Do employee referral schemes work?


Referral schemes are nothing new, but with the growth of social media and professional networking sites such as LinkedIn, they now have the potential to take on a life of their own. An opportunity can be shared and re-shared by a far broader network than a hiring team would typically be able to reach.

Many employers operate the schemes as a means to access ‘pre-screened’ candidates, figuring that if one of their trusted employees thinks this person might be a good fit, then they’ve done the job for them. Some offer financial incentives, either once someone is recruited, or after they have stayed at the company for a certain amount of time, or a half now, half later approach.

The advantages of referral programmes are attractive: the employer can save money they might otherwise spend on an external recruitment agency or on hiring a resource to track down potential candidates, for example. And in areas where particular skills are hard to source, they can prove invaluable.

According to Ashley Hever, head of talent acquisition for UK and Ireland at Enterprise Rent-a-Car, the company tailors its referral scheme in certain areas (such as IT or geographical areas where there are fewer graduates), offering an extra incentive to teams who can come up with potential hires. The company generally offers £1000 for a successful hire, while all referrals get placed in a hat with the chance of winning a prize such as a TV or a holiday, so staff are rewarded not just for successful referrals, but simply for participating.

“Sometimes you get a more engaged employee than you would from a job ad, and because they know more about the job and the company, they can hit the ground running,” says Hever. The company also gives feedback to staff who have referred unsuccessful candidates, and publicises referral success stories internally.

But according to recruitment veteran Mitch Sullivan, Enterprise’s successful scheme would appear to be an exception. “There are very few out there that actually work,” he says. “I think culture plays a significant part, and they seem to happen more in the US.” On the culture, many critics of referral schemes agree. If you use a referral scheme to hire people who are like the people you already employ, how can you expect to encourage a diversity of attitudes and skills? To counter this, some companies offer bigger incentives for staff who can help them fill any diversity gaps in the business.

There is also a danger that, should an employee refer someone who is not then recruited, they become disengaged. Or worse still, their friend or acquaintance joins the company and ends up leaving either by choice or because they weren’t right for the role. “If you make a referral and it doesn’t work out, it reflects badly on you,” says Kay Chouhan, director of recruitment company Kinnect Personnel.

On top of that, making a referral programme too complex can also put staff off suggesting potential recruits. By introducing too many layers of conditions (such as only paying the referral bonus after someone has passed probation) or demanding that staff fill in long-winded referral forms, participation in the scheme is likely to be low and therefore of limited benefit. Keep it simple, perhaps with a page on the company intranet with links to Facebook and Twitter, and it’s more likely to generate leads.

The bottom line is that referral programmes should never be used in isolation, and that all of the referred candidates go through exactly the same interview and assessment process as all other candidates, rather than receiving any special treatment. But employed in conjunction with intelligent sourcing on LinkedIn and other online media, as well as wider employer brand initiatives, they can be a low-cost and effective addition to a recruiter’s arsenal.

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