The Pros (and Cons) of Implementing a Referral System at your Company


When it works, when it doesn’t, and what to look out for when determining whether or not the referral system is right for you.

There are some strong opinions out there when it comes to implementing a referral-based system. Some believe that with a strong referral system, you will never have to pay a dime for advertising again. However, others remain wary of the finder’s fee and what it entails.

The truth is, only you will know if a referral system is right for your business. Similar to your recruitment strategy or profit-sharing plan, you will need to assess your internal goal to decide if the referral system will help grow your company, and fulfill your mission in a way that is genuine and authentic to you.

The Pros

Curious why so many gravitate towards the infamous referral fee? Read on:

Reach More People

If clients and employees see a personal benefit to send the best and brightest your way, you will cast a much wider net of potential recruits. Implementing a referral system encourages those who are familiar with the company’s needs and culture to bring fresh talent to the team.

Increase Employee Engagement

It’s amazing how a little incentive can get the whole team fired up to find new customers and clients, or candidates to your hiring pool! Company loyalty, engagement in company-wide activities, and excitement surrounding your growing business can all be ignited with a successful referral system.

High Conversion Rate

Referrals typically have a higher conversion rate… and a high retention rate. Furthermore, a new employee with an existing relationship within your firm may be more readily integrated into the social scene at work, leading to a higher likely hood of staying at the company long-term.

The Cons

You can’t have the good without the bad! Take a look at the cons some companies experience when implementing a referral-based system. Do they resonate with you?

Downplay Diversity

Referrals can cause managers to hire people who are very similar to one another. What does this mean for you and your team? There is a chance of getting a little homogenous in types of people and ideas if you rely on referrals.

Oh, the Drama

There is always the chance for nepotism, playing favorites, or cliques to develop when implementing a referral-based system. Furthermore, hiring one employee’s referral over another’s may cause some resentment and frustration within the team.

Never Enough Referrals

And when the diversity remains intact and the drama stays at bay, there is always the chance that you simply don’t get enough quality referrals. It is unlikely all of your hires (or new clients!) will come from recommendations. Having an alternative source to grow your business team is always in your best interest.

Making the Best Decision…for YOU

Whether you are looking to grow your team, expand your client base, or are considering a merger or acquisition, a referral system is always an option. As with any big decision, take the time to assess your choices and ask yourself the age-old question: does this decision enhance my growth as both a business person and an individual? If the answer is yes… you may have a great concept on your hands that is authentic to you and your values.

Interested in talking more about referral systems and how to effectively bring a new dynamic onto your team? Let’s talk! We would love to connect with you and understand your experience in the world of referrals and finder’s fees.

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