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Often, businesses offer payment to employees who recommend qualified applicants. This form of referral recruitment has existed for decades but has become much more successful with the advent of social networking. Today, some organizations hire over half of their new employees from these types of programs. The success of this type of program, however, sometimes comes with unanticipated outcomes.
The costs of employee referral recruitment initiatives are generally much lower than traditional recruitment methods. While referrers are paid for each hire, there is no money wasted in broader types of advertising. In short, there is a guaranteed hire for each payment made.
The quality of potential employees and the likelihood that the individuals will be good fits for the business is frequently much higher with referral recruitment. In essence, these candidates have already been through a prescreening. The referrer usually knows the prospective employee and has shared firsthand information of the position with him or her. As the referrer also has intimate knowledge of job, he or she is in a good position to recommend applicants who are truly qualified.
Referral recruitment programs can be powerful tools in certain situations. Businesses with high turnover rates or rapidly growing organizations can benefit from the influx of new leads. In addition, organizations with low employee morale often can improve employee relations by hiring new workers with established relationships with the existing workforce.
These kinds of programs are not without their negatives. Problems can occur when employees with outside relationships bring personal issues into the workplace. Likewise, cliques can rapidly develop among groups of these workers. This often causes other staff to feel excluded and lowers morale.
Ill-managed referral recruitment programs come with their own sets of problems. Those programs that allow unlimited referrals, for example, may find themselves overwhelmed. Frequently, an employee will inundate a human resource office with stacks of resumes, seemingly from every person who that employee knows. As it is unlikely that all, or even most, of these referrals are qualified for the position, this flood of applicants serves only to waste a human resource manager’s time.
Programs with exceptionally high referral bonuses encourage this type of overparticipation. In addition, programs that pay bonuses equivalent to half or more of an employee's monthly salary can expect drops in performance as it becomes more profitable for a worker to recruit than to do his or her job. Conversely, referral recruitment programs with low payouts may be largely ignored.
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