Winning the Recruiting Game | with Ziv Eliraz of Zao [Transcript]

by Joe Sherwood on June 10, 2013

Link to podcast episode:  Winning the Recruiting Game | with Ziv Eliraz of Zao

Jesse Lahey: Ziv Eliraz is the CEO of ZAO, an online platform for gamification based employee recruiting.  ZAO has been called “the first employee referral solution that intelligently leverages multiple social networks to help you find the best candidate for your company.”

Ziv, welcome to Game Changer

Ziv Eliraz: Thanks Jesse, good to be here.

Jesse: Ziv, what is your personal history and how did your company come to be?

Ziv:  I’ve been in the startup world for over 16 years in different companies and before that in my own company.  What brought me onto HR into hiring was my experience as hiring people.  If you’ve got to hire someone or a team or build a team, how do you do it?  There are a few “traditional channels,” right?  You can use a job board.  That’s what I did when I tried building teams.  I post an ad on job boards and I got very, very irrelevant candidates.  I think that there are good ones and bad ones, but for sales, people in a specific category or account managers and for other specific tasks, sometimes it’s hard to get a qualified candidate to come into a job board.

I work with agencies, so you know if job boards don’t work, I reach out to agencies and what I’ve found is that typically agencies will do a search on LinkedIn based on the parameters that you give them.  You pay them a lot, they don’t necessarily know if the people that they speak with and they reach out to.  I felt that for that kind of service — again maybe, it’s just the agencies I worked with — it wasn’t worth the effort and the candidates that I got in typically weren’t a good match.

So what are you left with, right?  In terms of source of hire, there are job boards which are the main source of hiring and that didn’t work for me, and agencies, which for some company are a big source of hire.  There are referrals, right?  So employer referral programs are a major source of hire.  The problem that I had was that I didn’t have in my last company, any employees that were charged with building a team in the states for an international company.

The way that I managed to hire people and I was extremely satisfied with, was referrals from non-employees, from our business partners.  You know, in our network in our category so they know what a salesperson for.  We were in ad, they work at Pay per Click ad network so when you reach out to them and you tell them “Hey, I needed a salesperson for agencies or an account manager for Pay per Click,” they do exactly what you’re talking about.  So people that are in my industry knew other people and I got amazing referrals and I hired great people that are doing an excellent job to this day.

So out of the frustration of the tradition channels and of having to be creative in other sources of hire, came ZAO which is a platform that I felt I was doing a lot of these things manually, right?  I had to reach out to people that I know and remind them and ask them and take them out to lunches and just engage with them and waited.  It was very manual.  With all the data in LinkedIn, with all the data in Facebook and with all the automation that is possible, it just didn’t make sense to me that this whole process couldn’t be automated and made much more efficient.

So what ZAO is, ZAO is the product of that vision.  It’s a platform that lets you engage your employees and reach out to your entire business network, not just your employees, but through your employees and get great referrals in to your company and hopefully help you hire great people.

Jesse: How does it work then?  How does that feel as an employee or as somebody outside of the company who would use the system?

Ziv: Let’s look at how things are done in the world before ZAO and the way we do it.  In the traditional referral world, if you don’t have a platform to automate, HR sends out a job description and somehow employees are supposed to come up with a resume.  Typically there is a reward associated with it and that applies to employees.

When you send out job descriptions to your friends, typically there aren’t rewards there, they’re just helping you because they’re your friends.  They also are sort of somehow supposed to come up with a name and that doesn’t make sense, right?  They all know hundreds of people, but if to sit down and to go through all their contacts, and to go through the job description and read through that manually, is a lot of work.

