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Employee Referral Vs Recruitment

10th February 2017

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Employee referral Vs recruitment

Est. Reading Time: 23 minutes

Introduction

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This blog post has been created with the intention of providing the reader a fair and accurate comparison of various recruitment techniques to highlight the importance of Employee Referral Schemes and the benefit of leveraging a company’s own employees to attract high quality candidates in a cost effective and efficient manner.

This blog post has the intention of discussing these merits purely for the purposes of the recruitment of permanent employees.

Recruitment Methods

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Before making a comparison between the differing types of recruiting employees into an organisation we must first understand the methods of recruitment that are available to a company.

Internal Recruitment

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The first, and most common, method of recruitment for companies is Internal Recruitment. This, essentially, means that someone within the company takes responsibility for the attraction, selection, interviewing, recruitment and management of new candidates to the organisation.

There are a number of processes that the Internal Recruiter would utilise throughout each stage of recruitment cycle mentioned above and we’ll take a look at each of those in a bit more detail here.

Candidate Attraction

This is the generation and attraction of new candidates to the company from the wider market outside of the organisation.

This always begins as soon as the job requisition has been approved and the hiring manager has the sign off to “go to market” for a new employee and a job description is either provided to the Internal Recruiter or they are required to create one themselves after speaking to the hiring manager to discuss the scope of the position.

Once the job description has been finalised, the Internal Recruiter then needs to advertise the position. This is completed by creating the role within their own recruitment systems and advertising the position on the company’s own website. Additionally, the recruiter may want to increase their exposure to the active jobseeker market and advertise on external job boards (Reed, Monster, etc.) or post the roles on the company’s social media outlets (LinkedIn, Facebook, Twitter, etc.).

Once the job has been advertised the recruiter may then take a step back and wait (hope) for the responses to come flooding (trickling) in however, they may want to take a more proactive approach to attract candidates rather than just hope that someone great sees the advertisement.

Whilst the job is advertised, to be more proactive, the recruiter may go into their own internal database of candidates thit have been generated from previous recruitment drives or have sent their cv in speculatively waiting to hear about future opportunities. Alternatively, for a wider reach, the recruiter can register with external cv databases where candidates who would like to be contacted about opportunities will post their details online for recruiters to go through and select anyone they feel would be appropriate.

As well as the cv databases, the recruiter can adopt a headhunting approach. This is typically done via social media (mainly LinkedIn), where the recruiter will research the market for people with the job title or experience that matches the open requisition. Once a suitable person has been located, the recruiter will then contact them directly either on LinkedIn with a mail or, more aggressively, with a phone call to them at their business.

Candidate Selection

Once the candidate attraction phase is underway or even completed, the recruiter will be left with a pile of application forms, cv’s and covering letters that have been generated. Now, given the outlets that the position has been advertised in, not all of these applications will be suitable for the role and will need weeding out. This is where the selection process begins.

Now, (unless the recruiter employs the “throw half of the applications away as they don’t want to recruit unlucky people” approach -93 not advised by the way) they will need to go through each application/cv and assess each candidate against the criteria on the job description.

After completing the initial “weeding out” of unsuitable candidates the recruiter will be left with a “longlist” of candidates. It is then common practice for the recruiter to arrange a qualifyino call with the candidates remaining. This is to reaffirm any impressions from the application or to close off any issues/questions that arose whilst going over the cv. This part of the process is to also gauge the interest of each candidate and gives the recruiter an opportunity to give a bit more information about the company and the role to reinforce the candidate’s enthusiasm for the position and decreasing the chances of the candidate going elsewhere during the process.

Once the qualifying call (or telephone interview as it’s commonly called) has been completed, the recruiter should be left with candidates that they would be willing to bring in for a face to face interview. At this point, depending on how many people are left in the process and the capacity of the recruiter to do so many interviews, the recruiter may want to sit back down with the hiring manager and create a shortlist of candidates that they want to interview.

Once the final list has been agreed, the recruiter will then inform the candidates of their success and find out their availability to meet for a first interview. This availability will then be cross referenced internally between the diary of the recruiter and anyone else who would be part of the first interview (usually the hiring manager). The preferred time is then agreed with the candidate and the meeting is booked in. Repeat process for all other candidates.

Interviewing

If the company doesn’t have a standard interview process or if there wasn’t one agreed at the beginning of the recruitment cycle, then the recruiter will have to spend some time considering the best approach to interview the candidates.

