Last summer, a few months after launching HireTeamMate, in San Jose, California, CMO Ninh Tran and his three co-founders took on five interns, paying them a near-market rate for entry-level software engineers. Many companies eager to add full-time staff see the employer-intern experience as an extended interview with valuable takeaways for both parties. "Our expectation was that they'd learn new things and execute small projects, such as building marketing tools," says Tran. In hindsight, he concedes he didn't provide enough challenges. Two interns from hotshot colleges didn't take the work seriously. "They were difficult to manage, because their attitude was, if they couldn't do big projects totally on their own, they didn't want to contribute the components," says Tran. HireTeamMate has since revised its program to include a probationary period. In return for passion and a good work ethic, says Tran, "what we offer is our time, expertise, and compensation." Today's best programs are, like HireTeamMate's, sophisticated, engaging, and stripped of the busy work of years ago. Is yours up to speed?

Where are the interns?
Who hires them and who pays them
1.5 million
Number of interns deployed nationally in 2013.
1%
Percentage of skilled workers who are interns in the total U.S. labor force of 152.7 million.
28%
Segment of interns taken on by nonprofit organizations
48%
Percent of interns who are paid. The number of salaried internships on student help and placement site Chegg has been growing. In 2012, 32% of interns were paid, and of those, 63% got job offers upon graduation.
$52,000
Average first-year salary of paid ınterns who get jobs after graduation. Unpaid interns average $36,000.
Sources: Chegg; Georgetown University Center on Education and the Workforce's analysis of data from the National Association of Colleges and Employers

Paid Versus Unpaid

One of the most critical aspects of an internship program is deciding whether to go paid or unpaid, because of the legal ramifications, advises Julian Cordero, founder of Cordero Law, in New York City. Budget is clearly the deciding factor, but unpaid doesn't mean unregulated. State regulations draw from the U.S. Labor Department's Fact Sheet #71 on Internship Programs Under the Fair Labor Standards Act, which stipulates, among other things, that an unpaid position must benefit the intern, that the intern's training match that of an educational environment, and that the intern not displace regular employees. You can teach an intern how to make sales calls, a valuable skill; but after how many calls does the intern become just unpaid labor?

And there's the rub. Donna Sosnowski, director of the Undergraduate Center for Career Development at Babson College, says employers are often reluctant to invest in training unpaid interns, because they usually don't stick around, so the ROI is zero.

Duration

"Many employers, especially small businesses and startups, erroneously assume that interns are available only in the summer, and don't realize how flexible the time frame can be," says Sosnowski.

Bill Fish, president and majority owner of ReputationManagement.com, in Cincinnati, looks for a one-year commitment from his paid interns. "It's an ample period to see if the intern is a good fit for full-time employment," says Fish--he's hired two staffers this way. At Patriot Software, a payroll and accounting firm in Canton, Ohio, founder Mike Kappel brings in paid interns, and, if they're a good fit after a semester's commitment, offers them opportunities to stay on for a year or so. Ajay Prasad, founder of GMR Web Team, a digital marketing agency in Tustin, California, also favors long-term internships. "The longer they stay, the more they understand your company's systems, and the more productive they are," says Prasad, who has already made a job offer to a current undergraduate intern. "It's a way to lock in talent."

Sourcing

Go beyond a college career center's job board. Prasad is a big fan of speaking at local universities--describing what digital marketing is all about--to recruit interns. Felicia Curcuru, co-founder of Binti, a startup that makes the child-adoption process more efficient and affordable, likes introducing internship opportunities to university clubs focused on business and marketing. "These venues are a cool hack because the clubs want to offer value to their members," she says.

Sosnowski suggests searching college course offerings related to your business and then contacting professors or career centers to volunteer to speak to classes.

She notes that the interns most in demand are on the hunt in the summer prior to their senior year. These kids tend to be highly selective about internships, because they're hoping for a job offer at the end of the summer. And they are demanding. Don't be surprised if they ask to do more in specific areas or departments. It's a signal that you're coming up short in their eyes.

 

How to score and cultivate top intern talent

1. Be understanding.

A startup may be everything to you, an obsessive entrepreneur, but not all interns will be on the same page, says Kerry J. Sulkowicz, founder of  Boswell Group, a management consulting firm, and a professor of psychiatry at the NYU School of Medicine. Empathy--the ability to put yourself into someone else's emotional shoes--is essential for getting the best out of interns and giving them a good experience. "Assuming that they're just like you with respect to work ethic, values, and needs--and that they have the same mission as you--is extremely unrealistic and a huge pitfall," Sulkowicz says. By the same token, interns feel as entitled to richly rewarding employment as you do, and the only way to learn what their expectations are is to ask, listen, and respond, he says.

2. Communicate clearly.

Startups' frequent use of  jargon and verbal shorthand can make an intern feel like an outsider who's kept from learning about and participating in your culture, often because the supervisor doesn't have the time to share it. Interns are often bewildered in first-time job settings and need clear instructions from the boss about what's expected of them.

3. Be a manager, not a friend.

Likability is a good quality, but focusing on this trait can be a liability when you are faced with underperforming interns. "For a young or inexperienced entrepreneur to feel confident in the role of authority figure is very challenging, especially when the intern is very close in age," says Sulkowicz. You have enough friends. Address interns' poor work or discipline issues head-on.

From the May 2016 issue of Inc. magazine