So what we do is three core things within ZAO.  The first thing is we have an automatic matching algorithm.  So, we’ll take all the job descriptions in your company and we will invite you as an employee or as a friend of an employee or somebody in the business network to connect with Facebook and LinkedIn.  The minute you do that with two clicks, we scan all your friends in a very private way, so that the company isn’t exposed — we don’t save this data, we just do this on the fly — as against all the job descriptions in the company and we highlight to you as an employee or as a friend of an employee who are the top people that you know out of the hundreds of people on Facebook and hundreds of people on LinkedIn that you are connected to, who are the people who are the best match for the job.  Then with one click you can forward the job to them.

Jesse: Wow.

Ziv: So that’s the first — yes.

Jesse: That alone is powerful.

Ziv: Yes, thank you.  That’s the first thing that we do out of three.  The second thing that we do is, you know how companies have a referral reward and typically that is offered only to employees.  So we have that, too.  Let’s say that you put a $1,000 referral award, if you’re an employee of the company and you know someone great you get the $1,000.  But we also let companies offer that same reward to non-employees and this can go to former employees, and it can go to business partners or vendors.  We take care of all the payments and stuff, so it’s no tax headache for the company.

But we take that even one step beyond.  We take that even to the employees, as follows:   So, if you’re an employee and you know someone, you get the $1,000, great.  But if you don’t and you forward the job onto a friend, that is immediately offered out with an offer for half the reward, for $500 in the case of our example.  What that does is it motivates non-employees with a financial incentive to help find friends.

Jesse: So first of all, I totally get the part about matching the needs of my company up with what I have in LinkedIn or Facebook, because often you get asked either by clients I know or companies, “Hey do you know anybody who’s good at this?”  You sit there and you just think, “Okay, who do I know?”  You do your best effort, but you’re going to forget people and then you get distracted five minutes later and you forget about it.

Ziv: Yes.

Jesse: On the flip side, you have a friend or colleague somewhere in your network that sends you a notice that says, “Hey I’m out of a job and looking for my next.”  Again, as much as you’d like to help them out, you would have to spend a lot of time going through the company’s database.  So, that makes perfect sense that if you’re just going to make that a much shorter, less painful process, I’m in. Then if your company offers is reward for that,  that makes sense.

The forwarding to a friend, break that down for us.  If I have to share this with a network buddy of mine and she knows somebody, do we both get half that reward?

Ziv: Yes, exactly.  So what you’ll do — remember how I said we do the matching, right?  Let’s say your company is looking for a sales person in Boston.  So we’ll show you all your friends that are sales people that are in Boston.  If there are any other keywords that are relevant, we will highlight those people as well.  Let’s say you want to hire someone from Google or whatever, so we can highlight those people even more.  So we show you as an employee all your friends that are sales people in Boston.

Now when you forward the job to them, to interest them in the position, the way that the template e-mails that we send, or the template message that we send is not just, “Hey here’s a job, if you want it, apply.”  But it’s rather, “Here’s a job, if you want you can apply.  But if you don’t and you know someone, we will pay you $500.”  The reason it’s $500 is because that is like you said half the reward, so that both you and your friend have an incentive to forward the job and to recommend someone.

Jesse:   Is it telling me, “Suzie who is your first tier friend and LinkedIn has somebody in her first tier that matches up,” or am I just sending this to all my friends?

Ziv: No, it’s neither.  We’re not looking into Suzie’s full profile; we’re only in terms of her friends.  We’re just looking at what she can do and you forward it onto her, right?  So, it’s not sending it to all your friends, you selectively chose who you want to share the job with. We just present to you the people that might be a good fit for the job, right?  So we believe that only good people can refer good people and we give employees the power to choose who they forward the job onto and who they don’t.  We don’t send it to everyone.

Jesse: Okay.  Now have you run into any, let’s say, unintended consequences? People trying to game the system or things of that nature?

Ziv: No, not at all.  I think that people understand that it’s a system that you only get paid out if you — and we’ll talk about the gamification in a bit which is the third aspect of the platform.  But we do a lot to make people understand that it’s only quality that matters, not quantity and people get it.  So, the answer is no.  People always ask that, but when you get to real life, people understand it’s their reputation and their real name in there and they care, so don’t try to game the system.  No.

