11 December 2019

RSS Feed

Pros and Cons of Employee Referral Programmes

E-mail Print PDF

Employee referral programme is increasingly becoming popular among companies today. It has rather become a de rigueur recruitment tool for the companies. Companies are aware of the positive spin-off, employee referral programme generates. Besides being the most cost effective recruitment tool, referral programs also bring in high return on investment. Though employee referral programme offers a host of advantages to the organisations, it has its own share of disquieting consequences.


Companies of all stripes call upon their employees to leverage on their social and networking capital so that they can rope in their friends and colleagues. To put it succinctly, it is the recruitment method in which the current employees are encouraged and rewarded for introducing suitable recruits from among the people they know.

Business Implications of Employee Referral Programme

Companies are making concerted efforts to attract and retain top-notch talent. In their frantic bid to retain talent, companies are betting big-time on employee empowerment and engagement initiatives. In the same breath, companies are on the cost-cutting spree even as they spread their dragnets to hook the best talent available. In the light of these developments, employee referral programme is increasingly being perceived as a platform for getting candidates with a "better-fit."

• Quality-Driven Candidate
• Cost Savings
• Faster Recruitment Cycle
• Longer Tenure of Employees
• Fosters Cultural Bonding
• Easy to Track Results
• Eases the Burden of Recruiting Managers

The Flip Side of Employee Referral Programme

The success of the employee referral programme hinges on its conception, execution, and maintenance. But executing and maintaining referral program is far from easy. It calls for concerted efforts and unswerving commitment from the organisation in general and HR department in particular. The cause of employee referral programme should be widely espoused and evangelised across the organisation. Some of the negative and disquieting fall-outs of employee referral programs are discussed below:

  • Hooked by the lure of lucre, employees may indiscriminately recommend candidates left, right, and center
  • Excessive reliance on employee referral programme can result in exclusion of certain class of people from total applicant pool.
  • Restrictive Qualifications can Upset the Programme
  • Employee Referral Programme Strips an Organisation of its Diversity
  • Instances of Nepotism and Favoritism Abounds

Strategies to make referral programme a success:

  • Reiterate the critical role of employees in fostering and sustaining a well-knit team: Top-notch referral programme is just not about money. It is all about empowering an individual employee to come forward and create a well-knit and cohesive team, comprising of people who are suffused with passion, energy and common purpose.
  • Promote the referral programme inside the organisation aggressively (Sound referral alerts): Organisation can make it known via e-mail, SMS or intercom about the dire need of a talent to fill a very key position.
  • Inform about successful hires: Their efforts to rope in individuals should be recognised in a special get-together or some other appropriate event.
  • Let the key manager do all the talking: Get the key manager in the organisation to give an inspiring talk in the crucial meeting, to underscore the importance of employee referral program. Such talks will have an effect of positively charging the employees, who otherwise think of referral exercise as a pocket borough of the HR department.
  • Foster a culture of swift follow-up: Referring employees will beat a hasty retreat in the future, if their submission is not followed through expeditiously. Employees may get disinterested in the referral programme, if they feel that the organisation is not serious about the candidates they referred.
  • Accord referral the highest priority that it deserves
  • Give feedback on bad referrals
  • Do not prolong the payment of bonus or reward: Employees can get de-motivated or disheartened, if the company to delays the payment of bonus/reward for too long. Rewards can work wonderfully well, if they are handed out on time.
  • Don't pay peanuts
  • Simplify the rules: Cumbersome submission rules will be deterrent on employee's participation. Organisation should put in place guidelines that are simple and easy-to-follow.
  • Keep clear records: Organisations should keep regular tabs on the data that sets out the name of the referring employee and referred applicant, the date, a copy of the curriculum-vitae and all attendant information about the candidate, along with a detailed copy of referral application.


Employee referral programme alone would not suffice to meet the recruitment needs of an organisation. Top-notch jobs in the higher echelons of the company can hardly be filled via the referral route. If the organisation decides to embark upon employee referral programs, it has to keep a close watch on the programme to ensure that it delivers on the goals envisaged. Companies should make enough investments in employee referral programmes on a continual basis as it is capable of generating attractive returns on investment vis-à-vis cost and quality per hire.

Last Updated ( Monday, 06 December 2010 15:06 )  

Add comment

Security code


Get the Flash Player to see this player.

Follow SEI

Facebook Twitter Linkedin Youtube RSS Feed
Small Enterprise India Newsletters


Take Our Online PollVoice your opinion
What do you expect from the StartUp India Action Plan?