Dear All

Need Your help. Wanted to know your views on Employee Referal Policy.

1. What are the advantages and disadvantages of this policies.
2. What points should be considered while drafting a policy.
3. Any suggestions.
4. Monetary conditions.
5. Who should participate and who not if you are working in a multilocation and multi product Organization.

Please send your companies policies and suggestions Immediately.

Cheers

craig

Employee referrals are much debated in smaller organisation but are largely encouraged (and should be) in larger organisations

Advantages - The referers are familiar with the level of competency required in the organisation and the referred CVs will be reflective of this. You would be looking at a much shorter turnaround time for actual hires.

Disadvantages - Nepotism, pressure, 'have-to-hire-because-of-business' cases .. (you know where this is going!)

While drafting the policy - Manpower planning budgets. How much are you actually willing to spend? Does it make more sense to go through a consultant vis-a-vis paying the referer a sum of money.

Non-participant would typically (and obviously) include HR! Though I'm not sure what industry you're in..

Payouts would be based on the level at which the refered person is being brought in (Key referral should be handsomely rewarded). Payment is usually made out only after (and if) the employee completes probation period.

The points I've made may be very generic. I hope they've helped ..do let me know if I need to elaborate.

I am a student of MBA in HR and have a view against referrals. ( Hoping to trigger a discussion in this forum)

As I understand E.R.s, an employee of the company tips his friends about a vacancy and they subsequently go through the normal selection process.

I totally agree ( the disadvantages) when he says that they are rearing grounds for nepotism and other pressures. As a person looking at a career ahead of me, I somehow find it totally sad that one has to know "someone somewhere " to get in there.

Aren't industries losing out on golden talent on those ppl who do not have a internal contact who could tip them about such a vacany???

True, that, costs may be lower, but then, is it socially just to have such referrals?. All I am saying is that probably this has got to be used in moderation and only in cases where there are budget constraints as regards holding a large scale test/selection process.

Referrals, sometimes, becomes the only way to get one's resume across for a job.

I am open to any other views and request all of you to kindly mail me (if not the group) about your views

Warm rgds and it is great being a member of CHRM.

Thanks

Rehaan

Hi all,

I am also a student doing my MBA in HR . I feel that referal policy has its disadvantages and advantages both. Considering the fact that the cost incurred in employing a wrong person to a job is too high compared to the cost of not hiring the right person. Also in todays era, Talent as a requistion to the job is as important as the soft skills that a person needs to display.

Hiring a complete stranger may be an expensive option, if the recruitment turns out wrong. Nowdays more emphasis should also be given to other aspects of the candidate's personality, than mere qualification and, in this case, the background of the person would be better known.

I do not intend to say that referral check is a good option in its entireity but feel that this option should also be exercised. The final selection of the person will not depend on " Someone knowing Someone " but definetly his skills.

What do others feel about this issue? Being a student with not much of work experiance my point of view might be debatable, but I am open to feedbacks.

Regards

Barkha Doshi

Hi Rehaan

You seem to have triggered interesting thought within the group. I would like to respond with some of my views regarding your queries.

The idea behind a referral is not to get people who know people into an organisation. The objective is to shorten the recruitment cycle by using an internal network rather than an external one. To use your own phrase 'knowing someone' does not 'get you in'. There is no compulsion on the organisation to hire a referred candidate. The presumption made is that the employee doing the referral is competent and intelligent enough to know the manpower requirement before making reccomendations.

The point I am trying to make is that there will never be any substitute for the calibre of a candidate to determine his selection into an organisation. Not even a referral. As HR professionals we need to uphold this in our respective organisation.

Hello Friends,

Companies encourage employees to refer people whose work and work ethic they are familiar with. It is advantageous to have a referral scheme as the employee knows the company, knows the work and the culture of the organization and also knows the person he or she is referring. The employee uses his or her judgment in determining a fit between the two. And the organization should give some weight to the employee's judgment. Once the resume is screened by HR, it falls into the same pool of already short listed resumes and from that point on, the candidate's calibre will be the only strength on which he or she will make an entry into the organization.

Lakshman

Hi Friends,

It is really nice to see lots of MBA HR students coming out with their great views and suggestions on referral policy. I basically feel that referral scheme is one of the most important source of recruitment which is been followed by most of the organisation.

1. It enhances the loyalty of the employees in an organisation.
2. This will make them feel that the management giving recognition by providing opportunity to them to refer their known circle of people for the available requirement.
3. It also motivates the employees to participate in organistation's growth by placing the right person on the right job.
4. More than monitory benefits these are the few recognitions which each and every employee expects from the top management. This will infact help them to work more for the organisation's success than individual success. ' When organisation is recognising us why not we work for their success' this will be the type of attitude of the employee when we give them this change of referring people.
5. Incase of immediate requirement this source will help us to fill in the requirement asap.
6. Ofcourse if the other selection procedures are perfect then there will not be any misgap in filling the wrong person in the wrong job though it has been referred by an employee.
7. As already said this will be one of the source and not the only source. It all depends again on the type of requirement which arises whether it is a senior, junior or fresher based on which the sourcing of people also varies.

