Employee Referral Program

An employee referral program turns a workforce into recruiters and is a recruiter's key tool. This type of program, when set up appropriately, reduces the burden and makes the entire process of recruiting easier than ever to find the best talent for the company.

A great referral program encourages all employees to help in finding and hiring the best potential candidates for the company. It also improves a business's overall retention rate as referred candidates, if and when they complete the hiring process, stay at jobs longer than other hires.

Employees are more likely to "prescreen" candidates for things like skill set and cultural fit before making a recommendation when relied upon to spread the word about job vacancies. This can ease the hiring manager's burden, so they don't waste time on poor candidates and lend credibility to the company, showing they're only going to take high-impact candidates.

Guide to Building the Perfect Employee Referral Program

When creating a referral program, the first step is to determine the goal. Some companies seek to improve diversity with referrals, while others seek to up referrals in specific departments of the company like sales or marketing.

If an employee is excited to share the news about a job opening, then the applicant is more likely to believe it is a great company to work for. The next objective to aim for is to create an easy-to-follow process. This is essential to getting candidates to apply for a job, and the same applies to referrals. The referral process shouldn't be lengthy, complicated, or require lots of clicks.

Consider using a referral software or platform. The kind of software allows hiring managers and recruiters to send requests for referrals for particular positions. Referral software is also a good option if the company wants to help employees share open positions with the social network. The less work an employee has to do to refer a candidate, the more successful the referral program will be!

What Attributes to the Success of a Referral Program?

A successful referral program continues to adapt by making use of a variety of initiatives:

  • It plans spontaneous promotions.
  • It trains the workforce after the referral program is set into place.

Training should cover the basic aspects of how to use the referral system and also look into the company's preferred candidates. Explain to the employees what the company's management looks for in a candidate, so that the end goal ) is met. Lastly, training should cover the employee's expectation after referring a candidate.

The hiring department needs to be clear about what happens to referrals from employees. This includes:

  • Communicating in a timely fashion
  • Reporting responses or any feedback within less than 72 hours
  • Keep employees informed about what's happening during every step of the process

If employees are fully aware of the program, employees won't be discouraged if the referred candidate never hears back from the company. When a referred candidate isn't selected for an interview, send referrers a thank you email anyway. Always encourage the employee to keep looking for great people so that employees won't feel underappreciated.

How to Interview

There are programs where referred candidates may only hear from the company if considered qualified enough for the position and move on to the interview. Leave the choice of time and date of the interview to the candidate and offer assessments online. Candidates are looking for these flexible options in order to save time.

The best way to conduct the training depends on the structure and size of the company. A small organization might choose to host a 30-minute meeting in-person to explain the logistics. A larger company, on the other hand, will probably go a more digital route and be relatively short to keep both the expectations and process known.

Get the People to Make Better Referrals through Engagement

It's key to keep employees engaged. Train the workforce on how to use the system and keep employees up to date on open positions by sending out a weekly email or mention them during companywide meetings.

Encourage the team to browse LinkedIn connections as an option to see anyone who is right for the company. The referral program is not about filling a position, but finding the right person for the right position. Don't restrict managers and recruiters to only referring within their areas of expertise and leave room for non-employee referrals.

Positive Reinforcement for Referrals

Don't reward just the candidates who are hired, do so for any quality candidates. When employees bring in a good candidate, the employee should be rewarded and encouraged regardless of the outcome. Set goals for team referrals and create attainable targets for the referrals given.

To consistently bring in talent, encourage the use of the program and keep people engaged in helping the company move forward. Request referrals from new employees right away and implement as a step in the company's onboarding process.

Keep relevant people or consistent referrers aware and updated on the needs and the status of potential leads by creating notifications. Explain job requirements by providing a job description when sending emails for referrals. It can also be a good idea to highlight what the company is not looking for.

Non-Monetary Incentives

Money is a popular incentive, but selling an experience (e.g. trips, vouchers, or motorbikes) can better market the company's employee referral program. Other forms of recognition include:

  • Paid time off
  • Gift vouchers
  • A manager publicly announcing employees who have referred candidates is a nice recognition tactic.

Acknowledging Referrals

The company has to make sure that employees efforts are appreciated. So, a thank you from the hiring or interviewing department or team, either via email or in-person, is also a nice way to recognize an employee. Any acknowledgement, ranging from an award to public praise from the CEO, can be meaningful.

