Employee Referral 101: How to Make Your Program a Hit

Leading American property insurance company, PURE hires 40%-60% of its workforce through referrals. The company’s remarkable success with referral-based hiring is not a fluke. 

An employee referral program is an excellent opportunity for businesses to develop a robust recruitment strategy. Instead of spending significant resources on external avenues, this method allows companies to make the best use of their internal networks. 

But running an employee referral program is not as straightforward as it sounds. 

From setting the right goals to choosing relevant referral templates, there are a lot moving parts to it. This blog will give you a deep dive into employee referral programs and how you can benefit from it. By the end, you’ll find the best practices to set up your referral program for success.

What is an Employee Referral Program?

An employee referral program encourages an internal stakeholder to recommend a suitable talent for the organization and earn a reward for this referral. This can be an existing employee or even a client. 

The referral program is a highly organized and structured way of utilizing the organization’s current workforce to fill the vacancies quickly and more effectively. Through this internal process, organizations can hire the best talents with the help of your employees, saving a lot of money on the hiring process. 

What’s more, candidates hired via employee referrals tend to be of higher quality and remain invested with the company longer. You can even use various HR metrics, like a referral to hire rate, the average time to fill, tenure of referrals, etc., to determine its effectiveness. 

5 Perks of Having a Custom Employee Referral Program in Place 

Here’s the thing: recruiting is tough to say the least. HR professionals have to tirelessly promote open positions, filter applications, and screen the appropriate candidates. At the same time, they also have to nurture a positive work culture to attract top talent. 

So, where does an employee referral program fit in all this? 

For starters, it can reduce the burden of recruitment by letting your employees to do it for you. There’s a lot more to it. Let’s break down the five best benefits of an employee referral program:

1. Access to Highly Qualified Candidates 

One of the primary benefits of a successful employee referral program is that it allows high-quality talent acquisition. In fact, about 88% of employers state that employee referrals are the best way to hire above-average talent. 

This is because your employees would already perform the initial screening to ensure their recommended candidates fit the job. After all, the person they refer also reflects on their own judgment and reputation. 

Besides, your employees know the work culture well enough to understand who would be an ideal candidate. So, when they refer someone, you can be sure of their eligibility and suitability. 

2. Higher Hiring Velocity 

A referral program can also make the recruitment and onboarding process a lot faster. Since your employees are aware of the minimum requirements for a specific role, there’s no need to screen a pool of CVs. This saves you the time and cost of job advertising, pacing the process. 

According to a Jobvite survey, 69% of employers believe that referral programs significantly reduce time-to-hire. The study concludes that a referred candidate can be hired within 29 days. On the other hand, recruiting through job boards and career sites can take 39 and 45 days, respectively. 

Not only does a referral program bring you access to a more diverse candidate pool, but you can also move forward with the interview directly. More importantly, there’s 3-6.6% higher chances of a referred candidate accepting the offer. 

3. Good for the Hiring Budget 

Traditional hiring methods not only cost more but also increase it based on the time of the search, salary range, and job role. Referral programs can reduce this since you do not have to invest in conventional recruitment methods. With employee referral programs, you can say goodbye to job advertisements, job boards, and agency fees. 

Moreover, the faster turnaround time also ensures minimal internal labor costs. That explains why 55% of companies believe a referral program can significantly reduce hiring costs. 

4. Better Employee Retention Rates 

Another noteworthy perk of an employee referral program is that it boosts employee retention rates. The fear of attrition is a reality in many corporate companies. 

But with employee referrals, potential candidates get a better opportunity to view the company from the employee’s perspective. So, if they are still willing to go through the interview process, it is a sign of their willingness to join. 

Simultaneously, the employees will also refer candidates if they trust the company would be an excellent place to work and stay. This has been supported by a study by ICIMS, which shows that referred employees tend to last 70% longer than non-referred ones. This is also a great way for companies to check the employee satisfaction factor of their current workforce. 

5. Higher Employer-Employee Satisfaction 

Speaking of employee satisfaction, employee referral programs can also boost employee engagement in more meaningful ways. When your company relies on its employees for finding the next recruitment, it empowers your employees. It is a great feeling for any employee to be a part of the company’s important hiring process. Also, this gives them a chance to lend a helping hand to their friends and relatives regarding their career moves. 

