Employee referral programs offer lower costs and higher quality candidates, but can also bring personal issues and cliques into the workplace. Poorly managed programs can overwhelm HR and lead to a drop in performance.
Companies often offer payment to employees who recommend qualified candidates. This form of referral recruiting has been around for decades, but has become much more successful with the advent of social media. Today, some organizations hire more than half of their new employees from these types of programs. The success of this type of program, however, sometimes brings unforeseen results.
The costs of employee referral recruitment initiatives are generally much lower than traditional recruitment methods. While referrers are paid for each engagement, there is no waste of money on broader types of advertising. In short, there is a guaranteed hire for every payment made.
The quality of potential employees and the likelihood that individuals are good for business are often much higher with referral recruiting. In essence, these candidates have already gone through a pre-selection. The referrer usually knows the potential employee and has shared first-hand job information with him. As the referrer also has an in-depth knowledge of the job, he or she is in a good position to recommend truly qualified candidates.
Referral recruiting programs can be powerful tools in certain situations. Companies with high turnover rates or fast-growing organizations can benefit from the influx of new leads. Additionally, organizations with low employee morale can improve employee relations by hiring new workers with established relationships with the existing workforce.
These types of programs are not without their negatives. Problems can arise when employees with outside relationships bring personal issues into the workplace. Likewise, cliques can quickly develop among groups of these workers. This often makes other employees feel left out and reduces morale.
Poorly managed referral recruiting programs come with their own sets of problems. Programs that allow unlimited referrals, for example, can feel overwhelmed. Often, an employee will flood a human resources office with piles of resumes from seemingly everyone he knows. Since it is unlikely that all or all of these references will qualify for the position, this stream of applicants is just a waste of a human resources manager’s time.
Programs with exceptionally high referral bonuses encourage this type of over-participation. In addition, programs that pay bonuses equal to half or more of an employee’s monthly salary can expect to see a drop in performance, as it becomes more profitable for a worker to recruit than it is to do his job. Low-paying referral recruiting programs, on the other hand, can be largely ignored.
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