My view is more than disadvantages , referral policy has lots of positive effect on any type of organisation, of course with good selection procedures which will make sure "Right person to be on the right job " .

affluenthr

Hi there,

Advantages of a referral policy are that you reduce ur recruitment costs,also it ensure stability of new recruits as the employees who refer are aware of the company culture and know whether the people they refer would suit ...Its beneficila both for the employee and the company..If recruitments wud have been thru agencies , we pay them 1 months salary of the person selected,so in a referral policy,normally we pay the employee some amount say for the selection of a PM and above it cud be 5000 and so on..Normally the top management and HR persons should not be a part of this policy..the disadvantages are groupisms and may be spoiling the culture if its referred from management people..

Regards

Rekha

Dear friend,

Any policy/practice have both advantage and disadvantage.. All you need to see what you organisation needs and the ability of your organisation to manager this.. The key to success lies in right implementation..

Referal policy is good tool to use to reduce your cycle time of recruitment.. actually it helps your employee become Brand ambassador for your company..

However it should not be looked as money saving exercise by Company and also it should not be viewed as money making tool by employees.

We should ensure that there is no difference in selection criteria based on the source of candidature and we should be upfront in communicating this.

We should also have tools in place to track the success of the scheme, both in terms of quantity and quality of people it attracts.

We also need to keep a track employee wise referral to tell you that how is the scheme viewed by employee..

If you do not have control mechanism in place the chances are you may get in like minded people which you do not want.. Also employee may perceive rejection of candidature and biased attitude.

The scheme should be applicable only to Junior Management level of the organisation.. Middle and Sr Management employee have the integral responsibility to attract the talent to the organisation (not just their team) without any expectation of reward.

Monetary benefit should also not be too high or too low.. lots employee equate this incentive with what company would have otherwise paid to consultant.. we should discourage that at all count.. Incentive is token of appreciation by organisation,

Cheers

Sonia Sharma 

Hi,

This seems to have become an interesting discussion.

This is all dependent on how are you able to manage.. transperancy and communication is the key..

Referal scheme shold not be viewd as money saving device for company.. what is does is it brings the person to company how know little about the company, have a brief idea on the prospective job and the person is ready/eager to do this job..

The robustness of recruitment process will decided whether it is working or not..

Data from companies where these schems are working fine shows that selction rate of referred candidatess is similar to the candidate supplied by consultant.

it boils to down to how your organisation is able to manage the expectations and implement process.

jigyasa 

Dear chrm'ites,

I well and truly appreciate your taking time off in responding and participating in the discussion. Thanks a lot.

The discussion on the whole has been a learning experience for me.

However, I would request a few of you to address the aspects of

1: general social perception of referrals used by companies

2: social justice - as in are we giving the the relevant recruitment population info about the vacancy

3: using the company website effectively for getting possible employees in the case of there being a E.R.Policy so that people who do not have contacts inside the company do not feel left out.(Resonably, speaking on behalf of the general student community that has been through the recession, there is a large sense of bitterness about companies that use ERs.)

Thanks

craig

Nowadays, we are using various recruiting tools - Newspapers Advt., Walk-in, Campus Recruitment, career fair, jobsite etc. But the tool that brings in the highest quality candidates for the money invested is an employee REFERRAL Scheme. In India, very few organizations use it. Internationally, the best Organization get more than 50% of their hires employee referrals. Some employees are bound to have a better network than others and Organizations should take advantage of that. This has been observed that refereed employees are good.

We are into Software Product Development. We have also referral Policy. It has many advantages & disadvantages.

HR guy does not need to sell the company if any body is refereed by employees. If there are more references, it means they are satisfied with culture, policy, process, management, vision & mission. A good employee has a good network. You reduce the recruitment cost also.

The monetary part (cash) should be based on grade system.

For example: -
Grade 4 (Executive) - 8,000/-
Grade 5 (Sr. Executive) - 16,000/-
Grade 6 (Manager) - 32,000/-
Grade 7 (Sr. Manager) - 64,000/-

The amount should also be based on demand & supply gap.

Employee should feel also free to give the only potential candidate name, e-mail & tel. if they even do not know personally but know that x person is really good. It must be employee reference if joined.

If there are more than 3 references within a year (if joined), HR may reward with one month salary or 2 day night stay in 4 * hotel with one family member. It can be like incentive scheme on 1st candidate 5000, on 2nd candidate 10,000 & on 3rd candidate 20,000 irrespective of grade. You may also announce that if there is any reference within month, the amount will be just double.

We give 50% of amount after candidate join & 50% of amount will be paid after his confirmation or after 6 months, whichever is later irrespective of grade. Both of them should be there on payroll. Confirmation is purely based on Performance & discretion of
Management. Confirmation period can be 3 months, 6 months & maximum up to 9 months.