Other than the rewards and recognition for the employees, it is also helpful in employer branding. By allowing your employees to spread the word about the job openings, you open new traffic to your business. This can result in direct traffic or referral traffic. But both help in improving your brand visibility. 

You can even utilize this opportunity by designing the company’s career page that feels more inviting for the visitors. This way, you can use your own company website to convert a passive talent into a potential candidate. 

Why Your Employee Referral Program is Failing

Employee referral programs are indeed one of the most effective and efficient methods for talent acquisition. Despite this, many companies fail to utilize them fully. It can result in not bringing high-quality hires or the results you desire. 

Therefore, it is crucial to know why your employee referral program can fail and avoid them to make the program a success. 

1. Complex Process 

Your employee referral program is a waterfall process where you must map the project into definitive phases from beginning to end. Making the process too long and tedious can only result in failure. 

For example, if your employees have to fill out a lengthy application form for referring a candidate, it can demotivate them. Instead, you could provide a simple referral system with no log-in hassles. 

Simultaneously, allowing the employees to share the job openings on various platforms and devices with a single click can accelerate the process. For instance, allowing your employees to refer the candidates on their personal social media via desktop or mobile applications can be fruitful here. 

Using a tool like Suitable can help you with this. The ERP allows the integration of a robust Applicant Tracking System and makes the referral process really simple. With its help, your employees can complete the referrals in 30 seconds, resulting in higher engagement. 

2. Communication Gaps

One of the biggest mistakes recruiters make when executing an employee referral program is not communicating well enough. Leaving your employees and the referred candidates hanging without timely responses does not look good for the company. Instead, providing them with a timely, personalized answer can go a long way in building trust in your company. 

Your referring employees also should be informed of the status of the referred candidate. In this, a real-time status update can be beneficial. Also, providing feedback for both the referred candidate and referring employee can benefit the hiring process in the future.

You must also make the employee referral rules clear for everyone to understand. Any lack of transparency in this step can sabotage the referral program, creating confusion instead. 

You can take a cue from search engine giant Google in this aspect. The company sets the standard for a successful employee referral program with its razor-sharp questions. 

American human resources manager Laszlo Bock has explained the process in his book “Work Rules.” According to it, recruiters in the company ask direct questions to their employees, like “who is the best product person you know in NYC?” Instead OF roaming around the bush, this type of direct interaction can tremendously benefit the hiring process. 

3. Ineffective Employee Referral Rewards 

One of the key factors behind the success of your employee referral program is the rewards you offer. Apart from making the process simple and fast, you should also focus on this particular aspect of the process. 

However, the rewards do not just refer to cash incentives. In the end, you need to make sure that the referral rewards you offer can motivate the employees. For this, you may need to research and implement innovative rewards that focus on the emotional factor just as much. 

For instance, simply sending a personalized “thank you” to the qualified candidates that did not make the cut can be a morale boost. Even a simple recognition from the hiring manager is sufficient for the referrer to feel valued. The key here is to make the process “awarding” as much as “rewarding” by acknowledging the time and effort of the employees. 

You can follow the example of Accenture here. The company attracted almost 4.6 million candidates yearly through 600,000 employee referrals, while others suffered from higher attrition. What’s more interesting is that the organization engages not only its existing workforce but also its former employees in the referral program. 

4. Lack of Continuous Promotion 

Your referral programs can also fail due to a lack of promoting the program properly. This is one of the biggest reasons for the failure of the employee referral process. After all, your responsibility is to make the process known to your internal stakeholders for its faster implementation. 

Now, of course, publicly recognizing the referring employees’ efforts is an excellent way to boost the referral process. But you can also implement other methods to ensure that everyone within the organization is aware of the program. 

For instance, you can utilize emails to let your employees know about the ongoing referral programs in the organization. The emails are immensely helpful in providing regular updates on the latest job openings. You can also use the banner on your website to announce new job postings. Also, you must preach the importance of referrals to your employees. 

6 Best Practices to Ace Employee Referral Programs

Employee referral programs can be highly effective in increasing the hire rate of your organization. But you must adopt the best practices to witness the quantum leap in its effectiveness. 

Here are the top five practices you can follow to ensure your referral program brings about a positive impact. 

1. Defining Hiring Objectives 

The first thing you need to do is clearly define the hiring objectives, guidelines, and expectations. While your main objective is to hire better talents for the open positions, being able to identify measurable goals can make your program a success. 

