Employee referrals- the pitfalls

Employee referral schemes have a lot of benefits. As we mentioned in our previous blog, not only do referrals reduce recruitment costs, they have the ability to build a real sense of community within your organisation; helping with engagement and retention. But are they all they’re cracked up to be? In this blog we’ll be looking into the pitfalls of employee referral schemes and how to avoid them.

Diversity- Although employee referrals are great for building relationships within the team, they will have an impact on employee diversity. Think about it- if your employees are primarily made up of a certain demographic, it’s very likely that a large portion of their personal network will be from that demographic too. While it’s great to hire individuals with the same values, hiring too many similar people may mean your organisation struggles to think outside the box when it comes to important business decisions.

Referral spam- The incentives for employee referrals can be pretty big. From extravagant trips abroad to large sums of cash, it’s no surprise that employees are keen to refer a friend. However, one of the biggest downfalls of these schemes is referral spam. Have you considered that some of your employees may refer loose connections in the hope of a bonus? Or that they spend valuable work time searching for suitable candidates because it’s more lucrative than their actual job?

Remember, the whole point of having a referral scheme in place is to ensure better quality hires by employees referring candidates they have a genuine connection with and know will fit within the business. If your staff aren’t doing this, the aim of the scheme is being defeated.

The selection process- One of the problems with employee referral schemes is that they have the tendency to undermine the usual talent acquisition practice, with a large portion of referred candidates skipping parts of the interview process. If a top candidate was referred, would you continue with the standard lengthy process and risk losing them to another company, or would you cut some corners to get the candidate on board as soon as possible? Whatever you choose to do, don’t let your selection process slip.

Bad experiences- It’s all too easy for employees to become disengaged after a bad experience with your referral process. For some referral schemes, it can take up to 6 months before the employee receives any kind of incentive for the referral. Having to wait such a long time for a reward is a big turn off for any employee, especially if they have to chase the finance department for it. So, if the employee’s candidate is successful, make sure they’re rewarded as soon as possible- they’ll be much more likely to make another referral!

How can you avoid these pitfalls? 

Cut out the spam- Although it’s probably not the best idea to restrict the number of referrals an employee can make, it’s still worthwhile having a structure in place to avoid spam. To stop anyone and everyone being put forward, create a system where all employees making a referral must state their relationship with the candidate. By getting the employee to make a note of how they know the referral, they’re less likely to refer someone they don’t have a genuine connection with, and you’ll be able to make a judgement on how legitimate the relationship is.

Be clear on what you want- In order to save the time of yourself and your employees, make sure everyone knows what kind of candidates you’re looking for. For example, if you’re looking to hire for IT, make sure the team understand the specifications in terms of skills and personality, and keep them updated if your priorities change. By doing this, you’ll avoid employees referring candidates who don’t fit the job description.

Focus on quality- Whilst it’s great to reward employees for successful hires, think about taking your incentives to the next stage. Rather than simply rewarding an employee for referring a successful candidate- provide extra incentives based on candidate quality. For example, if you start rewarding employees based on the candidate’s ROI, they’ll become much more focused on referring quality candidates rather than a high volume of them.

By being creative and using the strategies mentioned in our previous blog as well as avoiding the downfalls mentioned here, you’ll be able to produce a referral scheme that works perfectly for your business. To read more about hiring, check out our blogs on enhancing your interview techniques and how to onboard for retention.