Jesse: Yes, and I would say that matches up when I’ve done work with clients related to their employee referral programs, even ones that weren’t so tech sophisticated.  We’d never, even over a long period of time, we didn’t see people gaming the system to get rewards.  The rewards maybe created some excitement and got you past a little bit of inertia maybe, this was not an area where the reward’s gotten away.  Go ahead and tell us about the next level, the gamification aspect.

Ziv: Yes.  We said the system sits on three core things.  The first is the automatic matching to help you find friends.  The second is the sharing of rewards with non-employees, so that you change the question that you ask your employees, it’s not just who you know, but think of who your friends might know.  The third is gamification.

We think that gamification is really important for engagement in referrals for two reasons.  Number one is that if you look at the number of hires that a company makes, overall an average, it’s typically 10% to 15% of the work force, over a year.  So if you are a company with 1,000 employees, you’re going to hire 100 or 150 people over the course of a year.  Let’s say using ZAO and even most of your hires now come from referrals, great.  You’re still only making about 100 referrals hires a year.

What that means is that over a course of a year, 9 out of 10 people in your company can’t win.  No matter what they do, as long as you are acknowledging and rewarding only the hire, then you are putting people into a program where they are likely to be disappointed and that over time causes disengagement.  That’s the first flaw of traditional referral programs as they are implemented in most of the companies that we work with.

The second flaw with referral programs is that there is no feedback.  You make a referral and then a month or two can pass, you don’t know if the person that you recommended is hired or not, interviewed or not.  If they do get hired, typically the bonus is paid out three months or six months or I’ve even heard a year after the hire.  In that long time that passes between the points where you make an action, which is the referral, to when you get the bonus, which has nothing to do typically whether your referral was a good one or not; if the employee performs or not; if they pass the interview and they are hired or if they are convinced to join the company.  You have little impact on that, right?

So, too much time passes and those things are engagement killers.  So, the fact that you have a low chance of winning and the fact that too much time passes before you get feedback are engagement killers.  What we learn from gamification, you know, gamification is I guess it’s a relatively new buzzword.  But what it basically means is learning from how games engage people and taking that into non-game environments.  There are a few principals you can learn from the way game manufactures keep people engaged in games.  For example, one of them is constant feedback and implements them in employee referral programs.

Jesse: Just a quick pause from this interview with Ziv Eliraz to tell listeners about a game we’re playing to have some fun throughout this series.  First, everyone has the chance to win 10% off ZAO’s fees for one year.  To enter for that, go to the LinkedIn Group for Game Changer.  You’ll see a discussion I’ve started about Episode 5 featuring ZAO.  At the beginning of that discussion is a link that will give you 10% off ZAO’s fees for one year.  To make it easy, we’ll automatically direct you to our LinkedIn Group if you go to EngagingLeader.com/group or follow the link in our show notes which you’ll find at EngagingLeader.com/gc5.

Our clue for the Game Changer series price is the letter “A” as in Alpha.  There will be other tasks and clues in each of the first 14 episodes in the Game Changer series as well as an Engaging Leader podcast Episode 38 featuring Kevin Werbach.  From those 15 clues, if you can be the first person to guess the secret phrase, you will win a $100 gift card from Amazon and everyone who guesses it correctly will be honored in our Game Changer Genius Board.

So, two flaws of traditional referral programs — the low percentage of employees that ever receive a referral bonus and a lack of feedback.  How does ZAO use gamification to overcome those problems?

Ziv: The first thing we do in order to gamify the employee referral program is we look at the things that we want employees to do and we give feedback for them, right?  So we give them points for the various stages in the referral cycle.  We split it into six parts.  It’s not that hard, I’ll walk you through it.

The first is just sharing the job.  So, you want employees to share the job versus not share the job, and we give them one point for each person that used a job shared.  The second part we want our employees to give us a name, a lead, right?  This is all configurable but the default is 20 points for giving a lead, right?  So if you sat down and thought about someone that might be a good fit for the company, that’s worth way more than just sharing a job.

