Friday, February 20, 2009

Referral Blues - HR practices

Employee referral programme has always proved to be an efficient recruiting tool. However, for consistent performance output it is important to work through a checklist...

Key learnings:

  • Design and execution are two critical parameters for gauging the success of employee referral programmes
  • An insight into the attributes of a world class referral programme can help frame an effective employee referral programme

Employee referrals have been touted as one of the most efficient recruiting tools. The efficacy of the programmes can be gauged by the percentage successes of recruiting deals made through employee referrals. In addition to the efficiency factor, employee referral programmes (ERP) offer a number of other advantages also. The time and cost-effectiveness of employee referral programmes figure among the most attractive benefits of the tool. This apart, better use of recruiter and management time, insight into moral and ethical stand of individual employees and better quality of talent are other benefits of ERPs.

Since ERPs impact a host of organisational factors, their efficacy can also take a beating when one or more these factors become less favourable. Hence, to offset adversity of any kind recruiting managers must focus on the design and execution of ERPs. Most referral programmes have been known to succumb to their own internal flaws in programme design or execution.

ERPs have shown a recruitment rate of 50%-70% . To attain this level of efficiency organisations have to work hard on the design and execution aspects of the programme.


As mentioned earlier, design of employee referral programmes makes all the difference between success and failure of the initiative. Hence, to attain impeccable design and immaculate referral plan , recruiting managers should incorporate the following attributes in the design component:

  • The entire process should be web-based making it a completely paperless effort, saving both time and effort
  • Provision to gauge satisfaction levels of referred employees
  • Provision to recruit referrals from non-employees
  • Rewarding employees who get referrals from competitors, especially for senior level positions
  • The programme should allow employees to send emails to friends regarding job openings
  • A successful referral in a position that seemed difficult to fill should be given extra bonus and rewards

Organisations could add more design components to make the programme more customised.


Even when the design components are in place, referral programmes could fail because of poor execution. Execution issues are often related to the workability of the design. The following execution problems are encountered most commonly:

  • Lack of constant monitoring by authorities
  • Referrals get turned down because of redundant rules and policies
  • Lack of control on the quality of referrals can make the entire exercise ineffective
  • Undue stress on diversity can take the steam off referral schemes
  • Bonuses and rewards may lose their sheen over a period of time
  • There is no distinction between referral bonus/reward for junior and senior positions
  • Lack of disciplinary measures to tackle referral misuse and abuse

After ascertaining the right design and execution process , organisations should institute the right measures to scale the efficacy of referral programmes.


The measures to determine and assess the effectiveness of ERPs include:

  • Cost per recruit
  • Time saved in reaching out to potential recruits, identifying them and processing their job requests
  • Manager satisfaction levels with the referee performance
  • Rise in employee participation in ERPs
  • Percentage of diversity referrals
  • Success rate of referrals made by employees
  • Number of senior level positions filled through ERPs

Referral programmes are undoubtedly one of the best tools for accomplishing corporate recruiting needs. However, there is enough evidence to suggest that more than 70 pc of organisations using the programme for filling up job positions have shown only mediocre results. This is primarily because corporates fail to take ERPs seriously and use it as a subordinate recruiting technique. However, for organisations that value employee referrals truly and announce attractive rewards for every job that gets filled through it have indeed shown that ERPs are at least twice as effective as the traditional approach to recruiting.

Organisations that wish to leverage the real potential of ERPs need to begin their efforts at the deign stage. The design for employee referral programme must be competitive enough to meet world class standards. Using this design , then leaders can move forward with execution of the programme . Thus, by ensuring the right design and execution measures organisations can aim at enhancing the success rate of their recruiting efforts significantly.

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