Be Careful with Employee Referral

 Be Careful with Employee Referrals

Employee referrals are common practice at many companies – and to encourage them, many companies offer both cash and non-cash incentives. But while bringing new assets to a company can bring an employee extra cash and other rewards, it can also hurt his or her reputation if a candidate recommended is hired and doesn’t work out, according to an article in The Wall Street Journal.

When Cindy Sopp, senior operations supervisor at insurer Chubb Corp., was considering referring someone to her company for a job, she thought carefully about who might be a good fit. “I knew the individual for this particular job needed to be social, but not too social, work well with others, [be] responsible and not be afraid of hard work,” she explained.

Her candidate worked out well for the company, but Sopp pointed out that it’s important to think long and hard about the person you refer. “The candidate is a reflection on me – why would I refer someone that wasn’t right for the position?”

That advice is particularly important for employees thinking about recommending people for jobs who they don’t know well – or people who may be better friends than co-workers. Career counselors agree that referrals work best when employees have a strong grasp of the qualities a candidate has to offer.

Gerry Crispin and Mark Mehler, principals of CareerXroads, a recruiting-technology consulting firm in Kendall Park, N.J., found that 98 percent of 58 U.S. companies they surveyed earlier this year used referrals to recruit. Mehler said he has seen a variety of payments: “U.S. savings bonds, dinner for two; I’ve even seen [payments] as high as $50,000,” although he noted that that amount is rare.

Gloria Brooks, a human-resources business partner for Mitre Corp., a non-profit in McLean, Va., that manages three federally funded research and development centers, said 45 percent to 50 percent of Mitre’s hires come via employee referrals. “Employees aren’t referring friends and family members,” she told the newspaper. “They’re referring folks with strong work ethic because their name is at risk.” Mitre pays between $500 and $2,000, depending on the position, for employee referrals.

Indeed, referral programs are a cheaper way to bring in new blood “when you think of advertising and going through employment agencies and incurring relocation costs, said Dan Squires, founder and principal of Management Solutions Inc., a career-management firm in Fort Lauderdale, Fla.

But sometimes the lure of extra money [and other rewards] can blind an employee to a candidate’s faults and that can be dangerous, according to the article. “If you don’t have experience with them, take a look at their résumé,” says Karen Armon, an executive coach at Alliance Resources in Littleton, Colo. “Who you refer takes on your credibility.”

In the end, though, it’s up to the company to decide whether a candidate is a good fit, noted Steve Gravenkemper, a psychologist with workplace consultancy Plante & Moran PLLC of Southfield, Mich. “It is the organization’s responsibility to do the selection by testing and reference checks,” he said.

According to The Wall Street Journal article, “a successful program has to educate employees about referrals as well as pay them,” said Squires of Management Solutions. “The incentive needs to be creative and generous. You need people to be active, actively looking for people to refer.” And employees who refer candidates should be rewarded regardless of how well the hires work out, he said. “If something goes wrong, it’s not the referrer’s fault, it’s the company’s.”

For sure, a bad fit hurts the new hire as well as the employee who recommended him, the article pointed out. “You messed up their career because they will probably be terminated down the line, and you didn’t do your due diligence,” Squires added. “You’re probably not going to get fired, but you’re judged by the company you keep.”