Jesse: Okay.

Ziv: The third step is getting them to apply.  So, now you’ve got a resume in your hand which means that you just didn’t give a lead and tell HR, “Here’s a really smart person, you should talk to them,” but rather you spoke to that person and you got them to apply.  That’s worth a 100 points, five times more than just giving a name.  The next step is if HR determines that this person’s qualified for the job.  So, HR has now read through their resume and they said, “Yes, that person really looks interesting to us, we’d like to speak with them.”  You get 400 points for that and again this is configurable.

The next step is whether that person gets interviewed and passes the interview.  You get 2,000 points for that and if they’re hired you get 10,000 points.  So step number one is showing people the value of actions, and that goes back to gaming the system.  You can share the job all you want.  If another employee refers one qualified person, that’s worth more than 500 shares.  People who share the job get more points than people who don’t, because we want to encourage any form of engagement, but if you share the job in a quality way that’s way more important than just sharing it.  That’s why it’s very hard to game the system.

So points wise that’s one element of the feedback that we learn from games and we bring into the referral program.  There’s a nice leaderboard which is also an element learned from games and there are achievements, so we give badges for quality referrals, and for interviewed friends and for hires.  So you get points for sharing, but you get badges and sort of a green circle with stars on your name on the leaderboard, so everybody in the company can see that.

We also share that with all the employees on a weekly basis, so everybody knows whose pitching in and whose helping.  The company’s management, if they are good users of our system they will acknowledge this at a very minimum. We’ll talk about what we can do with these points later on, but just acknowledging the fact, you know, “Thank you for Employee X for being the top of the leaderboard” or “Thank you to anyone who brought in a qualified lead,”  just that will go a very long way.

The second element of how we give feedback is the fact that we notify employees as their friends progress through the hiring process.  So when a friend applies, the employee gets an e-mail.  If their friend is qualified, employee gets an e-mail.  If friend passes an interview, the employee gets an e-mail.  Every time you get that, it’s a little thing right?  It turns out that most Human Resources Department don’t keep the employees in the loop, just because it’s extra work, or I don’t know why.  In terms of how it’s going, it just sort of goes into a black hole.

Those little e-mails increase engagement, because the e-mail that we send is “Hey, a friend that you referred just got qualified, why don’t you keep sharing?” or “Why don’t you continue to share?”  The fact that somebody sees success and sees that their referral didn’t go to vain or didn’t into a black hole, but is actually listened to and is actually being appreciated and reviewed causes them to say, “Okay, this thing works. I’m going to keep doing it.”

Jesse: That makes sense.

Ziv: So that is another aspect of feedback.  Now people enjoy getting feedback and they enjoy being acknowledged.  Another thing that people enjoy is getting rewards obviously.  What we recommend to our customers is to not just look at the referral reward as the only thing you pay out.  It’s much better if you even reduce that reward a bit, but increase the number of people that can win by doing one of the following.  One of the things you could do is say, for this month the month of May or April whatever, the top three people on the leaderboard get a dinner for two.  So what you have now is a small prize, it doesn’t cost you much, but it gives an incentive to people that have a specific deadline to it that isn’t related to a hire.  So people now know that the points are worth something.  Right?

It doesn’t matter if a person is hired or not, but if I bring in enough quality leads or if I bring in enough people that are interviewed, I’m going to win.  The fact that the reward has a definite deadline or an immediate outcome is important.  Another cool thing that we have seen our customers do is, get an iPad or an iPad Mini or whatever or even a TV.  So, get a big screen TV.  Put it in the lobby and tell all the employees the person on top of the leaderboard this month is going to take this home.

Jesse: So in those examples you’re resetting the leaderboard each month.  So at the start of the month everybody’s back on equal footing?

