In sales, your most qualified leads usually come as referrals from satisfied customers.
In recruiting, a referral from one of your satisfied employees can be just as powerful.
Employee referrals bring qualified talent to the table and cultivate a sense of company loyalty in both the referring and prospective employee.
In addition, referred employees tend to stay with their employers longer than those who are hired using traditional recruiting strategies.
A recent study found that 46 percent of employee referrals stay for three years or more, while only 14 percent of those hired from job boards stayed, according to a Jobvite report.
An employee referral program can also significantly increase your company’s qualified talent pool. Most of the time, the referrers (your current employees) have a good understanding of what you expect. Therefore, the candidates they refer are more likely to have the skills and personality you’re looking for. This can speed up the initial screening process so that you can hire qualified talent quicker.
In fact, referred candidates are hired 55 percent faster than those who came through a career website (Jobvite Index).
Now let’s explore how to encourage participation with incentives and launch a successful referral program.
Motivating Employees: Cash Incentives Alternatives
Cash rewards are an effective and popular method for motivating employees to participate in referral programs.
The amount should be fair and buzz-worthy, according to your industry, company size and culture. You may want to offer bigger rewards for harder-to-fill roles. Also consider incentivizing referral quality and retention by giving a second award after a newly hired referral has worked 90 or 180 days.
But sometimes cash incentives just aren’t in the budget. These low-cost alternatives can also get your employees excited about making referrals:
- Lunch – If you regularly take new hires to lunch, include the employee who referred them on the invitation.
- PTO – Give employees who make referrals an extra day of PTO when a recommendation is hired.
- Recognition – Openly recognize employees who have suggested a great candidate. You could do this with a thank you note, reserved parking space, or announcement and thank you at a department or company meeting.
- Lottery – Instead of giving an individual reward for every hired referral, you could do a drawing for one big prize every quarter out of all the employees who participate.
Launch Your Program
When you’re ready to establish an employee referral program, you can take one of two approaches: the year-round program or seasonal campaign approach. The program can be year-round or sporadic to address the ebbs and flows of your business.
A year-round employee referral program would be best if you would like to accept and incentivize referrals at all times.
A seasonal employee referral campaign might suit you better if you do most of your hiring in certain months of the year, or if you’re working with a tight budget.
Another point to consider is whether you need referrals for all openings at your company, or just those that are typically difficult to fill. By only incentivizing referrals for your hard-to-fill positions, you avoid paying employees for referring candidates for positions that already have a large pool of qualified, available talent.
Whichever way you want to configure your program, the setup is mostly the same. You’ll need to:
- Put the program design in writing
- Ensure you have a way to track referrals
- Consider how you’ll “market” the program to your employees
Pitfalls to avoid
When designing your program, consider these pitfalls and how you’ll avoid them.
- Responding too slowly
- Failing to follow up
- Hiring based on relationship alone
An employee referral program may very well be the shortest path to better hires. For more suggestions on how to build a solid recruiting infrastructure, download our free guide – Talent Acquisition: 13 Secrets to Recruiting and Retaining Top Talent.