Popular opinion is that employee referrals are the #1 source of hire in a corporate environment. I believe that to be true. But are employee referrals the #1 source of quality hires? I doubt it! Following are some thoughts from my own experience. Your mileage may vary.
Companies often pay a referral bonus to encourage employees to refer their friends and former colleagues to open positions. Bonuses range from a few hundred dollars to thousands of dollars. I wonder sometimes if referral bonus programs are incenting the intended behavior in employees. I'm often on the receiving end of numerous internal referrals that are so off the mark that it's laughable. How can one candidate be a fit for multiple engineering positions in multiple disciplines? Most likely they cannot be.
Now let's say you worked with someone at a previous company in shipping. He was a good guy, you used to hang out after work and maybe you caught a ball game on the weekend together. You're buds so you want to help him out so you submit his resume for a variety of positions to HR following the approved referral procedure. You do that because you want to be sure you'll get paid if your bud is hired. Eventually the corporate recruiter will get around to reviewing their stack of referrals. The referral's chance of being submitted to a manager for review is about 5 percent. That's right, 95 out of every 100 referrals will go right on the discard pile! That's about the same chance someone has if they apply online.
Another strategy is to shotgun your friend's resume direct to the hiring managers. I often get calls from employees asking me if I know who the hiring manager is for such and such a position. I never reveal this information but it doesn't take a brain surgeon to figure it out without my assistance. Managers are often weird when it comes to employee referrals. Rather than just being straight with the referrer they make all kinds of vague promises to review the resume, call the candidate, and potentially set up interviews. Mostly, once the referrer has left their office, they forward the resume to me with a request that I deal with it. But sometimes the referrer actually has some valuable, first-hand knowledge of their colleague's capabilities and they express that information to the manager. They are actually adding value by doing that. This occasionally results in a first rate referral.
Some referrers submit so many resumes that people see them coming with their stack of resumes and they duck behind the nearest bookshelf so someone else has to deal with it. A very few referrers actually take a professional approach to making their referral. They research the available positions, they study their friend's resume, and they make informed matches. In short they only refer people for positions that they realistically could fill. Perhaps they speak with the hiring manager or they write a letter of recommendation or they come to speak with me. The funny thing is that these folks are not motivated solely by the referral bonus. They genuinely want a qualified friend or colleague to come and work where they work. They want to help out a friend and provide a quality referral. This, unfortunately, is quite a rare occurrence.
But what about quality of hire? Do employee referrals make better, worse, or average employees? I've heard and read that they make better employees with the rationale being that people will only refer quality people. Sure. Do you really believe that? I don't. What I do believe is that, at best, employee referrals provide about average hires. Some will be great. Some will be not so great. On balance they will be average. I can hear the metrics police shouting, "What do you mean by quality of hire?" I mean do employee referrals get solid evaluations, do they stay with the company for many years, are they an employee relations problem, and do they become key players? Do their managers wish they could hire more like them or do they wish they would leave before they have to fire them?
The fact that you worked with someone is just not a compelling reason to hire them. Perhaps you served in the military with them and you know they are great under fire. That's nice and some of the best people come from our military but are they qualified to do the job? Are their skills and experience a match with the requisition? Do they fit the profile of people who exceed in the company? What you should be seeing here is that assessing a referral candidate is really no different than assessing any candidate. Don't hire her because Joe in accounting says that she's a great gal. Don't let the hiring manager slide one in as a favor to someone. Do your job and hire the most qualified candidate for the job.