Employee-referral programs have been an integral part of recruitment policies since time immemorial. By a rough estimate, companies hire 25% of their workforce through referrals from their existing or past employees. So what is it about them that make them so popular? Do they solve the real purpose of filling out positions as per the skills and qualifications?

Referral programs when structured correctly generate a great deal of enthusiasm among the workforce. It often works well to offer some financial reward for referrals that are hired and retained for a specific time. This not only ensures that genuine applications are received but also encourage employee retention. Also, some companies impose a limit on employees in terms of how many can they individually refer in a year. It is a great strategy as the employees then ensure that only the candidates with the best credentials get to win the position. Finally, when organizations take time to analyze the results of referral programs versus the other channels such as advertising, they can greatly improve their policies and programs driven towards hiring the very best.

In certain situations though, referral programs may prove to be counter-productive. Since there is the lure of financial compensation, employees usually refer even those who may not be properly qualified. Over a period of time, when a large number of referred employees are hired from a certain employee pool, it may lead to resentment among other sections that have been unsuccessful in their referrals. This in turn leads to bitterness.

However, despite a handful of disadvantages, it is a fact that employee referral programs have contributed positively to firms and institutions both in the public and private sector. Not only do they provide high quality candidates (especially for the senior/specialized positions) but also negate to a large extent the heavy costs involved with other modes of recruitment like advertising, job fairs and so on. If the organizations structure and execute the program well, there is no doubt that they stand to gain manifold in their recruitment programs.

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