by: Pat Hedley and Melanie Hughes
They key to great talent is right in front of you — your network and that of your current employees
Entrepreneurs and growth company executives face several challenges in hiring high caliber people: hiring takes time, search firms are costly and great talent is scarce and hard to find. Yet the solution is right in front of you — it’s in your own network and that of your current employees.
Employee referral programs are not new. According to a study of 53,000 workers by PayScale more than half of companies over 5,000 employees have such programs in place. In fact, the best practice goal for companies is to recruit 30% of their hires from employee referrals. Few hit this goal for three key reasons:
1. employee dissatisfaction (an unhappy employee will not refer a friend),
2. employers don’t know how to identify or value strong networks in potential hires, or
3. referral programs that are not well-constructed or communicated.
The main driver of employee referrals is a happy employee, one who wants others to join him or her at an amazing company. A strong brand, great professional development opportunities, an engaging culture and charismatic leadership are key elements to increasing employee referred hires. Not surprisingly, great companies with strong brands have strong employee referral rates.
However, at many companies, identifying candidates with strong networks is not explicitly prioritized. While hiring managers look for skills and expertise which are easily revealed on resumes and LinkedIn profiles, they talk less openly about the “unwritten competency” — a robust professional network. Recognizing the huge time savings and monetary value implicit in an employee’s professional network can change the way in which you evaluate candidates. A well-networked hire who brings in as few as 3 to 4 additional senior hires can easily pay his/her own annual salary in savings from search fees. At one high growth company, a female executive hire quickly resulted in several additional referrals and female hires expanding the firm’s diversity initiatives. Well-networked employees can make your hiring process faster, cheaper and better. Well-networked diversity hires can accelerate your diversity initiatives.
Not all employee referral programs are created equal. Many companies do not have one in place or if they do, employees are not aware of it. Yet good programs that compensate employees for hires that stick can provide the extra incentive to tap one’s network for high quality candidates. Referral fees can range from $2,000 to $5,000+ per hire dependent on the seniority of the role. Just a few successful referrals can add a nice success-contingent bonus to an employee’s total compensation. Even by paying employees for referrals, the referral costs versus search fees are significantly lower.
According to the PayScale study referenced above, employee referred candidates have been proven to get better performance reviews, experience greater success and have longer tenure than other hires. Here’s why.
Referred hires are usually pre-vetted. A high-quality employee will generally refer other high-quality candidates because the new hire will reflect well on the employee. Once the referred candidate is on board, the referring employee has a personal vested interest in the new hire’s success. The referring employee will make sure that the new hire has the inside scoop to be successful in his/her job. Referred hires have a built-in support network from the start which accelerates their onboarding, helps them in problem-solving, makes them more comfortable in the workplace and increases their productivity. It is not surprising that referred hires stay and thrive.
What should you as a CEO, entrepreneur or hiring manager do to access such high-quality hires? Here are three tips:
1. Make sure your network is strong, current and growing.
Get ahead of your hiring needs by meeting with candidates regularly, whether you are ready to hire or not. Determining what ‘good’ looks like at the start of a search process is already too late. The only way to know what a good CFO, HR Executive or General Manager looks like is to have met many well ahead of the need. Let people in your network know what roles you need to fill now or in the future and meet people. In addition to your employees, your well-networked investors, customers, suppliers and former colleagues can all be referral sources. Tap them regularly.
2. Look for evidence of a strong network.
How can you tell? While having 1,000 LinkedIn contacts doesn’t ensure a robust network, only having 100 contacts or no LinkedIn profile especially for experienced hires, is not a good sign. In interviews, ask candidates how they learn and enhance their skills. Do they attend conferences and industry events? Are they a part of a peer group for learning and sharing? Do they have a mentor? Do others reach out to them for guidance? Responses to these questions will provide relevant clues as to the strength and value of someone’s network.
People with strong networks not only lead to additional great hires, they are more successful in other ways. Their broad access allows them to reach experts and resources when needed. They are able to problem solve more quickly, and in many cases, more cost-effectively. Others would have to hire consultants or pay for studies that well-networked employees can often access for free. Those with strong networks have a better sense of industry trends, potential pitfalls or problem areas and new opportunities. They keep their skills relevant and fresh by being in the flow of information. Through their networks, they are better able to connect the dots and see the bigger picture than those who operate in silos or with limited networks.
3. Communicate that you want and expect your employees to refer high quality candidates for open positions at your firm.
Formal employee referral programs can be very useful and cost effective, but they must be communicated clearly and updated regularly. Publicize and celebrate wins to encourage broad participation. Establish a ‘hot jobs’ bulletin for urgent key hires so that people know they should focus on these key roles and tap their own networks for ideas.
4. Use referral programs to help bolster diverse hiring initiatives.
Hiring diverse candidates leads to expanding your diversity initiatives. You will be able to tap the networks of these diverse candidates which you otherwise might not. Make it a point to provide extra incentives to access these rich pools of talent which might otherwise be more challenging to reach.
You are well-served to look to each new hire as not only a great potential employee but a source of additional members of your team. Do not overlook this hidden but incredibly valuable competency.
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Pat Hedley is an investor, advisor and author of Meet 100 People: A How-To Guide to the Career Edge Everyone’s Missing. She spent nearly thirty years at global growth investor, General Atlantic and now invests in and advises growth companies.
Melanie Hughes is an HR leader having spent thirty years in HR and operations roles. She has specialized in managing companies through growth and transformations in the technology, retail, media and financial services sectors.