Employee Referral Programs – Are they effective?

Many organizations recruit candidates through the employee referrals. The major advantage of this type of recruiting is, it is the least expensive method. As the existing employee is already aware of the Company’s culture, policies and recruitment process, the person may be referring to candidates who will fit-in to the Organization’s environment. This makes the hiring manager’s job easy to screen the right candidate. Providing referral incentives to your employees motivates them indirectly.

Anyway there is also the flip side. As the employees may be referring to candidates from their known circle only, the chance of getting a quality candidate becomes less. If the employee is not aware of a person who will fit in to the job requirements, then the referral may not happen at all.

A Research suggests that people hired through employee referrals tend to have longer tenure and higher job satisfaction. Yet, national surveys indicate that only 10 to 15 percent of positions are filled this way.

Even though this method of recruiting is cost effective, the number of potential candidates you can find is very less compared to other methods.


I think there are two advantages to this kind of hiring. The most obvious one is the cost -- it may not cost you anything if one of your employees brings in a friend or former colleague. But the other is a popular trend that has taken hold of the corporate world, a kind of simulated camaraderie that attempts to transform the workplace into a familial-type atmosphere. Not that I disagree with this entirely. But, I have also worked with friends, and found out that they were better friends than professional partners.

No, I think the hiring process is a necessary evil (that's even overstating it). There are job boards for hit-and-run type positions and recruiting markets like Dayak for finding long-term employees without too much time or money suck. Most people would rather recruit from friend-networks, but the investment of the latter method, especially with recruiting, really pays off. Finding the right employee starts with the right tools.