Sudarsan Ravi

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Employee Referrals is messed up! Here's how.

Employee Referrals is messed up! Here's how.

Every company implements a program based on Industry best practices. As a leader or a professional, have you questioned if the universally accepted solution is the best practice? Something similar is at play for employee referrals.


Employee referral programs are based on a simple premise. You refer a friend and I will compensate you on a successful hire. Let us dig a little deeper and see how it is actually in play.


Delayed and Disconnected gratification


In the west, the notice period is usually two weeks before a person quits his job. In India, we have two to three month notice periods for most jobs. Let us look at the hiring timeline.


Day 0 - Post Job and launch communication seeking referrals

Day 30 – Make an offer to candidate.

Day 40 – Candidate accepts the offer and resigns.

Day 130 – Candidate joins the organization.

Day 150 - 50% of the reward is processed out as part of the employee payroll.

Day 240 to 330 – Remaining 50% of the award is processed as part of the employee payroll.

*Please note that the numbers below are a representative sample and can vary from organization to organization.


Do you remember what work you did 150 days ago? Do you remember what meetings you attended? Think about it. It is not easy to recollect, is it?


In summary, the point I am driving at is that the reward is clearly disconnected from the action. This means that while the reward does induce some behaviour (an act of a referral), delayed and disconnected gratification means that your employees no longer care about the reward. The very purpose of inducement for which the reward was in place is now defeated resulting in a slow decline in the number of participants. Usually, the middle management tends to refer the lowest and it is one of the unintended consequences of this design.


In the past, I have written about - 8 Reasons why Employee referrals are the best way to hire. I have also covered the symptoms in the post on - Do you know what employees think of referral programs? What are your thoughts on this series?

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