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In hiring circles, a referral is a transaction wherein an existing employee recommends an outsider for an open position with their employer. A good referral is a boon to candidate, employee, and corporate recruiter alike.

A candidate benefits because they can often bypass the first level of resume screening, which is designed to weed out the trash. They can also often get details about the job from the employee who will be referring them, helping to ensure that the position is going to be a good fit for them. They may also be able to get updates which are otherwise difficult or impossible to obtain. Some companies will always grant at least a courtesy interview to a referral, and once the candidate is in the door, good things can happen.

The referring employee benefits by having the chance to bring a compatible personality into the company, through the positive karma of helping out, and in many cases, through a small monetary reward or prize provided by the company for a successful hire. Usually the reward is big enough to be meaningful but small enough to discourage the referral of winos and odious uncles (not that there isn't some overlap there).

The employer may avoid paying third-party recruitment fees, which are often a substantial fraction of the first year salary. The company hopefully gets quality candidates who have been lightly pre-screened for fit by the referring employee. Nobody wants to embarrass themselves by referring a clown for an interview, unless of course you're actually hiring a clown. A good referral program can leverage employee networks to draw in top talent who may not be actively looking for work, and who would otherwise not see or consider the role.

The one downside is that sometimes a referral is not a good fit, but the referring employee may not see it, or may just desperately want the iPad Pro that's the quarterly referral prize. The hiring manager then has to let both the referring employee and the candidate down gently, hoping not to alienate them in the process. I've found the best way to do this is to offer polite and constructive feedback on how the candidate can improve their presentation and/or skill set for future opportunities. It's usually a mistake to discuss why you don't see a fit, as this way lies argument, subjectivity, and bad feelings.

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