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Advantages And Disadvantages Of An Employee Referral Program

By Expert Author: savio vadakkan

The employee referral program (ERP) is an initiative that has being used across companies around the world by which an existing employee recommends another professional for positions open at his organization. It is a very cost effective tool when it comes to sourcing candidates and hence many organizations are now motivating employees through various employee referral engagement activities to leverage their social capital and assist in the hiring of the right candidate.

Advantages of an employee referral program

Companies have now realized the potential of running an employee referral program and so leave no stone unturned to be able to achieve the goal of sourcing talent through employee referrals.

Some benefits of hiring talent through employee referral programs are:

• Quality candidates are found through referral recruiting
• There is an indirect trust on a referred candidate
• Cultural bonding is ensured
• Reduction in attrition rate
• Savings in terms of recruiting costs
• Recruiting mechanism is faster
• Employee engagement leads to a positive work environment
• Referral rewards instills a competitive spirit
• Effective for hard to-fill positions

The employee referral program makes the recruiter’s job fairly simple since the most consuming task finding potential candidates is eliminated.

But there are certain pit-falls of having a referral program and using it for hiring.

Disadvantages of an employee referral program

The success of an employee referral program depends on its implementation and the mechanism in which it works. Hence it becomes very difficult to manage and at the same time ensure success of the program. It is not an easy task to expect the same level of dedication and commitment from the employees as that of the recruiting team.

Some pitfalls in case of employee referrals:

• Inactive participation from all the employees
• Excessive reliance on employee referrals as a recruiting source
• Impacts organization diversity
• It can lead to favoritism, partiality and employee discrimination
• Affects organization diversity
• A mismanaged reward policy system will lead to employee dissatisfaction

Overall, the benefits of employee-referral programs decisively outweigh the potential pitfalls. A well-designed and highly visible employee-referral program is a critical part of any company’s recruitment strategy.

The pitfalls in the employee referral programs can be easily rectified by using efficient employee referral tools eg. ZALP that help in generating a transparent and just process.

Author Bio:

Savio Vadakkan is the Marketing Professional at ZALP, Savio Vadakkan is the Marketing Professional at ZALP, a unique employee referral program. Latest employee referral tool like ZALP have features like analytics help organizations track the employee activity thus tracking the entire employee referrals as a recruiting source.

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