Referral Programs – An Asset To Any Company

By Irina Nagy

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Recruiting and ways of recruiting the right talent are two topics that have been discussed a lot lately. I’ve mentioned the benefits of recruiting via social media and job boards in two of my previous posts and now it’s time to reveal the advantages of using a referral recruiting program.

Referrals have become increasingly popular amongst recruiters to determine the right candidates for vacancies and one of the main reasons for that is the fact that people are more connected than ever before with new technologies - so recommending a friend or family member for a job has become an extremely easy task.

Referrals allow and encourage a company’s employees or non-employees to source potential candidates for job openings from their personal or professional network usually in exchange for rewards. According to different studies, candidates hired via referrals often perform better than non-referred candidates because referrals tend to be pre-qualified by the referrer and better-suited for particular jobs as the referrer understands the working environment. Furthermore, 67% of employers agree that this cuts down recruitment time and makes the recruiting process considerably shorter.

Benefits of hiring based on referrals:

  • a higher employee retention rate after one year (46% vs. 33%)
  • saves on cost per hire as the only cost would be the referral fee (if applicable)
  • reduces work load and saves time
  • can increase productivity
  • speeds up the hiring process – usually hires made from employee referrals are completed in 29 days, compared to hires made from job boards (39 days) and hires made from career sites (45 days).
  • strengthens the bond with existing employees
  • increases management satisfaction with the human resources department because employee referrals prove to be more reliable and productive
  • boosts the employer brand as they turn employees into brand advocates

It is pretty obvious that a referral scheme will add a lot of value to a business but, besides all the advantages, there are a few downsides to consider too. For example, the lure of financial compensation can make people refer even those who may not be very qualified for an open position; some may only recommend people from the same age group, religion, gender or race.

Anyway, if your company doesn’t already have a referral program it's worth looking at how and why they can work so well - and also how expanding them into open referral networks could take recruitment to the next level with significant savings.

Have you had success hiring via employee referrals? Have you been a referrer? I’d love to hear from you.
 

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