Ziv: Yes.  So what we do is all our leaderboards can be you can either view an all-time leaderboard, which is nice because if you are making an effort over time, you know that those points aren’t thrown away, but that can be pretty discouraging to new employees.  So what we do is every leaderboard has multiple views.  There is an all-time view, there is a current month view and there is a past month view, and you can also select dates if you want.  So you can always make competitions based on the current or previous month or quarter and that way everybody gets a fair shot at the beginning of a month, but nobody loses the value that they have put into the system over time.

Jesse: Now does this end up feeling fun to employees or is it primarily a feedback and rewards that drive the success?

Ziv: Yes, I think it doesn’t work without fun.

Jesse: Right.

Ziv: So I think that if there is if the TV is out there, it makes people want to get it.  If somebody takes it home, is putting it in their car at the end of the month, then other people see it and it’s certainly fun for that person and you know it’s certainly a motivator for the other people.  If they take a trip somewhere, you know, a three day trip somewhere as a prize.  That’s something they’re going to talk about and that absolutely is a motivator that’s fun, yes.

Jesse: Now do you have any data or case studies to share about the kind of difference this is making?

Ziv: Yes.  So, it’s hard to show a graph on a podcast, but we love the graph that we see with our customers, is sometimes called a “smile graph” of engagement.  So, imagine here’s what a bad graph looks like and what a good graph looks like.  A bad graph is something where you launch your referral program and a lot of people know this, they get some responses and then it just dies down.  You’ve got to keep re-launching it.  That’s low engagement or declining engagement.

A good graph which is what we see with our customers and you can see it on the computer on our home page if you go to www.zao.com, you will see what we call a “smile graph.”  A smile graph is whenever a company starts using us, there is always a lot of engagement in the first week because people sign-up and look at it and forward jobs and then sort of the week after because everybody can’t log in at the same time, it goes down a little bit.  But the nice thing is as the leaderboard starts kicking in and the feedback starts kicking in, you start to see continuous, improving, ongoing and increasing engagement even to the extent that it passes that fist peak.  That is what you want.  What you want and the benefit of having an automated system is that it just works on its own over time, you don’t’ have to keep feeding it to enjoy long-term benefits.

Jesse: Yes, that’s interesting.  Now how much does it cost to implement ZAO?

Ziv: We’ve got a very interesting business model.  You can start using us for free.  It does cost, so it’s not a trial, but the way that we charge money is as a percentage of the referral reward.  In the event that you hire, so if you pay out $1,000 then our fees are $300 per hire.  So we like that because it incentivizes us to have a really good product and our customers like that because they only pay when it works.

Jesse: So if you’re going to give $1000 bonus, then you are going to pay ZAO $300.

Ziv: Yes.  So, in addition to the $1000 which you need to pay your employee.

Jesse: Right.  So let’s say I typically am spending for — I guess, you can tell me the matrix — but the matrix I’ve seen a lot, let’s say for a knowledge worker, you’re going to pay about 50% to 100% of their first year’s pay in terms of how much it’s going to cost to get them there.  So let’s say that’s a $70,000 a year person instead of spending $35,000 to $70,000, this is going to cost you $1,000 plus $300.

Ziv: Yes, very cheap.  Absolutely.

Jesse: Yes, that’s pretty amazing.  What types of rewards are you seeing companies offer?  How much are they likely to spend on it?  What’s the spectrum?

Ziv: Yes, I think it depends on how important the position is and how desperate they are to hire and on the seniority.  I think the average is between $1,000 to $1,500.  We’ve seen developers positions in tech companies go to $5,000 and $10,000 in extreme cases.  We’ve seen if it’s retail chains, it could be as low as $50.  It really depends on the position.  It’s a pretty broad spectrum.  But I would say the average is probably, for knowledge workers, between $1,000 to $2,500.

Jesse: Are there any other costs that an employer should expect?

Ziv: With ZAO, no, just that 30% above.  So, decide what your budget is and remember that it costs 30 percent to use us.  So if your total budget is around $2000, then offer a reward of $1500 and ZAO is going to cost you 30 percent of that.

