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It’s Who You Know: Using Referrals in Recruitment

Recruitment is an imprecise art. You can spend thousands on advertising, put candidates through tests, ask them do presentations, and interview them until you’re blue in the face, and you still cannot know for sure how good an individual is really going to be at working in your company, with your people, dealing with your problems.

A number of companies rely on potential employees being referred to them rather than going through a full advertising process. Employment review website Glassdoor has found that overall the chances of a candidate getting a job if he or she is referred is improved by between 2.6% and 6.6%.

Understandably university and college referrals were the least effective. Such referrals often do not involve evidence of being good at the job and tend to be either boringly generic or overly affectionate for a star pupil. Technology companies, consultants and the financial sector were the highest users of referrals for their recruitment.

Referrals by employees can be a valuable tool. The figures speak for themselves. Employers find they have to trawl through fewer referred candidates before an appointment is made; it’s an average of one in 15, so it’s quicker and cheaper. Referred candidates are more likely to refer new candidates. Referred candidates absorb your culture of your company faster because they already know someone there. Finally, the retention rate in case of referred employees is much higher than employees sourced in other ways.

So is this a good idea? At one time a focus on referrals may have presented the risk you may deny yourself access to a wider pool of talent. But the use of social media creates considerable opportunities. It’s estimated that the average employee will have about 150 contacts on social media networks and the chances are that the contacts are similar to the employee in a number of ways. If you have 20 employees, that translates to 3,000 contacts. The majority of those contacts may not be suitable but the pool is large enough to provide several possible candidates.

What are the disadvantages of such programmes? When you appoint using a referral process, there is a risk of those who know each other spending too much time together and that can risk alienation from other team members.

If employees refer people with whom they have a number of things in common and an overly homogenous group forms, it might limit diverse thinking and creativity in some cases.

The main concern is the risk of unlawful discrimination. Restricting the people who can enter the pool of candidates to those your employees know could deny people with certain protected characteristics the opportunity to be considered. If your employees refer people like themselves (which is likely),it is possible this will further deny a greater range of candidates. A candidate can sue you without ever having met you if he or she can make out a case that your recruitment process is discriminatory (whether directly or indirectly). Sadly, there are bounty hunters out there who make a living from it.

The key challenge today is to broaden the talent pool efficiently, cost-effectively and lawfully. The ability to engage with different communities can widen both the talent pool and secure new customers or clients. Referrals are undoubtedly useful, but it’s wise to use a broad range of techniques in addition to referrals to generate suitable applications.

Russell HR Consulting provides expert knowledge in HR solutions, employment law training and HR tools and resources to businesses across the UK.

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