Even if the company does have standardised interviewing, it is still likely that considerations need to be given to the process depending on the type of role that is being recruited for. For example, a role within the sales team might be more of a personality and communication test whereas if the role is for an accountant then the interview might take on a more technical slant and rely on a case study or an aptitude test.

Once the process has been agreed, the recruiter will interview the candidates and take thorough notes in order to make an informed decision about the best candidate and be able to evidence why that candidate has been selected. This is also crucial for providing feedback to the candidates that are unsuccessful.

Depending on the amount of candidates in the process or the level of the role, it might be necessary to conduct second interviews. Repeat the cycle from the point of agreeing appropriate diary times.

Once the interviews have been completed, the recruiter will liaise with the hiring manager, compare notes and decide which candidate will be offered the position and which ones will be told that they have been unsuccessful.

Recruitment

After making the decision, the recruiter will get in touch with the successful applicant and discuss their feedback and make an offer of employment to them.

Now, hopefully, the successful application is still interested in the company and position and accepts the offer that is made to them immediately. What we must bear in mind however, is, at this point the process starts to become “real” for the candidate and it can be a scary concept the thought of actually changing jobs. Getting this part of the process right and ensuring that the candidate is taken care of and feels valued is the difference between getting the candidate that you really want or accepting a second (or worst) choice or, even worse, starting the entire process all over again because there wasn’t anyone else suitable.

Commonly, the candidate will ask for the offer in writing (if they’re happy with the package on offer) and request some time to think it through. It is, after all, a huge decision to change your career or move to another organisation. During this period, it is vital that the recruiter maintains open lines of communication with the candidate so they feel appreciated and wanted but, more vitally, so that the recruiter can keep control of the candidate and know their chances of success.

During this period, the recruiter will also go back to all of the unsuccessful candidates to inform them that they haven’t been successful and, if appropriate, provide feedback.

All being well, the candidate comes back after the waiting period and accepts the offer – happy days! Frustratingly, and I know from personal experience, the candidate could have been attending other interviews throughout the process and was waiting to hear about another (which is always better) position which they accept instead leaving you to go back to the drawing board.

Management

So, you’ve advertised a job, done some headhunting, gone through tons of applications, interviewed for days on end (evenings and weekends sometimes too) and finally got the perfect candidate to accept your offer. Job done and you can go to the pub now right and start enjoying your social life? Nope.

The time period between making an offer to a candidate and actually having them arrive on the agreed start date is one of the critical points of the entire recruitment process.

Playing devil’s advocate:

Depending on the company the recruiter works for, it is likely that their KPI’s include the actual starting of the candidates and not just the applications or interviews completed and their performance will be judged on actually getting a candidate to turn up on the first day.

In order to counteract the possibility of the candidate falling off the face of the earth, the recruiter will have checkpoints set up where they will “check in” with the candidate to make sure everything is still ok. This can be for any reason at all such as discussing the handing in of their notice, how their notice period is going, if they’re doing ok, talking about the ifduction process, their first day, provide company information and, possibly, invite them for lunch/drinks to keep in touch or meet the team to retain control and make them feel valued.

Summary

So the internal recruiter has gone through all of these steps in order to actually get someone through the front door of the building:

Sounds simple and completely stress free doesn’t? I mean, anybody could follow those steps right and recruit someone couldn’t they? Let’s all be internal recruiters right?

Wrong.

What if the recruiter had to do this for multiple jobs at a time? What if there’s an entire department that needs an uplift in headcount? What if the organisation decides to relocate an office and needs a complete staff overhaul? What if there was some other part to their job (such as a project) that demanded their attention as well? What if they’ve used agencies as well that are constantly on the phone to them or emailing them with questions or CVs (even after the interviews have been completed)? What if they wanted to do something extra to develop themselves and their career as well?

Still easy? Didn’t think so.

Ask any internal recruiter what the biggest problem with their job is and the vast majority of them will tell you that it’s actually having the time to do their job.

The hours are long (candidates don’t answer the phone between 9am and 6pm), the work goes unappreciated (nobody sees the effort in the screening, telephone interviews and longlisting – they only see the 5 candidates on your shortlist that you interview face to face!) and dealing with candidates can be the most stressful thing in the world when you have no control over the outcome.

Agency Recruitment

As an internal recruiter there can be many reasons that you would want to engage with an agency to help with roles within your organisation.

Maybe you’ve got a lot of roles on that you need a certain volume of a certain type of person (eg, sales) so you’ll go to an agency that specialise in sales staff.

Perhaps the role is something that is niche or high profile (eg, Chief Technology Officer) so you’ll need the expertise of an agency that deals with those kind of roles.

