Recommendations of suitable candidates from good employees may provide excellent prospects. Ordinarily, employees will hesitate to recommend applicants unless they believe in their ability to do the job. Also, the family and friends of current workers can be among the best and most loyal employees available, because these individuals are well known and trusted. Many small business owners say that this source accounts for more new hires than any other. A few employers go so far as to offer financial rewards for employee referrals that result in the hiring of new employees.
Scott Glatstem is often looking to hire skilled management consultants for Imperatives, his $2.5 million Minnetonka, Minnesota consulting company. But he has not had much luck finding them using standard recruiting tools. "It’s hard to advertise for independent consultants." says Glatstein. Not that he hasn't tried! After using a variety of recruitment approaches including Internet advertising, he has found that only one yields the results he is looking for is recommendations from his 40 current employees. Glaistein estimates that he has hired eight people in a recent six month period, all of them through employee referrals.
He didn't have to run a single ad to go the people he needed! Using referrals saves money (costing around 70 percent less than advertising or employment agencies) and reduces turnover. Perhaps the most important advantage is that these new hires become productive in less time and tend to have superior skills. Glaistein pays $300 for each referral hired. But if $300 would he a budget-buster for your company, adjust the figure down or use a different incentive. You may very well end up with the same result.
Hiring based on referrals is really just a way of tapping into the personal networks of employees. However, network recruiting becomes more important as the responsibilities associated with the position increase. Networking can be an indispensable tool when filling leadership positions in a small business, providing the best connections to individuals who have the background, skills and integrity that are essential to a position of great responsibility in the company,