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The hiring process is difficult to navigate for hiring managers and potential employees alike. When it comes to recruiting, employee referrals of high-quality candidates can significantly benefit this process. But that’s not to say that employee referral programs are without risk. There are instances in which a referral can lead to a bad hire.

To help you make the right hiring decisions for your company, the background screening professionals at Barada Associates have compiled the top pros and cons of employee referrals. In the end, whether you hire referred candidates or go a different direction, you should still complete a background check. Contact Barada Associates for all of your company’s background screening needs.

The Pros and Cons of Hiring Employee Referrals

Utilizing the following employee referrals benefits and understanding the disadvantages of employee referrals are the key to finding the most qualified candidates for your company.


Save Time

A study by Jobvite found that the average job interview process in the U.S. takes 39-55 days when the position is posted on job boards or a career site. Hiring a qualified employee referral can shorten that time frame by an average of 10 days.

Save Money

Hiring a referral candidate can also lessen hiring costs for your company. According to Zippia, employers can save more than $1,000 in hiring costs when they choose an employee referral. Even if your company offers employee referral programs, your business can still save on recruitment costs since you’re not posting traditional job advertisements or paying agency fees for outside recruiters.

Increase Retention Rates

Current employees are ideally familiar with your company’s brand and its goals. So it’s no surprise that they’ll likely recommend candidates who fit your company’s culture and, in turn, will stay with your business for a longer period of time. Jobvite reports that 47% of employee referrals tend to work with a company for 3 years or more, compared to 14% of other applicants.

Cultivate Company Culture

Maintaining a consistent, high-quality work environment is one of the most important and most delicate aspects of running a business. When an existing employee refers a candidate, the applicant is likely someone they have an established relationship with and who shares a similar mindset and values. By hiring a like-minded candidate from an employee referral, your company can support and expand its existing culture.


Biased Referrals

On average, current employees will refer quality candidates. But while their recommendation may paint the applicant in a flattering light, the employee’s relationship to the referral may not be as strong as it is presented. They might misjudge the referral’s qualifications, which results in a bad hire.

While most employee referrals that lead to a bad hire are unintentional on your current employee’s part, some may be the result of bias. For instance, they may only make a referral to help out a close friend – whether they’re a high-quality candidate or not. Employees also might be motivated by a referral program that offers a cash bonus or prizes.

Overlooking Other Candidates

Navigating applications can be a tedious process. It’s tempting to skip the clutter and only focus on employee referrals. According to Zippia, most companies in 2020 decided to take the quicker hiring route. While referrals only made up about 7% of all applications, employee referrals made up 30-50% of all hires. With this hiring strategy, your company won’t see the bulk of candidates and may miss out on a more qualified applicant who would be a better fit for the role. 

Severed Relationships

A healthy work environment relies on the interpersonal relationships between your staff members. While a current employee and a referral may start out as close friends, their personal relationship might fall apart over time or not translate to the workplace. Tension between team members can negatively impact their performance at work, as well as your company’s overall success.

Additionally, if your company offers an employee referral program, but chooses not to hire a current employee’s referral, this could negatively impact your relationship with that employee.

Relaxed Hiring Process

An employee referral program is one way to demonstrate that your organization trusts its staff to act in the best interest of the business. But sometimes that confidence can be overextended when considering an employee referral. Companies modify their hiring process because they consider the referral as “pre-vetted.” This can lead to a bad hire.

A current employee’s endorsement can give the referral preference over other applicants, but the evaluation process should maintain the company’s standard recruitment strategy. Business Insider reported that 72% of Americans lied on their resume. A careful and consistent hiring process for all candidates will allow your company to catch these fabrications and prevent a bad hire.

Contact Barada Associates for Background Checking Services

Overall, employee referrals can be better for your business, but it’s important to remember that referrals are guaranteed a chance, not a job. Hiring managers should still carefully consider all candidates for the most efficient and fair hiring process. When your company does find the perfect fit, Barada Associates will implement our timely and effective background checks to ensure you’ve selected the top candidate. For more information on our background screening services or to request a quote, contact Barada Associates today.