Employee referrals: Beneficial or harmful to your workplace?

An employee referral program is a company process that allows current workers to recommend potential applicants for open positions within their organization. Many times, these employees receive a bonus or another form of reward if the company hires their suggested candidate.

According to CareerBuilder research, 26 percent of all external hires come onboard due to current employees referrals, making it the top source for hiring employees. Meanwhile, an estimated 88 percent of employers stated that their best employees came from employee referrals.

Would an employee referral program benefit your company?

What are the benefits of employee referral programs?
Two of the main benefits for this type of program is it will save hiring managers money and improve morale. Instead of investing in costly recruiting methods, hiring managers can draw in quality talent simply by encouraging fellow employees to suggest someone they know for the position. While not every referral will be a perfect fit, if employees are motivated by a monetary or other kind of reward, they may be more inclined to recommend capable candidate that they would enjoy working with.

Another area to highlight is workplace morale. If hiring managers are seriously considering applicants referred by their coworkers and even onboarding them into the company, current employees will feel that their voice is valued. They may be more likely to stay with the company longer and speak highly of their experience. Working with people they care about will also improve their spirits during the day, possibly making them more productive or enthusiastic about their work.

What are negative elements of employee referral programs?
One of the most basic problems with an employee referral program is whether or not current workers will actually want to refer others to their company. Essentially, if they are not happy with their position or the company’s environment, they are certainly not going to subject people they care about to the same fate. Department managers must be proactive about changing company culture and addressing any shortcomings if they want to start or revive their organization’s employee referral program.

Problems with an employee referral program itself include a poor reward systems or creating a negative work environment. Offering monetary rewards are always a successful way to show your employees that you appreciated their input, but if hiring managers are paying them too little or too much, it can become an issue.

“Rewards will likely vary based on the position in question, but if bonus payments aren’t in line with employee expectations, good luck with making the program work,” Tim Gould wrote for HR Monitoring. “It’s a balancing act HR and the C-level folks have to work on together aligning your cost per hire and employee bonus levels.”

Most importantly, hiring managers should avoid hiring referred individuals that are too close to the current employee, such as a best friend or sibling, as they may be a distracting influence. Instead of making an office environment better, they could cause derision and harsh feelings. These employees may spend time together, excluding the rest of the team, causing feelings of alienation and resentment. To avoid this, hiring managers should make sure that they are hiring candidates who truly meet all of the jobs qualifications and not because a coworker just wants to work with a friend.

Hiring managers who want to ensure that their referred candidates possess the needed skills for the position should integrate EmployTest’s pre-employment tests into their hiring process. These tests provide reliable results and remove any uncertainties regarding whether or not an applicant would be qualified for the job.