Referrals Are No More Valuable In Filling Open Positions

down trend-1Increasing Trend in unemployment and Increasing Trend in reducing headcount in companies creates new challenges in Recruitment Process.

This trend creates complexity in finding the right talents as talent pool size keep increasing faster than expected. In order fill the open positions, Companies are trying in all possible ways to reach out the talents. One of them is ‘Employee Referral’. Companies are offering good money (referral bonus) for their employees when their referrals got hired. Some companies are allocating some portion of their budget for creating awareness inside their employees to bring their referrals.

Actually this referral bonus and awareness fund is just an additional expense to the company. This is not creating any benefit to the company.

When I discussed with couple of Recruitment Managers from some of top companies, about referrals, I got some interesting fact.  I have listed them here.

  • The resumes reached through employee referrals, also reached through their job consultant. So if he was not referred by his employee, he could have come through some job consultant.
  • 10% of their employees who submitted their referrals are submitted as their friends or relatives are in need of job.  This referral group guarantees always some successful candidate to get hired, as they are doing some filtration before referring them.
  • 80% of their employees who submitted their referrals are driven by referrals bonus.  This referral group very rarely gives successful candidate. Because they don’t even see the resume for any filtration.
  • Many of the occasions, employees do not know whom they referred. They just know only their names.
  • The cost occurred for getting a candidate hired is sometimes double than a candidate getting hired through job consultant.
  • Many times they have spent time for explaining the reason for rejection as the questions come from their own employees. This is really eating their valuable time; particularly when they are in high priority activities.

Finally what they concluded was, Giving referral bonus does not help anyway to bring the right talent. As long as there is any opening and there is a right candidate outside who is friend or relative or ex-colleague of own employee, then company definitely will get their CV.

Allocating awareness fund for their employee referrals is one step more bad expense than giving referral bonus.


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