While referral program is a key factor in employee engagement, more than 49 per cent of corporates feel this hinders innovative thinking within the organisation and promotes mediocrity, a TeamLease study says.
Experts believe, referral programs reduce hiring cost and improve retention, but the industry is abuzz with the pitfalls like clique forming and mediocrity breeding.
"Referral programs may have 50 per cent better retention, however with its inherent limiting factors like scale, informality and survival instincts, it is high time organisation re-look at the methods to acquire quality talent," TeamLease Services Senior Vice President Kunal Sen said.
As per the study, though referrals constitute only 5 per cent of the overall hiring, it leaves a far stronger impact on the functioning of the organisation.
Around 44 per cent of the employers believed referral programs proliferate herd mentality and complacency.
The referral network becomes a cluster of buddies. It was also observed that the talent on-boarded through referral are not always open to connect with other members of the organisation leading to an unhealthy work atmosphere, it said.
As per the survey, employer brand recognition, controlled communication, expectation management and goal setting are few measures corporates can ensure to increase the effectiveness of referral programs.
The report burst the myth about referral programs as being driven by satisfied employees. According to the study, majority (52 per cent) of referrals were mere fervent solicitations motivated by monetary rewards.
The survey noted that some of the downfalls of the referral program are - hired candidates have an entitlement mentality, they contribute little to the overall hiring and grey areas that create discord among employees.
