Although businesses have found referrals to be an effective way of attracting good applicants, not many organisations seem to use employee referral schemes effectively. Under a referral scheme, existing staff are given an incentive, financial or otherwise, to recommend friends or former colleagues for vacancies within the business. The incentive is only given if the recommended person's application is successful.
While employee referral schemes are not new, accounting for roughly 20 percent of hiring, technology is enabling them to expand. The use of internet-based social media can bring instant access to potential candidates via professional and social networking websites.
Employee referrals can potentially reduce the costs and time spent on the recruitment process and employees hired through referral schemes are more likely to stay in the organisation. If the employees don't feel good about the place, they're not going to subject their friends to the environment.
Employee referrals tend to be more popular in some sectors than others. Financial services, consulting and the legal profession rely most heavily on employee referrals.
Although the process seems straightforward, by relying too heavily on employee referrals, there is the danger of limiting diversity within the workforce, restricting new blood and new ideas to the business and often excluding minority groups. People tend to refer friends or acquaintances who are similar to them and rarely do an exhaustive review of all the people they know, nor do they have the perfect knowledge of all the open jobs available.
Employers need to ensure that the referral process is thorough. There are many things one needs to ascertain about a person in order to determine whether they are right for a job and therefore such a referral can only be one piece of the puzzle.
Employers also need to be aware of the legal implications of such programs if any. Are we in danger of indirectly discriminating by referring friends rather than opening up employment to a wider pool of candidates?
It is often useful to use different recruitment sources to get a wider pool of talent as a benchmark and ensure that all referred candidates go through exactly the same interview and assessment process as all other candidates. All applicants should be treated in exactly the same way - whether they have been referred or not.
In summary, employee referrals can be a valuable tool in the recruitment process but should not be used as the only means of hiring. Instead, they should be used in tandem with a broader recruitment plan in order to avoid limiting the candidate pool, as well as to avoid a lack of diversity within the company.