What is the underlying essence of referral and job posting system?

What is the underlying essence of referral and job posting system? 

The purpose or meaning of referrals is checking references to locate suitable candidates. Under this the potential employee is asked to give the names of senior professionals or eminent people excluding his relative who have known him over a reasonable period of time. The prospective employee mentions in theapplication form the names of references with whom the employer can discuss and check his credentials. Referral is also applicable in respect of potential candidates referred to for future employment in the company by the present employees. In some cases even the company extends some kind of incentive payment for having suggested or referred very good candidates. By this the company is able to make cost saving as otherwise it spends substantially on other modes of recruitment.
The job posting is an internal arrangement within a company. Many organizations follow this arrangement whereby the existing internal employees are first given a chance to apply for any job opening within the company. The company displays a communication in the notice board giving the various requirements of the job. Such employees who meet the eligibility criteria will have to go through a test to find their suitability for the opening. This is a very good system, which helps in obtaining commitment and motivation of thee employees.