Feature

Employee referrals: the flip side

Employee referrals are the most popular hiring process, but organisations have to be cautious and avoid the common mistakes, writes Sudipta Dev.

Ask the HR head of any IT company what is the favourite recruitment process, and the answer will be only one—employee referrals. Interestingly, this strong support for employee referrals often turns out to be the factor responsible for its biggest handicap—it is always assumed to be working in the best possible manner (without being used optimally). People refer those candidates whom they know well, consequently those who happen to be the best in the industry for a specific vacancy are left out. This leaves many gaps in the employee referral process and a list of necessary precautions that need to be taken.

"The success factors depends on timeliness of responses, partnering with employees and a widespread overall respect for the company that they must have" - Sandeep Devendra Kumar GM, Human Resources CSC India

The many benefits of employee referrals over other recruitment methodologies have been discussed and espoused again and again, ranging from the cost-saving advantage to easier assimilation aspect. What most experts never talk about is the fact that all the benefits of the system depend on how well it is implemented and managed.

“While this has become a popular method for recruitment and apparently accounts for 30-40 percent of new hires in an organisation, the success (or lack of it) in design, implementation, and outcome is likely to vary from one company to another,” says Tarun Singh, Director, Kenexa. Sandeep Devendra Kumar, General Manager, Human Resources, CSC India, points out that the success factors depend on timeliness of responses, partnering with the employees and a widespread overall respect for the company that they must have.

The common problems

Implementation and maintenance of an employee referral programme is not as easy as it seems. It requires concerted effort and commitment from the HR department. Budget allocation and widespread advocacy among employees is a must. Kumar believes that an effective employee referral system demands a clearly defined plan of action, incentives and process credibility. “Both the candidate and the referee are key participants to the process and therefore must be kept informed and updated.”

"The success (or lack of employee referral programmes) in design, implementation and outcome is likely to vary from one company to another" - Tarun Singh Director Kenexa

Tarun Singh lists the common problems associated with the employee referral system:

• Recruiting managers assume that the programme is working, without constant monitoring and evaluation using metrics.
• The programme suffers from cumbersome administration, rules and regulations.
• The volume of referrals is not managed carefully, which causes “chatter” to obscure quality candidates.
• The reward for referrals is nonexistent or is too low to effectively induce referrals. Or the reward process offers slow, split, or delayed payment of referral bonuses.
• Even though employees might have good intentions, the programme fails to educate them about where and how to find referrals and how to “sell” the firm.
• The referral programme is not integrated into other recruiting and HR programmes.
• There is no process to handle individuals who abuse the referral programme or violate its guidelines.
• The programme fails to require first-hand knowledge and assessment of the referee’s work, and as a result, most referrals turn out to be “strangers” who need detailed assessment to determine if they are qualified.

Necessary precautions

"Groupism is inevitable but people have their own priorities and limitations. There is no need to fear if caution is exercised in recruitment" - CV Prakash Director, Human Capital Team Computers

To avoid mistakes while implementing the employee referral programme, organisations need to cautious. Singh feels that in the course of preparing an accurate sourcing strategy it is very important to consider the various channels of recruitment, “While candidate sourcing is evaluated, a course-correction would be needed from time to time. In smaller organisations that have initiated aggressive hiring, internal referrals can be high in the initial period of hiring and then steadily reduce itself to a consistent stream. It is important for organisations to discern that initial ramping figures of internal referral source are not sustainable. Hence a creative mix of sourcing is always to be derived which can be dynamic while being controlled. An organisation should be a healthy mix of talent, without cookie-cutting the existing talent. New ideas are always stimulating, however organisations want sustained workforce in numbers.”

Then there is the possibility of merit being sidelined for familiarity. CV Prakash, Director, Human Capital, Team Computers, concedes that this can happen if the screening process is not adhered to.

The stringent selection process should be the same for all shortlisted candidates—whether referred or not.

Avoiding groupism/nepotism

It is necessary to ensure that the referral programme is not reduced to a ‘for friends and family’ system. It can lead to induction of below standard people. Furthermore, getting friends and family into an organisation can lead to formation of coteries in the company. Groupism and nepotism vitiates the atmosphere, spoiling the work culture of the organisation. It results in low morale and loss of productivity. “Groupism is inevitable but people have their own priorities and limitations. When little caution is exercised in recruitment, there is no need to fear about groupism,” says CV Prakash.

The best solution is as advised by Singh, “A strong administration and selection process can mitigate the risks of favouritism and prejudice. Nepotism is a consequence of lackadaisical management and hence if such problems are seen then there may be greater evils lurking that the organisation will need to address. It could be avoided by ensuring there is no reporting relationship between the referred person and the person who refers him.”

Making referrals more effective

The culture of an organisation should be healthy to ensure effectiveness of an employee referral programme. “Such programmes need to be built over a period of time through regular communication, constant monitoring and continuous improvement of processes. It may also require special promotional programmes to keep the momentum on,” points out Kumar.

CSC has recently launched a special employee referral scheme where employees get chances to win a car amongst other exciting prizes.

Organisations mistakenly assume that just having a referral programme is enough—they have to constantly monitor and upgrade this effective mode of recruitment to get maximum benefits.

ec@expresscomputeronline.com