updated 2/17/2005 3:13:42 PM ET 2005-02-17T20:13:42

Perhaps my favorite human resource practice of the past 20 years is the employee-referral bonus. After decades of worrying over the bad things that might happen if too many employees were friends and family, companies have realized that insiders might be the best source of new hires -- so good that they're willing to pay a finder's fee.

In my previous life as a corporate human resources person, I used to joke with referred-in newbies: "Your friend will receive $500 on your 90-day anniversary, after which you should be entitled to one lunch on him, at least."

Upbeat or flighty?
If you're in the referring mode, however, it isn't just the cash you should be considering. You should also be aware of how the people you refer could reflect on you. It's wise to spend some time pondering that before you chuck your out-of-work friend's resume into the recruiting hopper. If you don't believe it, consider some of the pitfalls you could face if things go awry.

First, of course, is the risk that your friend will annoy everyone during the interview process. I had this experience once, and it cured me of referring people for a while.

I recommended a young woman I had worked with at a previous job, a lady I remembered as upbeat and smart. On the day of her interview at my company, she arrived an hour late without calling to say so, and told the interviewer: "I'm horrible when it comes to the suburbs." During the interview, I learned later, she was flighty and scatterbrained. Maybe that's the characteristic I had recalled as perkiness! I was horrified, but at least she showed her colors early and didn't get the job.

Reputations on the line
Fortunately, referring someone who messes up an interview can only tarnish your reputation slightly. It's much worse if your friend gets the job and then makes you look undiscriminating.

I've seen this happen often. Around the end of the new hire's three-month probationary period, the manager sidles up to the referring employee and says, "Er, Sam? About your friend Tom -- does he have health problems? Seems he's been out of work a lot." "Oh, probably," says Sam. "Tom is into extreme sports, and he's broken like every bone in his body at one time or another. He did some pretty extreme boarding this weekend, so he's probably resting up. Tom likes to take a couple days off after a race."

Uh-huh. Great. And the worst part of it is, Sam got paid to bring Tom into the company. True, whoever interviewed Tom and hired him deserves a good chunk of the blame. But as the person who knows Tom best, Sam was the company's first line of defense. He wasn't supposed to send along any old drifter-layabout former roommate friend of a friend. He was supposed to send someone for whom he could vouch.

Dragnet routine
This is why companies often are specific in the fine print of their employee referral policy. Usually, it'll say something such as: If you're going to refer a job candidate, you must know him or her well. Your reputation here at XYZ Corp. is riding on this person's professionalism and performance, as well as your own.

Moreover, don't post an XYZ Corp. job opening on every Yahoo discussion group and then refer total strangers to the company. XYZ assumes you are recommending this person wholeheartedly and trusts you know his or her work and ethical standards. Does this really need to be spelled out?

Frequently, as a form of insurance, hiring managers will employ the Dragnet routine. They'll ask both the referrer and referee the same things, separately, and compare answers. You'll end up answering questions like:

  • How long have you known this person?
  • Have you and he/she worked together? For how long? What were your respective positions?
  • Tell us something about this person's work experiences and strengths.

Casual referrals
This isn't snooping. It's appropriate. If the job candidate says: "I didn't actually work with Jerry, who referred me, but I worked with his brother, and I've met Jerry at a couple of parties," then your employer will have a better sense of how reliably Jerry could vouch for the guy. The company may allow such casual referrals, but in this case it will have discovered that the candidate isn't heartily recommended -- only sent in its direction.

This is something an employer has a right to know. And if the company finds that you and your colleagues are taking the refer-a-friend thing too lightly, you may end up being counseled about safeguarding the value of your word.

Referral bonuses are one of the best tools employers have discovered for building a strong and loyal team. But in order for the system to work, everybody has to buy into the purpose of the program. So when you refer someone, just recall what your mom told you in junior high: People will judge you by the company you keep.

Copyright © 2012 Bloomberg L.P.All rights reserved.


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