How To Increase Your Employee Referrals

In the never-ending battle to acquire the best talent, companies are finding their greatest weapon in a familiar place: their employees. While there will always be a new recruiting tool or technology, the fact remains that referrals are an indispensable yet underutilized source of dependable talent. However, some companies consistently struggle to tap into this source. In this whitepaper, we’ll discuss the benefits of a referral program, as well as the tactics to design a program that best meets your company’s hiring demands.

Given the myriad of ways to find new talent, why should companies turn to referrals? Various studies have shown that hiring through a referral program provides vast benefits. For instance, a Jobvite analysis shows that while referrals only make up 6.9% of applications, they represent almost 40% of all new hires1. It is clear that referrals are highly preferred by hiring managers.

Yet, the question remains – why are they preferred? For starters, referred candidates are much cheaper than others. Even with some form of employee reward, the average referred candidate costs about $1000 to hire2. Compare that to the $4129 that it costs on average to make a new hire traditionally3. Furthermore, referral candidates are typically quicker hires4 than candidates from other sources, reducing the costs associated with having an unfilled position for weeks on end. More importantly, referred candidates who become employees are a better cultural fit5 and have a longer tenure on average6. This is intuitive, as current employees can vet their referrals for culture fit before referring them. Once those hires are made, employees who are a good cultural fit are likely to stay at the company for a significant period of time.

A well-designed referral program is the product of intentional decisions. First, it is essential to know the reason for implementing the program in the first place. A referral program can accomplish many things. It can improve the quality of hires, lower the time and cost it takes to find a new hire, and add to the culture of a team. In order to have a solid referral program, an organization must assess which goals they are seeking and how they will evaluate the program accordingly.

Secondly, the referral mechanisms themselves must be designed. In some organizations, only some employees can refer candidates. In others, everyone from executives to interns can offer refferrals. Some companies do not allow Human Resource department members or executives to participate in the program. Before instituting this policy, it is worth considering why you would impose this restriction. Good employees are needed at every level of any organization in all departments and restricting the program may be unnecessary. Furthermore, a company must select their way of incentivizing the program. Traditionally, referrals are rewarded with cash, but there are other forms of incentive as well, such as vacation days or material prizes. The prize should be affordable for the organization, but large enough to spur action in your employees.

To design a truly superb program, consider the whole lifecycle of the referral. Sometimes, employees may hesitate to refer a friend because they are uncomfortable thinking that their employer might think their referral is not a quality candidate. If this happens, will the referring employee be viewed in a negative light? Will the company treat the referred candidate poorly, making it awkward for the referrer’s relationship with their referral? In order to put these concerns to rest, create specific policies for how the referral lifecycle will work. For instance, determine whether all referred candidates must be contacted, a timeline for contact, and be sure to keep the referrer informed of their referral’s status throughout the process.

Still, having an excellent referral program is more than planning. Ultimately, it comes down to execution. Rewards should be timely, referrers should be kept in the loop, and employees should be aware of the program’s existence and goals.

Lastly, employees must know about the program and be excited about what it means for them as well as the company. Be sure that the HR department communicates that the referral program exists (or has been revised). Unfortunately, one email may not be enough. Some employees may simply never open it. Therefore, it is important to market the programs in several ways, including at meetings, in newsletters, and/or on a public bulletin board. Throughout these efforts, a company should seek to establish a consistent message about the benefits of referrals and what they mean to the company. Furthermore, it is essential to communicate specific current job openings in the company that are available for applications. While employees might refer everyone they know to their company, it is much more likely that when a specific position is open, they will refer the person they know who has the specific skillset to match the opening. In larger organizations, regularly scheduled emails with open positions and recognition of successful referrers can greatly help the program. Recognizing employees who have successfully referred a candidate publicly is a great way to both reward employees and to remind other employees that the program exists. Using these tactics can be an effective way to create a culture of referrals, where this method of recruiting is second nature to employees.

Referrals can be an excellent way to recruit the best talent for your organization. Below are some examples of tactics used by other companies to improve their programs:

  • At Amazon, employees who make a great referral receive a call or note from a senior executive.
  • At FirstMerit, small rewards are given to referral interviewees who are not hired.
  • At Accenture, employees can receive a small reward (up to $140) for referrals who are invited to interviews but who are not hired.
  • DNAnexus offers extravagant sums for exceptionally hard to fill jobs. They have offered up to $20,000 to catch their employees’ attention.
  • Whirlpool offers specific training to their employees on how to approach potential prospects and convince them to join the company.

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