For instance, making the referral program time-bound will allow you to achieve the goals faster. Some other examples of a clear objective would be: 

• Defining the percentage by which you want to increase the number of hiring candidates 
• Reducing the employee turnover in a particular financial quarter by a specific margin 
• Specifying the hiring turnover time, etc. 

2. Choosing an Easy and Standardized Referral Process 

When you ask your employees for referrals, you ask them to perform tasks beyond their regular responsibilities. Therefore, keeping the process straightforward is the key to making it more effective. 

You must make the referral guidelines simple and easy to comprehend in order to avoid making the referrals feel like additional work. Therefore, implementing a standardized referral process can help you in better execution.

This depends on the size of your company as well. For instance, 

• Small and mid-sized organizations need to focus on verifying the skills, strengths, and weaknesses of the candidate. You can focus more on quality here than quantity. 
• You Should also focus on building a company culture that your employees will feel proud to promote. Therefore, your referring employees can act as an advocate for your brand. 
• Even large organizations can benefit by implementing the proper referral process. An efficient reward management system, social media integration, and using a referral drop box are all great ways to ensure success.

3. Raising Awareness about the Referral Program 

You need to market the referral program properly, so your employees are aware of it. Using digital channels, like your brand website and social media platforms, is a great way to increase awareness. 

You can also encourage your employees to promote the job postings on their own personal social media channels, like Twitter, LinkedIn, etc. This will also boost internal communications. 

You should also teach the hiring managers to encourage the referring employees and instill the value of the referral program. Even collaborating with the marketing department is a creative way to ensure the employees are provided with regular updates on the progress. 

4. Having an Employee Referral Reward System in Place 

Besides promoting the referral program online and offline (by engaging the leaders, managers, and marketing team), you should also offer the right motivation. Almost 74% of organizations provide incentives in their referral programs, according to HCL research. 

Among these, almost 92% of companies offer incentives in the form of cash. But other than the amount of the rewards, the timing is equally important. 

For example, you can offer the reward only after the referred candidate serves within the organization for a stipulated time. Also, you do not want to end up paying more for a lower-level job. Therefore, you must ensure that the referral amount is reasonable for the job role.

Take Salesforce’s informal approach, for example. The leading cloud-based software company organized a get-together where the employees were encouraged to invite their relatives and friends. The recruitment happy hours serve well as an informal introduction to the workplace. 

InMobi, the mobile advertising technology company parked a Royal Enfield bike at its Indian office and a Vespa in its US office. This was placed as a motivation for the employees to take part in the referral program.

5. Bring Gamification into the Mix 

Adding games as part of the hiring process is a great way to engage the candidates, allowing them to prove their mettle. The significant growth of the global gamification market is proof that it works. 

You also reduce the candidate drop-off rate by introducing the gaming elements, as it increases the candidate experience. This, in turn, builds trust in the application process, making you appear as a lucrative employer. 

You can use many types of games in the recruiting process. For example, Google uses public riddles to attract new talents. You can utilize online quizzes or coding tests to hire the right candidates.

Freelancing marketplace Fiverr used this same method when it wanted to increase the number of employee referrals. The company provided employees with credits and points for referring. You can do something similar by using suitable.ai, which offers magnetic gamification to make the referral program far more engaging. 

6. Keeping Track of Progress 

Lastly, tracking the progress of the employee referral program is the best way to ensure that you are in the right direction. Tracking the referrals also allows you to view firsthand how your organization benefits from engaging the employee’s networks. 

You can make the tracking effective by focusing on factors like: 

• Comparing the number of new hires from the referral program with other channels for recruitment
• How much does it affect the retention rates? 
• Increase or decrease in the numbers of referred employees from the previous year 
• Changes in the quality, time, cost of hiring, etc. 

By monitoring these factors, you can understand what you are doing right or wrong and adjust the program accordingly. 

Wrapping Up

When appropriately used, employee referral programs can become one of the best resources for hiring quality talent for the organization. Moreover, it can engage the employees, creating a better employer-employee relationship. 

Apart from the direct sourcing practices, it also aids in brand promotion and saves you the hassle of additional job posting costs.

In the long run, you can implement a company culture that your employees take pride in and find out about the satisfaction rate of your employees. With the tips mentioned above, you can create an employee referral program to keep you ahead of the competition. 

To reap the benefits, however, you must focus on updating the reward programs, spreading awareness about the program, and building a solid company culture.