Utilizing employee referrals of family members and friends is an unethical recruiting method.

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Big employers are asking staff to fill vacancies with their friends and relatives in a desperate bid to fill skills gaps. It's not a new thing, but a recent study shows increasing numbers of employers are responding to recruitment difficulties by giving existing staff a crucial role in attracting talent.

Concerns that the policy will undermine efforts to increase diversity (why ask a largely white workforce to help in the recruitment of new staff, when we know even professional recruiters tend to employ people in their own image?) have, so far, been allayed.

As a result, many of the country's larger, and more ethical, employers have jumped on the bandwagon.

Carly Gilpin, a customer adviser at the Nationwide Building Society in Hertford is one modern-day recruiting sergeant. Ms Gilpin, 21, referred a friend under the society's People Like Us scheme, and received a £500 reward for doing so.

"People know people. They know what they like, whether they are going to fit in," she says. "My friend is bubbly. Everyone in the Nationwide is friendly and bubbly. I know you get rewarded with the money, but to be honest, I enjoy working for the Nationwide and I thought she would, too."

According to the Chartered Institute of Personnel and Development's 2004 recruitment and retention survey, which showed more than eight out of 10 employers experienced recruitment difficulties, 38% of UK employers used employee referral schemes as a way of finding staff. This was up 4% on the previous year.

As well as Nationwide, online retailer Amazon, Sainsbury's, Vodafone, Bupa and Asda are just some of the growing number of employers who use them. In the voluntary and non-profit sector, the CIPD says the proportion increased six-fold to almost one in five.

"We are all head-hunters now. We try to get people involved at all levels to find talent," says Philip Horn, head of resourcing at Asda Wal-Mart, a company whose staff referral scheme is a key tool in helping to fill the 40,000 new jobs which come on stream at the supermarket every year.

Referral schemes have several advantages over the traditional ways of recruiting staff, says Jamie Barber, a consultant with Recruitmax. "Set-up costs can be surprisingly low, especially when compared with search and selection fees and advertising costs.

"And you only have to pay up when the right candidate is taken on board."

Mr Horn agrees that cost is a major factor. "Recruitment is a very prohibitively expensive process," he says. Whereas "the cost of this is basically free, certainly much cheaper than an ad in the paper."

However, according to a study published in September 2004 by Income Data Services, a pay and reward consultancy, which examined 14 company referral schemes, cost is not the only advantage.

Applicants tend to be of a higher calibre than those attracted using adverts, says the report, and "this can result in a reduced time to hire, with fewer interviews required to fill a position."

They also have more realistic expectations of what working at the company will be like, and are more likely to fit in better with the culture of the company.

Cultural fit is an important benefit, agrees John Wrighthouse, head of training and development at Nationwide. "If you like working at Nationwide, then the chances are that you are going to get the same thing from friends and family, who have similar sets of values," he says.

People Like Us, he explains, is a way to reward employees who refer such people because research has shown that they are more likely to stay. This, he says, has contributed to an annual staff turnover rate of less than 10%, compared with more than 16% for the banking sector as a whole.

Since it began in February 2004, Mr Wrighthouse says that the scheme has received 400 referrals from staff. This has resulted in 68 people being taken on. And because it is much cheaper than usual recruitment methods, he reckons it has so far saved the society £190,000.

Above all, he says: "We benefit from more satisfied and committed employees."

Other employers rely on their staff referral schemes to an even greater extent than Nationwide. For example, according to Income Data Services, Cap Gemini fills about a quarter of its vacancies from employee referrals, while at Novartis Pharmaceuticals the figure is 30% within the sales department.

Pete May, HR manager at Selfridges, is another fan of staff involvement. Faced with the need to recruit 1,000 staff for its Birmingham store, at a time when the reopening of the Bull Ring meant retail staff were in great demand, Mr May laid responsibility squarely on line managers, with the incentive of a financial bonus if they achieved all their targets. "I told them 'It's your responsibility to recruit them'."

But even Mr May was impressed with the results when managers of the skateboarding and skateboard accessories department approached skateboarders in Armageddon Park, Birmingham.

"As a result of their initiative," Mr May says, "we took on five people. Had we not given line managers 'ownership' of recruitment' then arguably we may not have attracted those people," he says.

It is not just the company that benefits from such methods, says Asda's Mr Horn. "A lot of people get satisfaction when they see the person they recruited coming through the organisation, and long-term seeing them do well. The person who is taken on thanks you, as well. People you have helped don't want to let you down."

Mr Barber says he recognises these schemes can limit the entry of new blood to an organisation and stifle fresh ideas, because existing staff tend to favour recruits in their own image.

It might also run counter to equal opportunities policies and limit diversity. Mr Wrighthouse admits that discrimination "was a big concern for us". That is why, he says, that before introducing People Like Us, they checked it through with the Equal Opportunities Commission.

So far, he says, the signs are promising. "There doesn't appear to be a different make-up compared with traditional advertising in terms of ethnicity and age."

Other employers argue that there is no inconsistency between their staff referral schemes and their commitment to fairness and diversity.

"This method of recruitment only by-passes the use of agencies, and no other stage of the process," says Vicky Twibell, human resources manager at Baker McKenzie, a large firm of solicitors, whose employee referral scheme pays staff between £2,000 and £5,000.

"Anyone referred, like anyone who comes via the more traditional routes, is put through a rigorous recruitment process to satisfy all our requirements, including our diversity policy."

Mr Horn concedes there may be an element of "fitting a mould". However, he doesn't believe that staff will limit the type of person they target. "Asda people are outgoing, friendly, challenging, open to change and new ideas, maybe even a bit off the wall," he says.

As a result, though, he admits there is a danger of people at senior level bringing their friends with them when they join, but argues that Asda is unlikely to end up as a company of clones. "The only negative thing is if a person refers someone and that person doesn't get the job. That can cause problems," he says.

Another weakness is that referral schemes don't necessarily work for all types of vacancy. As Mr Wrighthouse points out, while People Like Us has a good record for attracting customer advisers to the Nationwide, for jobs such as project managers, or tax specialists, "where we need to cast the net far wider" they still use "traditional methods", such as newspaper adverts.

Although not the complete solution to all Nationwide's recruitment needs, Mr Wrighthouse describes it as "a success by any measure".

With increasing numbers of employers going down the same road, it's one that more and more of us look likely to share in.