We also encourage & promote referral policy during interview process where we request candidate to refer any body for various requirements we have. If X refers Y & Y joins before X or X joins* before Y, referral amount will be given as per policy. *One should be on the payroll within one month after person joins.

The reference amount can be given to ex employees if he refer any body. HR should have target that 10 % of people recruited in a year should be through references.

Disadvantage: -
1. Any interview questions or question paper should not leak out b;coz employee might disclose everything so that refereed candidate can be selected.
2. There should not be any group made otherwise it may create trouble later on.
3. The HOD references for team members should be evaluated carefully so that groupsim should not be developed.

Hope this will help.

masterhr

I would just like to add that money should be just incedental to the referral policy. what should motivate an individual to refer candidates (family and friends) is beacause they are happy working with company and would like their kith and kin also be a part of a growing organization. However idealistic it may sound, it has worked for us at Sonata. our referal amounts are large but the USp of the scheme is to motivate the employee to have a family member work here with us and with them under the same roof.

Dear divya,

To have a family member working in the same organisation is the philosophy of a very tiny segment of organisations. On the contrary I think most organisations try and AVOID situations where members of the same family work in the same organisation (especially where a 'reporting relationship) is present. This is to encourage an unbiased and professional appraoch from all it employees.

If I am not mistaken a similar practice is also used in our large government organisations where individuals from the same family are segregated into separate departments.

While encouraging the 'family' spirit we should also take caution against bringing the family to work with us (literally). Its a radical concept no doubt, but I feel that it is one where pros are clearly outweighed by the cons.

Cheers

Chouhan

From the Banking point of view. As long as the relatives/spouse's are not in the same unit or reporting to each other either directly or indirectly then it should be fine. HR/Unit Heads would need to ensure that at any time down the lane also the same does not happen in terms of same unit or reporting. Friends working in the same unit is fine.

Regards

Prof Tandon

Dear friends,

I wish to add the following to the discussion. referal policy for recruitment depends upon the policy of an organisation and mostly private sector organisations adopt it. In public sector it is needed that they should give equal oppurtunity to all eligible persons and open ness in the policy of recruitment besides several statutory requirement of reservations for sc/st, phicically handicapped,ex defence personnel, women, minorities , displaced persons, sports men etc.

the referal policy envisages that not necessarily to refer kith and kin but , the employee who is interested in the sound grouth of the organisation and having loyalty can refer a well qualified and suitable person about whose integrity and honesty he has first hand knowlege with .all requirements are fulfilled the refering employee takes the moral responsibility and pride that he is able to get a person who will be an asset to the organisation.normally he can vouch for it when the candidate is his close relative.

while every effort is made that the close relative is not directly under the control or to whom the new candidate has to report.however where it is not be possible it is no bar.

I know even in banks close relative s(husband and wife or two brothers working in the same branch.)

Murali

We just had this situation & we transferred one of them to a different department, whr they don't have any reporting relation(direct or otherwise).

I think its not fair to ask one of them to resign and I feel it would be draconian measure to do so & think about the impact it would have on the productivity, motivation,.. etc on the officers

There are pros & cons of this issue like others..our company was quite open to this idea and we had employees who came in as singles and worked with us as couples..

Now the advantages are - that you have dual loyalities i.e.if either of the couple leaves the company,he/she cannot cause much harm/has to leave in good terms which is a major concern in the IT companies nowadays..this is so because the other half of the person remains in the company..

The disadvantages are- they both take leaves together(for going to trips,some family ocassion and birth of a child etc) Secondly if one has to be relocated to a client site permanently,u have to look for the placement of the other also..

Thirdly as an example cited in the previous mail,one hotel did not employ an employee's spouse who was working for another hotel - the reason being - the policies, compensation of one hotel may easily be known to the other as both the couple transmit this, also when employee referrals come in,a husband cud ask his wife to refer the names from her hotel which cud lead to employee exodus from the other..so companies usually do not prefer a couple from the same trade..but it depends on the business of the company also whether it wud promote or discourage this policy and how this policy affects the health of the company -but definitely,the company should not be punishing an employee for tying knots - the best cud be to change reportings-if its a Superior-Subordinate or departments if they are in the same department..hope this clarifies ur doubts

tara

Referral Programs can really help an organisation. When people refer their friends and acquaintances, the employees know the culture of the organisation and hence will refer only those candidates who may fit in with the culture.

Secondly it helps to improve teamspirit.

Thirdly when an empoyee refers his organisation to his friends, it creats goodwill for the organisation.

The logic behind widespread referral programs is that companies prefer to pay their own employees for the talent hired rather than pay an external consultant. In most organisations, only part of the referral fees are paid immediately on the joining of the candidate. The other major part is paid only after completion of a certain tenure in the organisation.

Another point which I would like to say is that even if an employee refers a candidate, the candidate has to go through the regular selection process. Companies may invite references and may call the referred candidates for interviews but they will not hire a candidate who is not suitable for the position just because he is a referred candidate.

Bill