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Beware of Employee Referral Programs Poisoning Your Culture
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Many hiring professionals feel that employee referral programs are the best source for successful hires. To oversimplify the logic behind employee referral programs, the idea is that top performers know other top performers and employees that are a good fit will refer other people who will likewise be a good fit. Hiring professional do need to be aware of potential talent management risks associated with excessively relying on employee referral programs as a hiring source.

  • Potentially creating an environment that fosters nepotism
  • Creating sub-cultures through hires with pre-existing loyalties
  • The recruitment sourcing function becoming complacent

Hazard 1: Potentially creating an environment that fosters nepotism

When an organization, especially a smaller company or business unit, excessively relies on employee referrals they can essentially be creating a counterproductive work environment. Outside of employee referral programs, what other employment interaction rewards helping a friend receive an opportunity that benefits them? Interestingly when you Google “define nepotism”, you get the following definition: the practice among those with power or influence of favoring relatives or friends, especially by giving them jobs. Sounds like your basic employee referral program right?

If employee referral programs become the main source of hiring and the focus of incentives outweighs the identification of talent, employee referral programs could subtly create a breeding ground for nepotism. Employees could wrongly reason that the company rewards the behavior of giving friends special treatments. This could set a tone where nepotism isn’t seen for what it truly is but masked as simply ‘helping out friends’ or ‘networking’. The sentiment of ‘it’s all about who you know’ could end up disguising discriminatory practices. Ridiculous as this may seem, employees could come to this conclusion if your employee referral program is not carefully monitored and held up to the same level of integrity as the rest of your hiring practices that are regulated by legal and ethical guidelines.

Hazard 2: Creating sub-cultures through hires with pre-existing loyalties

Employee referral programs can also run the risk of subcultures developing within an organization where groups of employees have pre-existing loyalties that supersede alignment with company goals, culture or identity. This can start by hiring numerous individuals from the same company, family, or other shared external relationship. Over the course of time this can lead to entire departments, functions, or business units behaving outside the norm of the organization. This can end up altering the employee experience or damaging the employer brand established by the rest of the organization.

More of the same is never good. Significant portions of employee referrals for job openings are close friends and family members of employees. Relinquishing to our selfish nature, most people aren’t going to refer someone whom they feel are going to out perform them or will make their job harder. Instead we usually want to work with people we like or think that we will get along with, our peers. After a few hiring cycles from this talent pool, an organization could find itself in an environment where everyone is the same. This could potentially lead to creating an environment that excludes others including top talent.

Hazard 3: The recruitment sourcing function becoming complacent

When employee referral programs heavily focus on the incentives the referrer will gain, the quality of referrals can be affected. An incentive-motivated employee referral program may not attract top performers to refer other top performers but instead cause referrals to flood in from individuals simply focused on gaining the incentive. This can lead to decreasing the validity of the program.

As a hiring professional it is valuable to have insight from a reference on an applicant. Having a referral should not mean that the applicant does not have to measure up to the same criteria as other applicants or be fast-tracked to the candidate short-list. Employee referral programs should hold the same weight as other sourcing strategies that have been judged effective.

Solution: Employer Brand in the Market

By all means employee referral programs do have a place in an organization’s recruiting strategy. An employee referral program is a great tool for reaching college and university alumni, filling unique, specialized roles and penetrating communal markets. But a good recruiting strategy has other key factors such as:

  • Your targeted market knowing your organization
  • Your targeted audience having a desire to work for your organization
  • A responsive talent community

Organizations should share open positions with employees. Employees are always great ambassadors to the market and their involvement can positively affect key recruiting metrics like time-to-hire and improve market penetration. Top performers, who have the interest of the company in mind, don’t necessarily need to be incentivized or a need a highly advertised program. Often on their own they will do what’s right for the company. That’s part of what makes them a top performer. Having your employer brand in the market, by both internal and external means, is the solution for attracting good hires.

As you develop your hiring strategy, there are no one-stop short cuts. An effective and sustainable recruiting strategy consists of an intricate blend of recruiting tactics, executed with efficiently, that remain flexible to the market. Never though should hiring practices put talent management at risk. Therefore keep an eye out on the entire employment experience and happy hiring.

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About The Author
Charles Newton
Charles Newton is a Human Resources and Recruitment strategist who aims to make sure tasks are strategic and strategy can be converted to tasks. In this regard his personal mission is to motivate, innovate, and achieve in talent management. He shares this passion via the website/blog The Middle Ground and the associated social media accounts.
2 Comments
  • April 11, 2015 at 10:41 AM

    Charles,
    Very nice post. I, too, believe referral programs have an important place in talent acquisition processes (for the reasons you mentioned).

    I have wondered, though, about one other potential liability with excessive reliance on referral programs that I didn’t see explicit here in this article: The temptation to hire “sameness” at the expense of diversity. The assumption is that my network of friends would likely include those who are like me (think like me, like the same things I do, etc.). Some good research points to the value of diversity (especially diverse personalities) on teams, and I wonder if excessive reliance on referrals might actually foster a culture of “sameness”.

    Thanks again for the post!

    • April 12, 2015 at 10:34 AM

      Nancy,

      Your response couldn’t have been more timely or correct! I just published a post on my personal site, http://www.TheMiddleGroundHR.com, addressing this entitled Diversity and Inclusion Isn’t Just About Race. I believe this snippet from the post mirrors your sentiment: Lacking diversity and inclusion can create the same feel as automaticity driving. Employees can get used to seeing the same. Employees become disengaged, becoming inattentive to new opportunities, chances for innovation and growth, or useful disruptions to validate the norm. Avoid crashes in your organization of employees always seeing the same “person”.

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