You may have already tried to fill the role yourself but you weren’t able to make the impact in the market that you wanted so want to use an agency that is well known in the employment world.

Whatever the reason for engaging with an agency, here we’ll take a look at the process followed by recruitment agencies when working on a role and, you’ll see, that some of the processes follow that of the internal recruiter. The difference, however, is that an agency recruiter might know somewhere specific to search or might know a “trick of the trade” (usually a Google Boolean search string that they’ll never tell you about) that will get a different result.

One thing that we must bear in mind before we proceed is that the majority of Recruitment Agents (or “Consultant” as they prefer to be called) “specialise” in a certain area (eg, Finance, Legal, Education, IT, Construction, Sales, etc.) and that, day in, day out, they will be recruiting for roles within a very specific sector.

The benefit of this for the Agent is that they can very quickly become “experts” in their market and have more knowledge on their specialism than an Internal Recruiter who would be required to recruit for all roles within the company. Additionally, if a Recruitment Consultant spends all day recruiting for one sector, for example Finance, then it’s highly likely that they’ll have a supply of Accountants on their database ready to go.

So the Internal Recruiter, for whatever reason, decides that they need to engage with a Recruitment Agency to assist with one (or several) of their roles this is the process that a Recruitment Consultant would follow. This process is broken down into time periods rather than a cycle as above for the Internal Recruiter.

Time Period: Initial Engagement

The Internal Recruiter (hereafter called ‘the client’) contacts the Agency and speaks to the relevant Consultant.

The Consultant will take down an in-depth description of the details of the position, the reason for the open position, the package on offer and the ideal candidate. Whilst taking the details of the role the Consultant will assess their chances of filling the position (they don’t waste their time on jobs they won’t fill) and confirms to the client their rates for the position if they are happy with taking on the assignment.

The majority of agencies will charge a percentage of the starting salary of the candidate upon completion (eg, the day the candidate turns up). This percentage varies depending on salary or type of role and is rarely the same between different agencies so it may take some research or shopping around by the client to identify an agency that is within their budget.

After discussing the rates, assuming the client agrees to them, the Consultant will put a date in the diary to meet with the client.

From the client’s perspective, this is so the Consultant can see the work environment, assess the culture of company and see a bit about what it would be like to work there meaning they can better inform their candidates giving them more change of finding someone suitable.

From the Consultant’s perspective, this is so they can gain control of the client and they won’t go to another agency. For example, if the client calls three agencies and they all want to go in for a meeting, how much time will that take? If the client is happy with meeting with one, they won’t go somewhere else as well unless dissatisfied with the service they’ve received.

Time Period: Initial Engagement to Client Meeting

The client hangs up the phone, the Consultant does a dance around the office to celebrate having a job on and then gets their head down to work on finding some candidates for it.

At this point, the process that the Consultant will follow is pretty much the same as the Internal Recruiter’s process whereby the Consultant will create an advertisement,#put it on the agencies website, external job boards and social media.

The consultant will also search their database, spreadsheet, memory and top drawer for any candidates that would be suitable for the position. Anyone that came back as suitable, the consultant will call them, give them the brief#and see if they’d be interested in being put forward for the role.

The consultant would then manage the responses coming in from the advertisements and provide a screening call for any candidates that apply and are suitable (after weeding out the unsuitable applications).

Time Period: Client Meeting

The Consultant arrives for the client meeting and is given a walk round of the building (if appropriate) shown the site and has a coffee with the Internal Recruiter and, wherever possible, the Hiring Manager.

In this meeting the Consultant will discuss the parameters of the job specification (if there isn’t one, the Consultant may be asked to write one for the client) and talk about what requirements are absolutely essential and which ones would just be “nice to haves”.

They would also discuss the reasons for the role being open, what the client has done so far and what issues the client has come up against. There will also be a discussion around the type of person the client would want rather than just ticking achievements off on a checklist in order to get a better cultural fit for the business.

If the Consultant was able to source some candidates from their database or from their advertisements and screen them before the meeting, they would then present them to the client. Based on the job specification and cultural fit, the Consultant will provide the client with their expert opinion on who might be good. All being well, there may be people within this list that the client wants to interview immediately.

After agreeing the timeline for the recruitment period (maybe 2 weeks to advertise then 2 weeks to do interviews before making an offer) and the interview process, the Consultant will go back to the task with the extra information they have been given.

Time Period: Agreed Advertising Period

Upon returning to the assignment, the Consultant will revisit their original job postings (Website, Job Boards and Social Media) and tweak them with the updated information that has been received. The Consultant might also revisit their own database as well as candidates that they may have rejected to see if the new information changes the landscape at all.

