The problem with this rationale is that the potential of employee referral programs, at least in terms of the delivery of quality talent, is seldom fully realized. In fact, the candidates identified by employees are generally the people they know best, not necessarily those who would be best for a specific opening. Said another way, employee referral programs often become the employment equivalent of a "family and friends" exercise.

These programs may increase retention, which is the metric often used to justify the "quality" of candidates sourced from employee referral programs, but it does not axiomatically lead to high levels of on-the-job performance. When we were waging a War for Any Talent, during the late, unlamented dot.com bubble, this get-a-round-peg-in-a-round-hole approach to recruiting may have sufficed. In today's War for the Best Talent, however, it will not. In that competition, the only strategy that will propel an organization to victory is sourcing and retaining top performers.

So, how should employee referral programs change? In my view, they must shift from a de facto program for family and friends to an explicit program of talent scouting. In other words, organizations should ask their employees to refer the best people in their field, even if they don't know them personally, and then reward those employees when the top performers are identified as a fit for a specific opening in the organization and subsequently recruited and successfully hired.
(Career Journal, Peter Weddle, What's wrong with employee referral programs)

With that, Weddle relegates employee referral programs to where they probably belong: a small component of a good sourcing toolkit. Referral programs are problematic and tend to limit a company's ability to navigate. They produce a monoculture of "more like we already have". They simply do not work if the workforce is savvy and aware of the cash value of their network.

The negatives do not seem to be slowing the flow of tool makers or online sites for internal referral programs. This week, we're going to look at the pros, cons, negatives and positives of employee referral programs and the companies who are bringing them to market.