The Hazards and Benefits of an Employee Referral Program

The Hazards and Benefits of an Employee Referral Program

Smart recruiting involves diversifying your strategies. A broader net means more applicants to choose from, and a stronger workforce.

An employee referral program can be one of the best ways to source hires. Before you implement a program, though, it’s important to consider the pitfalls.

Hazards of an employee referral program

1. A mechanism for bias Employee referrals can introduce biases into the hiring process, such as age, race, and gender, if the referral pool is not diverse. While employee referrals can be great hires, it’s important to hire through other means too.

2. Potential for abuse of the program While most employees won’t risk ruining their reputation to make an iffy referral – understanding they’d be sacrificing long-term good-standing for a short-term reward – you need to watch out for misuse of the program. It’s important to make sure only established employees have access to the program – many companies make the program available only after 6 months to one year. Likewise, a good referral program stipulates that the bonus be awarded only after the referral lasts a similar amount of time. It can also be helpful to differentiate between personal referrals and social media referrals. Allowing employees to share referral links to their socials can be a great way to advertise a role at low cost. But the program should consider having a much smaller reward for these social media referrals than for personal referrals.

3. Initial investment of resources Designing and implementing a program, and then monitoring costs versus reward to optimize the program, will take resources.

This is mainly an initial investment, though, and should pay off pretty quickly. Just make sure the program is well-considered, or that, if a test program is launched, it’s clearly communicated that it’s a beta and that future referrals may be handled under a different, finalized program.

4. Program needs employee support to succeed If the referral incentive isn’t strong enough, employees may not use the program – meaning the resources invested in its development won’t pay off. Cash rewards are popular, but employees may also want extra vacation time, or opportunities to further their education/professional skills. Consider floating some feasible reward schemes and gauging interest.

Referral scheme pay-offs

1. High-quality candidates Employee referrals can often lead to high-quality candidates who are a good fit for your organization and the role.

2. Increased engagement Inviting employees to participate in the hiring process can increase their engagement and satisfaction in their role.

3. Faster hires Employee referrals can expedite the hiring process, as the candidate has already been vetted by a trusted source.

4. Less advertising expense Employee referrals can be a cost-effective way to attract candidates, as it reduces the need for expensive recruitment advertising.

5. Better retention Employee referrals are often more likely to stay with the company for a longer period, as they have a personal connection to the organization. They’ll be more likely to push through the initial discomfort that tends to come with learning a new role in order to avoid disappointing their referrer.

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