Employee Referrals — Does yours stack up?

I doubt that many HR, recruitment or business professionals would question that there is value in having a healthy, engaging and productive Employee Referral Program (ERP). Though we know this to be true, more often than not, referral programs lean towards being ineffective, bureaucratic, boring, and simply in place because at some point, someone thought it would be a good idea to have a program. Even some of the better programs have simply become stale over time.

Let’s explore the key elements of ERPs that I see in my work with customers. Is your organization’s ERP experiencing some of these symptoms?

  • Awareness: Employees are unfamiliar with the program, hiring challenges or business needs. They may know about the program but only use it when one of their friends, relatives or professional colleagues is out of work or otherwise actively searching for a job.
  • Candidate Driven: Most candidates that are entering employee referral programs are actively seeking a position and are requesting to be referred by an employee of your company.
  • Communication: The employees that refer and candidates that are declined are not updated with status of their applications.
  • Payouts: Employees are paid out after the newly hired employee referral has completed 3 or more months of successful employment.
  • Measurement: Program success is measured primarily by cost and number of hires
  • Process: The manner in which referrals are captured, tracked and paid out is strewn with manual intervention and potential errors.

According to many surveys (including the Recruiting Trends Survey below), and from our own experiences, we know that organizations’ greatest hiring challenges are finding top quality candidates, filling roles with unique or “in demand” skill sets, and filling roles in a timely manner.

We also know that highly effective ERPs help organizations hire roughly half of their new employees, lead to longer tenure and higher on-the-job performance due to a mutual vested interest in success and stronger cultural alignment.

Knowing all this, shouldn’t we build our programs to attract and hire better candidates while still honoring our employee’s valuable time and commitment? Great people know great people and if our goal is to hire great people to grow our business and continue achieving our business goals, a thriving ERP can have a huge impact on our hiring success.

Let’s take a look at the characteristics of highly successful employee referral programs and how you can go about including them in yours:

  • Marketing: Develop your program as marketers design campaigns. Build in some excitement, success stories and marketing materials to drive referrals and engage employees to participate in the program. Strong communication of your ERP within your business through your intranet, company communications, posters, social media and e-mail/texting campaigns has a “double whammy” effect. It reiterates your brand to your employee population and drives home a message that you are looking to enlist your people’s help to hire more great people.
  • Awareness: Insure your employees know your business and hiring goals. Once you have raised awareness through a marketing campaign, helping your employees know what skills you are looking for, you’ll begin to change the behavior of your employees. Making this change will begin to drive a culture of every employee becoming a recruiter for your organization.
  • Hiring/Business Need Driven: Instead of only attracting candidates that are actively looking for work, you can begin to solicit direct referrals for your more challenging roles. Leveraging your existing employees that have and understand “in-demand” skill sets to reach out to their networks and solicit referrals will have a significant impact on the success of your program. This means, in most cases, connecting with your employees to first educate then help them help you. This proactive approach to generating referrals will become your secret weapon to generate incredible ERP value.
  • Communication: We’ve all heard about the importance of providing a
  • positive candidate experience. This is even more critical for employee referrals. Not only should you be stepping up your communication with all referrals, consider putting a mechanism in place to keep your employees informed and in the communication chain as well. Many programs fall flat because candidates are referred and both the candidate and your employees never receive any follow up, feedback or care. This proverbial black hole can erode your employee’s trust.
  • Payouts: Make ERP payments immediately. When the candidate is hired. HR has come a long way to shake off the “Personnel Department” moniker but policies that delay payments until the newly hired candidate has been with the organization for 3–6 months help slow that evolution. Employees already have a vested interest in the candidate’s success, and frankly, if they’re not involved in the hiring process, why hold them accountable for a poor hiring decision? If your employees are engaged, they will not refer anyone to the organization that will negatively affect their status with your company. While we’re on this subject, don’t exclude any of your employees from eligibility, except your recruiters. A great referral is a great referral.
  • Incentives: One size seldom fits all. If you know your hiring priorities, and hard-to-find skillsets are holding back your business, put incentives or bounties on those roles. Though I generally do not support large payouts as they can incent a counter-productive behavior, doubling a referral bonus for a position that has a big impact on your company’s success is far less expensive than resorting to a third-party recruiter fee or worse, not filling the position at all. Additionally, consider monthly or quarterly draws to recognize all your employees that made referrals — even if they weren’t hired.
  • Recognition: Let your employees know about successes. Circling back to the marketing of your program, share program success with your
  • employees. Recognizing the impact that an employee by way of their new referral are having on your business and publicly welcoming your new employees that are hired through the program will have a contagious effect in your organization.
  • Measurement: Measure, measure, measure! The only way you’ll really know the impact of your ERP is to track the results. Who is referring your brightest new hires? What’s the level of engagement, productivity and performance of your referrals? Where are your referrals coming from (organizations, industries, geographies)? What’s working well, what needs to be tweaked?
  • Process: Most ATS’ have the capability to capture, track and report on employee referrals so you can see not only the candidates that are hired (so you can pay them) but also the candidate referral activity (so you can see who’s referring whom). Most importantly, make the process easy. Employees will appreciate a streamlined, easy-to-use process.

Of course we’d be remiss if we didn’t discuss the biggest factor in realizing true value from your employee referral program — Employee engagement. Apathetic employees will refer active candidates, as their primary driver will be the incentive payout. Engaged employees, on the other hand, are far more likely to refer candidates that align with your culture and values. Your highly engaged employees will have a vested interest in that candidate’s success and though they may be incented by the financial reward, will have a litany of motivations that surpass the almighty dollar.

I’m sure that we’d all agree that there is value in having a healthy, engaging and productive Employee Referral Program (ERP). Great employee referral programs have been shown to reduce turnover (especially within the first year), increase engagement, lower your cost per hire and increase cultural alignment with new hires. The return on your investment to set up, market and maintain a great program is insignificant compared to the cost of hiring the wrong people.

Take the initiative to charge up your employee referral program. You’ll never regret it. Though it may seem like an overwhelming project, breaking it down into manageable pieces will help you evolve your program over time. As Francis of Assisi said, “Start by doing what’s necessary; then do what’s possible; and suddenly you are doing the impossible”.

Michael helps organizations align and optimize their talent acquisition processes with their overarching business objectives. This includes conducting recruitment audits, implementing processes, systems, tools and teams in order to attract, screen, recruit, select, and onboard engaged employees. Follow him on twitter @hireinsite