Referral programmes promote mediocrity: TeamLease study

According to the report, 49% of the companies surveyed felt referral programmes hinder innovative thinking within the organisation

Referral programmes are often touted to be the silver bullet that can solve employee engagement, reduce hiring costs and improve retention, but they promote mediocrity, according to a recent study among top human resources (HR) managers by HR services firm TeamLease.

According to the report, 49 per cent of the companies surveyed felt referral programmes hinder innovative thinking within the organisation. They attributed the passive attitude of the hires to the inherent survival instincts and the tendency to lean towards a safe harbour.

The study notes that although referrals constitute only five per cent of the overall hiring, these leave a far stronger impact on the functioning of the organisation. Nearly 45 per cent of the employers believed referral programmes proliferate herd mentality and complacency. The referral network becomes a cluster of buddies. It was also observed that those hired through referrals are not always open to connect with other members of the organisation, leading to an unhealthy work atmosphere.

The report bursts the myth about referral programmes being driven by satisfied employees. According to the study, 52 per cent of referrals were mere fervent solicitations motivated by monetary rewards.

Commenting on the report, Kunal Sen, senior vice-president of TeamLease Services, said: "Referral programmes may have 50 per cent better retention. However, with its inherent limiting factors like scale, informality and survival instincts, it is high-time organisations re-looked at the methods to acquire quality talent."

"Our referral programmes are productive and at a reasonably low cost," the report quoted an HR manager with a software firm as saying, ''but, there are looming concerns that referral programmes do not scale and they do have inherent grey areas that create discord among existing employees".

The survey also suggests some of the practices that companies can adopt. Employer brand recognition, controlled communication, expectation management, and goal-setting are a few measures that companies can use to increase the effectiveness of referral programmes.

'Referral Programmes Breeding Mediocrity Report' is the first in TeamLease's survey series to understand 'India's evolving World of Work'. The survey was administered on HR managers across sectors.