Implement right governance mechanism to prevent referral fraud

Referral frauds are an issue and come in different forms. I’ve heard enough stories from several CHROs of creative referral frauds. And, the need to implement the right mechanisms are critical to prevent such frauds.

Concept of frauds dilute the culture. It questions the veracity or the ethical nature of an organisation. Board rooms across enterprises value and expect a high degree of governance when it comes to business practices.

Here, we list a few ways on how we have helped establish right governance programs to eliminate or reduce referral fraud.

 1) Robust peer-monitoring - Peer monitoring is like having a whistleblower mechanism in place. Inclusion of peer monitoring policy is crucial for self governance and can be implemented effectively with as little as a form. Employees can raise or flag such concerns using the form. You can track challenges of governance, establish a process and respond to that form as and when raised. The key is spreading awareness around this process.

 2) Effective duplication checks - A cornerstone for any sourcing system is  to eliminate duplicate applications. A vigorous policy here also prevents unnecessary recruitment efforts. If you have a duplication check in place, it eliminates the possibility where a candidate who comes from another source is deemed as a referral or vice versa. There are enough cases where employees complain saying that ‘I submitted candidate called Elizabeth, however didn't receive credit because it went to an external third party vendor’. Scenarios like these raise different form of governance issues. Having a good duplication check ensures that the candidate - Elizabeth exists in the system and it’s crystal clear where the first source of application lies.

 3) Source tracking and reward - Automating source tracking is a proven mechanism to eliminate governance issues. Automatic source tracking ensures that you are not relying on individuals to decide the source of a candidate, reducing and eliminating the chance of governance issues kicking in.

 4) Tracking excessive (employee) behavior - Implement a referral system that tracks employee behavior/actions. The system highlights red flags on excessive usage or odd behaviors. There are cases where we have seen a group of employees getting together and purchasing job board licenses to benefit from the referral program rewards.

It becomes critical to eliminate such behaviour to keep the program sanctity. In organizations, we often set up rules which affect the majority when in essence it should be crippling the minority that abuses the rules.

Implementing a referral system that automatically tracks excessive behaviour and triggers red flags on usage helps you detect referral frauds. It is easier to isolate cases where there had been excessive behavior. A quick one on one conversation with the respective employee means that you are able to nip the behaviour in the bud.

 5) Reduce collusion - Basic concept of maker checker mechanisms rely on the principle that more individuals in a process increases the risk of getting caught thereby reduces the chances of collusion.

System checks and policy is key to prevent interviewer/hiring manager/offer approver from being the referrer. It is important to have the right checks from the HR operations and system standpoint that the referrer is not as the same person interviewing. And, you know the offer approver is also different from the referrer. Having some of these checks through the system reduces the risk or the possibility of collusion significantly.

 6) Systematic reporting - Auditing for recruiter/employee combination shall eliminate any hand-in-glove activities, fringe cases and are easy to spot in a good reporting system. For this, reporting is key. Auditing to check whether there is a consistent pattern or a pattern emerging among recruiter/employee combinations will help you proactively crack and identify cases.

An employee referral is the best source of hiring. A vibrant referral program is critical for organisation’s top line growth because of the quality of talent, retention, faster time to fill and increasing offer to join ratios.

Hence, it is imperative to have the right governance to ensure you retain the sanctity of the referral program and maintain the best practices.

Let me know your thoughts on interesting referral frauds that you have seen or heard and ways in which you have solved for them.