Employee Referrals Vs Recruitment Ads: Which Is Better?

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    Jun 26, 2014
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Employee Referrals Vs Recruitment Ads: Which Is Better? Photo by Savio Vadakkan

The choices that existed 15 years ago in terms of recruiting and hiring good quality candidates are very different from what exists today-in fact they are poles apart. The choices in front of recruiters then were more in terms of which publications made more recruiting sense to advertise in, whether weekly or regional magazines were more effective than newspapers. Technology and workforce changes have opened up new sources of recruitment which have added a whole new dimension to the talent war that is gaining more and more intensity with each passing day.

With the need for expansion and continuous innovation comes the need for a steady pipeline of highly qualified talent. But hiring talent has traditionally never been easy or cheap. A typical print advertising can cost anywhere between 2000-2500$, and does not come with any success guarantees. Advertising each time there is an open position is cost intensive and the only other recourse was to take the help of placement agencies which also came with a fee for every successful hire. A few pioneering organizations first realized the benefits of partnering with employees in the hiring process to bring down the cost of hiring.

One of the biggest advantages that employee referralshave over advertising for open positions is that it is much more cost effective. Organizations have the flexibility to choose the quantum of reward to be given out as well as the mode of disbursal, whereas in advertising all these decisions are taken by the external agency where the advertisement is being placed. This makes it easier for organizations to control budgets and expenditures. Moreover since most organizations typically pay the referring employee only after the referred candidate has worked for a pre defined period with the organization, payment is tied to result which is not the case with advertising.

The 2nd big advantage that using an employee referral toollike ZALPhas over advertising is the high yield ratio, which essentially means that the conversion ratio of selection from the overall pool of applications is much higher than through advertising. Infact advertising has traditionally had the lowest yield ratio as the number of people applying through advertisement is highest, of which very few turn out to be suited to the role. The main reason behind this is the fact that since employees know the organizational culture and the role, they are able to do a better screening of candidates to refer only candidates who are qualified for the job. On the other hand the cost of processing undesirable unsuitable applications through advertising makes the whole exercise simply too wasteful and cumbersome.

Add to that the indirect advantages of more productive teams, higher employee morale and better retention rates resulting from high performers referring other high performers, all of it at a significantly lower cost,  and it is clear why advertising as a source of recruitment is fast losing ground to employee referrals.

Author's Profile

Savio Vadakkan is the Marketing Professional at ZALP, a leading employee referral tool. Zalp enables organizations to boost their employee referral hires by implementing an effective employee referral program.

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