates the cost of boomerang recruitment in 2005 to be between a third to two-thirds of the cost of bringing in a new recruit. Berkowitch and colleague Cem Sertoglu published a paper on the topic in the Harvard Business Review in 2002, when the trend was nascent. She found then that hiring an ex-employee cost about half as much as a new hire. She also found that rehires were 40 percent more productive at work and tended to stay on the job longer.

    Joyce Gioia, president of the Herman Group in Greensboro, North Carolina, a human resources consulting firm that focuses on workforce trends, says that since the middle of 2004, she has seen an upswing in companies wanting a more formal approach to tracking ex-employees. “Not only top performers, but all those who left favorably,” Gioia says. “People who leave often discover the grass isn’t so green on the other side are very inclined to come back.”

    Katie Peterson, now regional resource manager for consulting firm Deloitte & Touche’s Pacific Southwest region, is a boomerang herself. Peterson started out as an auditor at the firm and left after two and a half years to get her MBA. She went to work in finance, then changed tacks and began working as an executive recruiter.

    Peterson kept up with Deloitte-related news and stayed in touch with former colleagues; she was also a registered member of the alumni network. In January 2004, after eight years away, she returned to Deloitte. “I wasn’t even looking for a job, but a recruiter at Deloitte who had been networking with others was directed to me,” Peterson says. “I had always held an affinity for Deloitte and missed it, so the opportunity was perfect.”

    Deloitte’s alumni network, Alumnet, was established four years ago and now tracks 75,000 ex-Deloitte employees nationwide. In February, the network will be opened up to current employees. The company has seven alumni relations regions, each of which operates autonomously. Karen Palvisak, coordinator for those regions, says most offer continuing education programs and networking receptions. The alumni Web site contains Deloitte job postings by region and office and a place where alumni can post their resumes.

    Deloitte’s internal recruiters use the alumni network to identify job candidates. Peter DeMartin, recruiting director for Deloitte’s Southeast region–which includes 22 offices from Washington, D.C., to Miami–says he is provided annually with a list of people who left offices in his region over the previous two or three years.

    “We go through the list with our human resources managers and partners in various offices to identify those we might be interested in having return,” DeMartin says. Anyone working for a client is ruled out, but the others are assigned to someone at the manager level or above who knew them. “We have found it is better to get someone who knew the former employee to call them. It’s more successful,” he says.

    Boomerang hires have worked out so well for the firm that raising their numbers has become a Deloitte recruiting goal. Palvisak, the regional coordinator, says those coming back require less training. And there’s another bonus: “Our numbers show they also stay with the company longer when they come back the second time, because now they know what else is out there,” she says. Rehires just in the Southeast region account for 10 percent of all hires. Of the past year’s 350 experienced hires–those who were not brought in through college recruitment efforts–about 30 were ex-employees.

    In 2003, Deloitte conducted a study to determine the cost savings associated with hiring ex-employees. At that point, 140 had been rehired nationwide, the vast majority coming through alumni relations and not search firms. “It came out to saving about $3.8 million in search fees,” DeMartin says.

    BearingPoint, the global management consulting firm that was formerly KPMG, launched its alumni network in October 2002, on the same day the company rebranded itself. By the end of that first month, 1,453 alumni had registered on the site. Sarah Martin, vice president of global corporate communications and one of two people who coordinate the alumni network, says nearly everyone who leaves is invited to join, even if the person was asked to leave because of a performance issue.

    “Sometimes someone doesn’t fit in with where they were assigned at that time in their career,” Martin says. “And we may be able to find a job for them in the future that’s a better fit.”

    BearingPoint alumni are offered many of the same benefits as employees, such as discounts on home loans through IndyMac Bank and Bank of America, education savings programs and even discounted Apple products.

    Network members are also kept abreast of the firm’s events and financial news. “We want them in the marketplace buzzing about our performance,” Martin says. “When we announced our new CEO (Harry L. You) in March, we made sure he reached out to the alumni network, because it’s not only a recruitment channel, it’s a communication channel.” It’s also a business development channel.

    In November, BearingPoint opened the alumni network to current employees. “There is tremendous value in allowing alumni access to both former employees and current employees,” Martin says. At consulting firms like Deloitte and BearingPoint, top employees often leave to work for clients or would-be clients, making contact with them not only important for recruitment, but for new business as well.

    If a BearingPoint alumnus has a business problem, he can reach out to former colleagues for advice or help and potentially become a client. Martin says the cost of creating and maintaining the Web site compared with what the company gains in new business leads and new hires is so small that “it’s not even worth discussing.”

    As for current employees who use the alumni network to find jobs with BearingPoint clients, the firm’s position is that its people are smart–if they want to find another job, they will do it with or without the network.

    “If we can place a BearingPoint employee with a client, that’s more leverage for our company. We facilitated them getting there and will have the goodwill that comes from that,” Martin says.

    The alumni network’s Web portal includes a job site where alumni (and current employees) can create a personal profile and post a resume. This year 100 candidates were hired from the alumni site, and alumni have referred a total of 153 candidates to BearingPoint recruiters. Sourcing someone cold, says Martin, costs the firm several thousand dollars; sourcing from the alumni network costs next to nothing. “And they have already been trained, so we reap the benefit of that; it enables them to hit the ground running and they are generating revenue sooner.”

    Management consulting firm Accenture also uses its alumni network for hiring and business development, but also to keep retired employees connected to the company. About 5 percent of those who retire come back as employees, and many more are hired as contractors, says Jill Smart, managing director of human resources.

    Although most corporate alumni networks and outreach programs exist at professional services firms–management consulting, investment banking, law, public relations–it is spreading into sectors where competition for talent is fierce. Allan Schweyer, executive director of the Human Capital Institute in Washington, D.C., which conducts research and holds events focused on talent management, says he has had recent discussions about alumni networks with those in the federal government and in health care.

    It’s also spreading within the technology industry. The Microsoft Alumni Network (MSA), established in 1995, hired Kathi Jones two years ago to help it expand. This year it has more than 6,000 members, up from 1,800 when Jones began work. She has overseen the launch of its first international section. Her goal at the end of the fiscal year, June 30, 2006, is 8,000 members.

    MSA charges a fee because it operates independently of Microsoft, although it is closely aligned with the company. U.S. alumni pay an annual $130 fee, while international members pay $80. Both have access to other Microsoft alumni, network-related special events, cultural performances and lectures and the Microsoft Company Store. They can partake of specially priced health, dental and life insurance and peruse the job directory, where recruiters post jobs but have no access to resumes. A special section on the alumni Web site is open to those seeking positions within Microsoft, and gives ex-employees access to a special group of Microsoft recruiters.

    “Alumni submit their resume to this specific group of recruiters, who will work with them,” Jones explains. “It’s not like being moved to the front of the line; it’s more like being in first class, rather than coach.”

    About 5 percent of Microsoft’s hires last year were rehires, Jones says. For the fiscal year that began July 1, 2005, rehires already account for 5 percent of all hires. But no matter whether they come back or not, Jones says corporate alumni represent an opportunity.

    “These are people that helped shape your company, and no matter where they go they are an important resource. When someone walks out the door, a unique collection of information walks out too,” Jones says. “And that’s something companies don’t want to lose.”

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