Whilst the advertising period is ongoing, the Consultant will continue to monitor the responses coming in from the advertisements and might also adopt the headhunting tactics that the Internal Recruiter will have taken. It must be noted that some agencies pride themselves in being headhunting experts and will be able to find a candidate somewhere out there that an Internal Recruiter might not.

Any candidate that meets the minimum requirements for the role will then go through a screening call (telephone interview) and, should they be successful, the Consultant will then arrange a face-to-face meeting with them.

From the candidate’s perspective, this is so that the Consultant can meet them, get to know them better and assess their interview technique and provide feedback.

From the consultant’s perspective, this is so that they can gain control of the candidate and find out about any other applications that they’ve made (maybe to call that client and see if they need any extra cv’s) and also box off the pesky compliance issues around Proof of Right to Work by getting copies of passports, proof of address, etc.

Time Period: Advertising Period Closing to Interviews

By the time the advertising period closes the Consultant should have a comprehensive short, or even long, list of candidates for the client. At this point, the Consultant would go back out to see the client with the applications to discuss the results and discuss which candidates will be worth interviewing.

The benefit of this meeting is that the Consultant will (should) have met with all of these candidates already as part of the process and can give the client a more in-depth assessment of their capabilities and fit for the company.

After agreeing the candidates that the client would like to see, the Consultant will check the availability of the interviewers and also re-confirm the interview process in order to g}ide the candidates appropriately.

The Consultant will then liaise with all of the candidates and either book in an interview at an appropriate time or provide feedback to the unsuccessful candidates. Whilst confirming the interviews, the Consultant will provide guidance on the interview process and, if necessary, some coaching and research tips.

Between this point and the actual interview date, the Consultant will check up regularly on the candidates to make sure they have everything they need and, more importantly, that they’re still going to be there (control).

Time Period: Interviews to Offer Date

On the day of the interviews, the Consultant will act as a conduit between the candidate and client to ensure that meetings commence (and finish) on time, feedback is provided and, if necessary, second interviews are arranged.

Once all interviews (including second interviews) have been completed, the Consultant will have a discussion about the candidates and get the thoughts of the client around the next steps which would either be an offer or go back out to market as there wasn’t anyone suitable.

Assuming the Consultant had a candidate who was successful, they would relay the details of the offer and follow the process as the Internal Recruiter would.

Time Period: Offer Date to Start Date

The candidate accepts the offer, the Consultant relays the good news to the client and provides the client wit` the candidate’s contact details so that they can start#to work out the contract. In the meantime, the Consultant goes out and drinks Dom Perignon until they can’t see straight.

After ensuring that the contract is singed accordingly and submitted back to the client, the Consultant will remain in#constant communication with the candidate to ensure successful completion. This is very much like the aftercare process the Internal Recruiter will follow.

Time Period: Start Date Onwards

On the agreed start date of the candidate, the Consultant will check in during the day to ensure everything is going well. This is for both the client and the candidate.

Over the following months, the Consultant will also have checkpoints in their diary to check in with both the client and the candidate to ensure that it’s still a good fit and that there aren’t any issues.

Summary

So the Agency Recruiter has gone through all of these steps to find a suitable candidate for the client:

Just as easy as being an Internal Recruiter isn’t it really? Agency Recruiters face the same problems and pressures of the Internal Recruiter and it is easy to think of one of the numerous benefits for a company to engage with an Agency to assist with some of their roles but what about the drawbacks of using an agency?

Common questions raised about the Agency Recruitment industry are mainly around trust and an agency being able to deliver on the promises that have been made. Most Internal Recruiters have engaged with an agency at some point who have let them down.

From my time in recruitment as both a Hiring Manager and as a Recruitment Consultant I’ve encountered the following issues between Internal and Agency Recruitment:

Ultimately, there are some excellent Recruitment Agencies out in the market and it will take a lot of research, trial and error and luck until the Internal Recruiter finds one that they are comfortable with to build a lasting relationship for the future but, once one has been found they can make a big difference to an organisation.

Employee Referrals

Now that we’ve looked at two of the more traditional and common practices of recruitment, it’s time we take a look at a different way of attracting people to an organisation – Employee Referral Schemes.

Firstly, what is an Employee Referral Scheme? Put simply, it is one employee seeing a job within the organisation, recommending the job to one of their friends and being rewarded for it once their friend starts their new job.

