Human Capital Management Blog

Strategies for HCM Professionals

Why aren’t companies using more employee referrals to recruit talent?

offboardingAt your company, it’s likely that you have a group of talent management leaders that spend the majority of their time focused on recruiting. After all, finding top-level talent is essential for building a successful organization. Without good people, you can’t build a happy, engaged workforce or expect to find a competitive advantage in business.

As such, recruiters spend a great deal of time investigating various methods for finding talented job applicants. They’re active on job websites, they’re networking via social media, they’re recruiting on college campuses and so on and so forth. Every new channel is a potential gold mine for the next generation of great employees.

But what’s surprising is that one strategy continues to go overlooked and underrated – the employee referral. One of the best ways to find great people for the future is to ask your current star employees for recommendations. Often, though, companies fail to take advantage of this opportunity. Why?

The great divide on referrals
The survey data indicates that there’s a massive divide between the effectiveness of the employee referral and the frequency with which companies are using it. According to the Society for Human Resource Management, an analysis of over 440,000 Glassdoor job reviews reveals two things – one, that employee referrals are the most effective channel for sourcing open positions, and two, that only 10 percent of today’s candidates are the product of referrals.

Andrew Chamberlain, chief economist at Glassdoor, told the news source that the data is convincing – an employee referral has a 6.6 percent chance of bringing in a successful match for a job, compared to a 2.6 percent rate in other candidates. Referrals also lead to the highest rate of accepted job offers.

“Employee referrals are effective because they provide useful context both to job seekers and companies,” Chamberlain explained. “Job seekers gain insights about prospective employers from the employee, and companies learn about the reputation of candidates from the recommender.”

Why aren’t people referring their friends?
It’s strange that employee referrals are so successful and yet used so seldom. Chamberlain’s data showed that online applications are still the most common sourcing channel for jobs by far (42 percent), while referrals are far behind at 10 percent. It’s baffling.

“An employee referral is a great source for interview candidates, but employers gather candidates from many different sources, frankly, because referrals are harder to get,” Chamberlain noted. “This could be for many reasons, but one that stands out is that job seekers aren’t necessarily inclined to do heavy research on their top workplace choices and reach out beyond friends and family to ask for a referral.”

While it’s difficult to figure out the exact problem with the current lack of referrals, it’s definitely possible for companies to do their part to fix it. One thing they can do is focus on employee engagement – if people are happier with their jobs and have more respect for their employers, they’ll be more likely to recommend their work to others.

Does your organization encourage employees to make referrals? Tell us about your experience.

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