I know what you're thinking. I must be crazy right? What can be wrong with taking advantage of employee connections to find your next hire? After all, studies have found that referral hiring saves money, takes less time, lowers employee turnover rates, and is rising in popularity.
While none of these things are untrue, referral hiring isn't just this perfect strategy with no strings attached. In fact, a lot can go wrong with using referrals, and it can often lead to terribly regrettable hiring decisions. Here's how:
1. It encourages laziness.
Referral hiring can potentially make it so easy to hire a candidate that companies become complacent. In other words: too much of a good thing is actually a bad thing.
Part of what makes referral hiring so appealing is that it gives companies the ability to outright skip parts of the recruitment process. Once you get a good number of potential referrals, you simply identify which among them will be your best bets. There's no longer the need to go through thousands of resumes and job applications to find the perfect candidate. No need to go to job fairs or to advertise on social media. Perhaps you also skip the phone interview stage and jump straight to on-site interviews.
The result? You save time and you save money, just like what studies claim. But as a consequence, your talent pool is significantly smaller and your screening process isn't as comprehensive as what it should have been.
2. It forces biased decision-making.
Alright, so maybe it doesn't necessarily force you to be biased about your hiring decisions, but it's definitely a very real concern and something that's very difficult to avoid. In fact, companies don't avoid biased decision-making. They embrace it. This is why referral hiring is so popular to begin with and why referral candidates have their applications placed right on top of the pile. What else would explain why referred candidates are so much more likely to be hired than your average applicant. It's why business connections are so important in the first place.
Ask yourself this though. Does having a pre-established connection with someone make this someone a better fit for the job? Are they somehow smarter, harder working, more creative, more driven, or more likely to do a better job than the next guy?
From what I can tell, the answer is "no," and that's what makes referral hiring so dangerous. Referred candidates have a way, way higher chance at getting the job, yet when you look at their actual credentials and work experience, they're often no more qualified than everyone else applying.
3. It doesn't find you the best talent.
Isn't the whole point of the hiring process to find top talent? I'm not talking about good talent or good cultural fit. I'm talking about the very best of the best. The elite. The cream of the crop. Now what are the chances this person just so happens to be someone your employees already know? Not very likely from my guess. The point is, finding the best person for the job should be a lot harder than simply going through a list of your employees' existing connections.
Look. I'm not advocating for you to eradicate referral hiring from your arsenal of hiring strategies. I'd be lying to you if I said I don't use referral hiring myself. However, it's important to consider some of the possible ramifications when using it.
While referral hiring does have its merits, it also has its fair share of issues as well. It can shrink your talent pool and cause you to make suboptimal hiring decisions.