Musings on employee referrals

According to a recent article by Times of India, Indian firms are estimated to have lost at least Rs. 2,460 crores in “wrong hiring” in 2012. So to avoid wrong hires the first check point is the source of CVs. This post will deal with one of the important sources of getting CVs for recruitment namely employee referrals.

Employee referrals are a unique way of getting a prospective candidate into your organization. Off late, it has become one of the most spoken and a very important source for the relevant CVs in most of the companies, both tech and non-tech. As a part of the HR team, I have a feeling that this probably is the best source as the initial screening/check is already done and also a reliable one.

Earlier, good candidates used to get attracted or get retained with a company because of its brand image. In the current dynamic scenario, it looks like not even the best of companies are able to do so. At the same time, it has also become very evident that people have individual fan followings as well, because of which good talent gets attracted to the companies. Today, one of the strongest reasons to join a company is the kind of peers that one will get to work with. I’m talking of the people whose reason to switch is more on the job satisfaction level than just money related factors. These are the kind of people who probably would not be looking for change but would not mind exploring the opportunity and if it turns out to be good, would consider the same. The reach to these people is the toughest part of the deal, which gets resolved up to a larger extent if any of the known (friend) starts the conversation. Once that initial talks have started then the recruiter who is well trained in closing such deals can take it over and control the outcome.

How effective is employee referral in today’s context?

If we all understand that referrals are a very good source of hiring then why is that the big companies who have 20K – 100K employees still face problems of hiring good people in terms of quantity as well as quality? Even if every 10th employee refers one person a year, the company will face the problem of abundance. So what really is the problem? The problem is that since these programs are rewarded in cash and other materialistic benefits most people have started misusing it. With the rise of professional networking platforms like LinkedIn and Facebook, the prospective candidates have started contacting people in the companies that they want to apply. The employees then simply refer these candidates to their recruiting team without even doing any kind of due diligence. This DEFEATS the whole purpose of setting up an Employee Referral Program.

So what is the solution to this? Should we stop asking CVs from the employees or we should accept only those referrals with whom the employee has worked with in the past? But this will impact the inflow of CVs to a very large extent. So the solution needs to be a win-win. For a candidate that has been referred by an employee (should be known as ‘Employee Referred’) CVs, we should expect the employees to give us a good insight of the candidate referred. This will save some time and effort of the recruiter who would be dealing with this candidate. In one of my previous organizations, we came up with a concept of ‘Employee Presented’. So you can still forward the CV that you have got through a friend’s friend and get some rewards for the same but now the recruiting team knows that there is no or not enough of credibility of the candidate presented as the employee does not know the candidate personally. In such a case the recruiter treats the candidate as any fresh candidate who comes through any other source like job portals. Though in most of the companies the rewards for presenting such CVs are not different, but rewarding it differently is not a bad idea. If the rewards are different then in that case, the employees will be more honest in letting the recruitment team know that the CV that they have presented is unknown to them and that’s the reason the reward is probably lesser. Happy Recruiting!

Manav Prasad is the Head of Human Resources at Compassites. Manav comes with over 12+ years of industry experience. Prior to joining Compassites he was leading HR & Recruitment functions at companies like Saba Software, Thoughtworks Technologies etc. He is well known in the Human Resource circuit and has been a key member of popular HR forums such as HRIA. Manav holds an Electrical Engineering degree from Nagpur with an MBA from IIIT, Pune in HR and IT

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