Traditionally, the Employee Referral Scheme (if there is one) will be documented somewhere within the organisation (employee handbook, contract, poster in some back room, etc.) so that the Employees know that it exists.

The usual reward is something of a monetary value to the employee, for example £1000, which will be received either upon the start date of their friend or after a given time period such as the successful completion of the probationary period.

So, one of your employees logs on to the internal recruitment portal or just happens to know that there’s a job available. They have a friend who they think would be great for it so they call them when they get home (if they remember) or, next time they see them, they mention it to them.

Your employee tells their friend all about the job, all about the company and gives them a list of reasons why they should go for (probably not mentioning the cash bonus they’ll get for it though) and their friend goes away and has a look at the job.

With your company and your job being amazing, the friend decides they’re interested so they ask their mate how to apply. At this point, your employee will give them hints and tips on how to apply to get your attention and, very sheepishly, ask them to put their name on the application form so they can be rewarded.

So, by the end of the process, you’ve got an application from someone who’s been told all about the job, all about the business and has a friend already working there so you know the cultural fit will be good. Winner!

Problem is, now you’ve got to track who these applications came from and who put whose name on which application and now you don’t know when you’re supposed to reward the original employee and you’ve got people knocking on your door asking for money that you’re not sure they’re owed.

The benefits of the Employee Referral Scheme are widely documented and you can find plenty of articles on why an effective scheme can be a powerful tool but here’s just a couple as an example:

A recent LinkedIn study suggested#that referrals are a better way of recruiting when compared to Internal and External with the below results:

So why don’t we embrace Employee Referral Schemes as much as we should? There isn’t a definitive reason. Perhaps it’s the administration that is required to run a really successful scheme, maybe it’s that employees aren’t encouraged or rewarded enough to be interested? It might even be that employees don’t even know that the scheme exists and how it works and, finally, it might simply be that your company just doesn’t have one.

Conclusion

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Just from looking at the tables with the pros and cons it is clearly visible that Employee Referral Schemes appear to be the more attractive proposition for attracting, recruiting and embedding a new employee.

Whilst internal recruitment can be an effective tool for sourcing candidates as the message of the company remains consistent and all of the knowledge remains in one place, it is easy to see how an internal recruiter can be overwhelmed at peak times or times of high attrition.

It is easy to see the merits of engaging with an agency firm; they will advertise the role within their own network/job boards, weed out unsuitable candidates, screen them, meet them and, finally, present them to the internal recruiter with their opinion of them.

The downside of this, however, is that agency recruiters don’t just work one job at a time. They will be working several roles all at once which will all be of the same ilk. So how do you guarantee that the “amazing candidate” that the Consultant has just shown you hasn’t been sent to all of their other roles? Simply put, you can’t.

Will the Consultant have spoken about your company in glowing, complimentary terms? Will they have done the same for all of the other companies they are representing? Or have they only done that for the Client that is going to pay them the most? Nobody knows and that’s the risk you take when using agencies and its part and parcel of the recruitment world.

The benefits of effectively utilising the Employee Referral Scheme greatly outweigh those of its comparators. It’s faster, more efficient, cheaper, has a wider reach, provides a better quality of candidate, stays true to the company culture and values and, perhaps most importantly, reinforces the belief within the existing employees that a company is somewhere they’d want to work and this belief improves morale.

Whilst the Referral Scheme does share the burden with the internal#recruiter it still means that the internal recruiter keeps the responsibility and oversight of the entire recruitment process without having to go to an external party. The main benefit here to the internal recruiter is that they will spend far less time sifting through unsuitable applications and be able to spend their time more wisely/efficiently on people that would make a genuine difference to an organisation.

An additional benefit of the Referral Scheme is that the company is rewarding its own staff just for recommending them to a friend. Whatever the reward for an organisation is for an individual employee, it’s guaranteed that it will less than an agency employee and, the extra benefit is that, rather than give money to a Consultant, the organisation is giving money to people it actually knows.

The drawbacks of the Referral Scheme, whilst appearing to be as many as the other methods, are actually easily mitigated against. With a clear plan set out, excellent communication and the ability to closely monitor the scheme the problems such as engagement, knowledge and clarity disappear quite easily.

The problems that aren’t easily mitigated against are the ones that come from the technological side. How does a company track the referrals? How do they know when to reward staff? How do they know which employees really push the scheme? How do employees quickly and easily locate, identify and share the jobs they think they know someone for?

If only someone would make the technology which allows the modern Internal Recruiter to manage the referral scheme and also allows employees to quickly and easily locate and share jobs within their networks…

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