Employee referrals are potentially a great recruiting tool, and the conventional wisdom is that it’s unlikely for an employee to recommend someone they wouldn’t want to work with, themselves, or who wouldn’t be a solid hire. However, employee referrals also come with risks. For instance, a current employee may not know enough about the potential employee’s past, or their sole purpose in making a referral might be to help out a friend who needs a job.
If a firm offers incentives for referrals, personnel also might be financially motivated. Some companies offer prizes, such as iPads and large-screen TVs, in addition to traditional cash incentives for employees who refer new hires.
Referrals Are on the Rise
According to an article in the New York Times, even the largest firms often prefer to hire internal referrals, and many are setting ambitious goals. For example, global accounting firm Ernst & Young has a stated goal to fill 50 percent of non-entry-level positions from internal recommendations. In 2013, the firm reported it had reached 45 percent, up from 28 percent in 2010.
Per the New York Times article, Ernst & Young looks at every résumé submitted, but “a referral puts them in the express lane,” according to Larry Nash, director of experienced and executive recruiting at the firm. Referred candidates are also two times as likely to land an interview as other applicants, per a Federal Reserve Bank of New York study. For those who are asked to interview, the study found, referred candidates had a 40 percent better chance of being hired than other applicants.
These companies often site the savings of hiring a referral, because the candidate is “pre-vetted” by their internal contact. While it’s fine for companies to give internal hires preference in consideration for positions, the evaluation process should not skimp on (or skip) traditional screening.
Careful checking should always be an elemental part of the hiring process, especially when a referral comes with a resume attached. A recent survey by CareerBuilder found that nearly 60 percent of employers caught at least one lie on a resume that came via a referral from a current employee.
In summary, referrals must be vetted as carefully as any other candidate—not only to avoid missing important flags but also to ensure a fair hiring process.