Why Internal Referrals May Cost You Your Job

by | Aug 23, 2016 | Employers, Hiring, Sales practice, Strategy

When it comes time to expand your team, you’re probably considering a number of options. Between recruiters and job boards, it’s easy for the cost of acquiring new employees to stack up pretty quickly. Often times, hiring managers look inward to internal referrals as a cheap alternative.

Upon first glance this doesn’t seem like a bad idea. After all you may end up with a couple of clones of your favorite employees. But if you’re not careful, this method can actually hurt you and your team’s overall performance and set you back worse than you thought, especially when looking for entry-level talent.

Inexperience breeds more inexperience

Here’s the issue: if you’re asking your employees for internal referrals, you’re going to run into two difficult roadblocks. The first is that your existing entry-level employees don’t have a large enough professional network. In fact, many entry-level candidates are new to Linkedin, have moved away from their college friends, or simply have friends that wouldn’t be a good fit for the job.

A weak network feeds into the second problem. With a referral incentive, employees’ focus can naturally shift from hitting their numbers to collecting that hefty instant ransom for signing up a buddy. I’ve actually had entry-level employees tell me “you can make a pretty penny with few referrals.” For someone making just enough to scrape by, that referral bonus looks like a big shiny diamond rather than a convenient reward for not much work.

The cost of your time

Let’s think more about what happens when you have an internal referral incentive. First, your employees will be excited by the prospect of making some money and potentially working next to their buddies. Second, you’ll be flooded with resumes of friends, cousins, neighbors, sisters’-friends-who-employee-X-knew-in-high-school, etc… you get the idea.

Eventually this costs you a lot of time sorting through resumes and taking phone calls from a random bunch of people. Unfortunately, too often these people aren’t necessarily looking for the job you’re hiring for. Even worse, they often come unprepared because they think their friend has got an “in” for them. Here you are, weeks later, still at square one.

Sales hiring is hard overall

The bottom line is hiring for sales is hard anyway. There’s a reason sales positions have the highest turnover and are constantly the most in demand position listed on job boards. In my experience speaking with sales manager and VP’s, I’ve found that it often takes up to 20 interviews to hire one person. With a conservative estimate, that translates to over 33 hours spent for just one hire.

( 10 min per resume + 30 min phone call + 1 hr in person interview = 1:40 hrs per person x 20 people = 33 hrs )

Entry-level hires are often the hardest to hire because they usually lack any real-world experience on their resume to help them stand out or prove they can do the job. In those cases you have to search for someone with the intangibles: Coachability, Work Ethic, Adaptability – all things that are tough to pick out without some serious digging.

So what’s the solution?

Whether or not you go with the internal referral approach, there are 3 things that you should have in place in order to be successful.

First, you need to develop an ideal candidate profile. This should be locked down, solid, and understood by anyone and everyone involved in bringing candidates to the table or making a decision to hire. Along with the intangibles mentioned above, I recommend looking for someone who can show they have successfully dealt with rejection. Additionally, have candidates show you why they have the potential or have experience in achieving some sort of goal that they had to work very hard for.

Second, if you’re using an internal or external source to help with recruiting, make sure they are entirely dedicated to finding someone for your specific SDR entry-level role. Often times recruiters are busy trying to land the big fish and think they can throw any entry-level-Joe at you. Make it clear to them that this is not acceptable.

Lastly, if you are going to go the internal referral route, make your employees show that their recommendations meet your specifications before you accept their referrals. Create a checklist, print it out, and make your employees check the boxes and sign off on it. This will help weed out the weak referrals, keep the number of bad resumes down, and save you a ton of time.

Do you have any tips or tricks for navigating the internal referral process? If so feel free to share them with me in the comments section.

By Sasanka Atapattu

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