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Employee Referrals: The Cost-Effective Way to Recruit

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The war for talent is rapidly escalating in the corporate world. In such times, when every HR department is battling it out to get the best talent for its organization, the struggle has certainly intensified due to the dearth of available talent. Accordingly, human resources professionals have started looking at new sources of talent, and employee referral schemes comprise one new source that is increasingly meeting their talent needs.

Human resources professionals are increasingly using employee referral schemes as a cost-effective way to recruit professionals without the need to spend on advertising costs or placement agency fees. In fact, they are now putting as much emphasis on employee referrals as on other recruitment methods.

Under employee referral schemes, existing employees are encouraged to bring in new professionals, and they are suitably rewarded if the person they refer is recruited. As such, employee referral systems provide win-win situations for employees, too, as they not only earn cash incentives but also get a chance to share the workplace with friends or former colleagues.

Benefits of Employee Referral Schemes
  • Referral programs save significant recruitment costs for the organization.
  • Professionals recruited through referrals tend to stay longer with the organization as they are already acquainted with the situation within the organization.
  • Referred recruits get more quickly absorbed, both culturally and socially.
  • Referral programs shorten the recruiting cycle as compared to other methods of recruitment.
  • Existing employees refer candidates only when they are themselves happy with their organization. Thus, referral schemes are also a good test of loyalty and satisfaction among existing employees.
Employee referral programs do have a few drawbacks, though. For one, they run the risk of limiting diversity of talent within an organization. Often, referred candidates belong to the same field and come with the same skills or qualifications as those who refer them. Also, sometimes there may be greater bonds between the referrals and those who refer them than between the referrals and the organization. The possibility of new recruits distracting their friends from their duties cannot be ignored with recruitment through referral schemes.

Tips for a Successful Referral Program
  • Suitable rewards and encouragement are a must to motivate existing employees to refer candidates. This also increases the momentum of referrals from employees.
  • Market your referral programs adequately. Ensure that the scheme is known throughout the company. You may also set different rewards for recruitment done at different levels in the organization.
  • Human resources professionals should ensure that the resumes of referred candidates are given priority so that follow-ups are not delayed.
  • It is advisable to proactively inform employees regarding the status of their referred candidates and how they have been faring in the recruitment process.
  • Make it easy for existing employees to refer candidates. A cumbersome procedure discourages employees from getting into the process.
  • Circulate an updated list of vacancies regularly.
  • More importantly, ensure that employees are paid their rewards in a timely manner and without the need for them to remind you.

Human resources professionals have been successfully recruiting good quality talent through employee referral programs, especially in sectors with shortages of prospects with adequate skills. While referral programs bring quick-turnover advantages and drastically reduce the cost of recruiting new talent, they should be used in combination with other recruitment methods to balance the quality of talent entering the organization.
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