The company has to make the acknowledgements a codified part of the referral program policy.

An employee who receives positive feedback for a good referral is likely to continue to refer candidates and also motivate others to participate in the referral program.

How to use the Employee Referral Program to Measure a Company's Efforts

A critical part in the employee referral program is to measure the company's efforts. A common figure to measure is the number of new hires referred by a current employee.

Make it easier for the employees to refer a candidate or send a more effective reminder of the open positions within the organization if you're not getting as many as you'd like. If the percentage is not met, the company must adjust the expectations or refocus on candidate outreach efforts.

The percentage of referrals must be higher than the percentage of all applicants who get an interview. If the percentage of qualified referrals doesn't exceed the percentage of all applicants who get an interview, then the employees are referring people that may not be the right fit for the company.

The company may solve it by establishing what the expectations and standards are for the company. The majority of referrals can often be attributed to a small percentage of a company's workforce. If the percentage is low, the company needs to market the referral program and the open jobs within the company to all employees.

Research suggests that referral hires are often better than non-referred hires. And, the company has to measure to ensure that employees are referring the right people. Measuring the quality can be tricky, but a company can use numbers or stats, like the tenure of a new hire, performance reviews, and so on.

Additional Factors to Consider

There are factors that can have an effect on a number of referrals a company receives. Factors like a high amount of layoffs at a company will cause the company to get fewer referrals, whereas other factors, when the team is dedicated to getting a large project done, may produce few referrals for the company.

If the company truly has a great program and consistently gets few referrals, there could be something wrong within the company culture. People will only refer friends or acquaintances if the company has a nice environment to work in. Instead of focusing on referrals, perhaps the focus should go toward making the company a better place to work. 

Employee referrals are a top way to find potential hires. A company without a strong and organized referral program might let the opportunity pass by. Concentrate on relaying the importance of good talent to the employees and effectively communicate how that affects the employee. Job security and improved company performance are two serious motivators.

While using an ERP gets people in the door, it is the hiring manager's job to thoroughly test the candidate's capabilities, weigh the candidate's personality and any other essential qualities needed for the position.

Employee Referral Program Best Practices

Employee referrals are the prime source of quality candidates for the most successful organizations. It results in hiring new employees faster, improves retention levels of current employees, and offers higher profitability. Employee referral programs should never be overlooked, especially when comparing to other sourcing channels. The company must fix the selection process to avoid bad HR practices with regards to the timing of the bonus payout.

Employee referrals shouldn't disappear into great beyond of a company's HR efforts; this could result in a major loss of credibility. Slow responses also suggest that the company's organization isn't serious about attracting or hiring the best talent, which impacts the company's employer brand. Many organizations understand the value of a new client and have a client referral program, thus the company must bring that same mindset and reward those employees outside of the organization for referring talent.

Build an ERP (Employee Referral Program) Brand

Consider campaigning a few times throughout the year and branding the program through various communication channels within the company. Some ideas include:

  • Using collateral as goal reinforcement
  • Physically mailing postcards to all of the current employees' homes
  • Design and brand a referral page online
  • Put random desk drops into the daily routine to ask for referrals

Engage leadership as leaders play an important role in setting the tone for referrals. Build excitement and teamwork by having contests and rewarding great results for teams with the most referral activity or most hires. Perfecting the company's employee referral program requires effort and strategic planning.

Focus on building and perfecting the company's strategy and measures of success from the get-go. Submitting an employee referral must be a straightforward and easy process for everyone. Set clear expectations so everyone who participates knows exactly what to expect and how to proceed.

It's also important to set goals and publicly acknowledge top referrers and generate excitement when paying out rewards. Always accept referrals regardless whether the company is in a hiring mode as it keeps the employees on constant alert for talents. Provide feedback on the strongest and weakest referrals; this creates a better, more open referral culture.

Further specify the referral culture by detailing what managers should discuss with employees about the program and how they can encourage them to participate. Educate employees about the organization's mission, vision and cultural values to advocate for the company and bring in new hires.

Look at an employee as a recruiter for the organization. For employees to participate in the referral program, they need to be treated as valued recruiters.

If you need more information to better understand how an employee referral program works or have additional questions pertaining to organize one for your organization, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Stripe, and Twilio.