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Are workers undermining referral programs?

Cash bonuses are effective, but some employees are blanketing HR with resumés of strangers in effort to win the 'recruitment lottery'

By Todd Humber (todd.humber@thomsonreuters.com)

Employee referral programs are effective — there’s no denying that fact. That’s why so many employers have programs in place and encourage employees to refer friends, family and other contacts to apply.

Many firms even offer a cash bonus to employees if their referral gets hired. It’s a great way to recruit employees.

But what if the referral program goes beyond just friends and family? I had an interesting discussion last week with an HR professional from Winnipeg who works for a retailer. He relayed a story about two retail workers at one of their Alberta stores who have set up a mini-business to supplement their income by referring people for positions.

But these workers don’t always actually know the people they’re referring. They find candidates across the country by trolling websites, such as Craigslist, to find people who they think might be interested and qualified for these positions.

So, the question was raised: Is this a good thing or a bad thing? The short answer is, well, yes — because it’s a bit of both.

The plusses are easy. These two employees are doing work that would otherwise have to be done by the HR department (or by a paid recruiter) to source candidates. It’s costing the employer nothing, and there’s really not much risk. The company only has to pay out when the referral is successfully hired.

The minuses are a bit more complicated. The entire point of a referral program is to tap into your employees’ network. If the staff in Alberta are recommending a bloke in Saskatchewan, whom they’ve never met, then doesn’t that defeat the entire purpose?

And how comfortable is the employer with workers supplementing their income in this manner? And if other workers caught wind of this scheme, wouldn’t they be tempted to follow suit? The end result could be thousands of resumés flowing into the HR department with employees essentially trying to win the “recruitment lottery” and hope one of their recommendations gets the job.

From HR’s point of view, that’s no better than just posting a job and watching the sea of resumés flood in — and the point of a referral program is to avoid that scenario.

These workers are hardly alone in cashing in on recruitment. Some websites — one is Bohire, which we’ve written about in the past — allow employers to post jobs and attach a “reward” to it for anyone who can refer a successful candidate. On Nov. 22, Bohire alone had nearly $275,000 in referral cash up for grabs. Last year, the hospital in the small town of Hawkesbury, Ont., announced it was willing to pay $5,000 to anyone who could refer a doctor who would stay for a minimum of two years.

There’s no doubt referral programs are an effective and valuable source of candidates. But should employers draw the line on how many people workers can refer? Or at least ensure they actually know the person?

Todd Humber is the managing editor of Canadian HR Reporter, the national journal of human resource management. For more information, visit www.hrreporter.com.

Todd Humber

Todd Humber is the publisher and editor-in-chief of Canadian HR Reporter, the national journal of human resource management. Follow him on Twitter @ToddHumber
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