Jesse: Are there any pre-requisites that an organization should meet?  For example, do you integrate with only specific applicant tracking systems?

Ziv: No, there are no pre-requisites.  We obviously haven’t integrated with all the ATS in the world.  We’re working to integrate with the leading brands out there in terms of we slice it by market share and by customer need, so we prioritize those applicant tracking systems that have the largest market share.  But typically, the way that it starts out is you can integrate with any ATS, you can redirect people to apply there with no technical integration at all and there are additional features that get enabled, once we have a full integration with an applicant tracking system.

Jesse: So if we have a certain applicant tracking system, you’ll go ahead and integrate with that at no extra costs?

Ziv: Yes, typically unless it’s a really, really unknown one, because we then have the benefit of enjoying that for other customers.  Up until now we have never charged for integration with an applicant tracking system.

Jesse: How long does an implication typically take?

Ziv: If it’s with an applicant tracking system that we support or if you’re a small company and you don’t need the integration with the ATS, you can be up and running literally in 20 to 30 minutes.  You need to get the jobs into the system.  You know, each one takes a couple minutes to get in.  Then, you just invite your employees and that’s it.

Jesse: How do you compare with other solutions available in the marketplace?

Ziv: For referrals, that’s sort of kind of been oddly by the way because it’s such an important source of hire, it’s been very neglected.  Applicant tracking systems really have focused on being sort of like advanced filing cabinets of getting candidates in and doing things with them.  But they’re not really a sourcing tool in terms of engaging your employees.  So, a lot of applicant tracking systems will say they have social, but what they’ll basically do is put a Share on Facebook button, on their job page and that doesn’t work.  So, that I would say is something that if your applicant tracking system says they have social recruiting, but typically this feature is free in ATS and that’s what it’s worth.  All right, so we’re focused on that channel and we work alongside your ATS.

Jesse: Have you seen other competitors that are taking a game-based approach and even having that deep integration with LinkedIn and Facebook?

Ziv: We haven’t seen anything as comprehensive as ours.  We’ve seen some people offer points and a basic leaderboard, nothing as comprehensive as the solution as ours.  We’ve been doing this for what is in gamification terms, almost since the beginning of gamification.  So as a term, as a buzzword, obviously gamification has been before not called that, but the integration with social, the gamification, the idea of putting these together is fairly new and we’ve been, even though we’re a young company,  pretty early on that.

Jesse: Ziv, how can someone find out more or take the next step with ZAO?

Ziv: It’s really very easy.  Just go to www.zao.com, that’s z-a-o dot com, and you can either ask for a demo there or just get started using the system.  We also have a resources tab with a lot of great content about gamification, tips for referral programs.  We actually have an entire webinar just dedicated to gamification.

Jesse: Ziv Eliraz is the CEO of ZAO, a provider of gamification-based employee referral programs.  Ziv thanks for joining us on Game Changer.

Ziv: Thank you very much; it was a pleasure to be here.  Thanks a lot.

Jesse: We’ll provide contact information for ZAO, which is spelled Z-A-O and the link to the webinar recording that Ziv mentioned in our show notes which you can find at EngagingLeader.com/gc5, as in Game Changer Episode 5.

That wraps up today’s show, Game Changers.  Don’t miss our next episode when we’ll feature Chuck Coonradt, who has been called the “Grandfather of Gamification.”  He is the author of the book The Game of Work, first published in 1984 and frequently updated since then.  We’ll be talking to Chuck about five game based principles that unlock keys to employee engagement and energy.  Don’t miss it.

If you enjoy this series be sure to check out the weekly leadership podcast, Engaging Leader where my guests and I share more ways to communicate, engage and lead with greater impact.  Until next time, remember life is short, so keep it fun.

Link to podcast episode:  Winning the Recruiting Game | with Ziv Eliraz of Zao

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