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One of the most critical and widespread challenges facing businesses today is the inability to hire qualified workers for open positions. According to the U.S. Chamber of Commerce, 94% of state and local chambers said businesses in their area are finding it difficult or very difficult to find workers.
The solution, it turns out, may be a matter of rethinking the recruiting process.
There’s another option beyond posting to a job board or company website and hoping for the best: employee referral programs. They’re certainly not new, but they offer an avenue to sourcing high-quality candidates quicker, easier and cheaper.
For most hiring methods, it takes an average of 55 days to find and hire the right candidate, according to a LinkedIn report. Referred hires only take 29 days. And if you award a cash incentive to employees who successfully refer a new employee, the amount you spend on the new hire will likely be less.
So, what goes into a successful employee referral program, and how you can use one to land your next hire?
6 Components of a Successful Employee Referral Program
Crafting a successful employee referral program is both an art and a science, involving strategic planning and thoughtful implementation. We dug in and found 6 steps to help organizations successfully leverage internal talent to find highly qualified external hires.
1. Make It Simple, Clear and Accessible
Your referral program needs to be accessible to employees, said Katie Rakusin, director of talent acquisition at Merit America. When designing and managing the program, ask yourself:
- Do employees know what the “rules” are?
- Does the program make sense?
- Are there any barriers to submitting referrals?
“At Merit America, we have clear criteria about who is eligible — what staff are eligible for the referral bonus, and what new hires are eligible,” she said.
Mark Cucinelli, talent acquisition manager at global SaaS IP organization Anaqua, added one important piece of advice: keep it simple.
“Create a referral page with a link that allows the referrer to upload a resume and choose the requisition that the referred candidate would be a match to,” he explained.
2. Introduce the Program at Onboarding
Introduce the referral program as part of the onboarding process with a simple one-page handout, recommended Cucinelli.
“To achieve a successful referral program, it is essential to introduce it to new hires during the onboarding process,” he said. “A dedicated team member should be responsible for educating and encouraging employees to participate in the program.”
The effectiveness of the program, he added, depends on the quality of communication, marketing and valued incentives.
3. Share the Referral Program in Multiple Ways
“Share the referral bonus policy in multiple modes to better share the knowledge and be differentiated to people’s learning styles," said Rakusin, whose team hosts a Referrals Office Hour in April, where they go through the referral bonus and share fun facts.
Cucinelli said a monthly “Hot Jobs” newsletter, where companies can be creative and consistent in their messaging, is also valuable. However, he cautioned not to be redundant.
“Consider slightly different subject lines that will peak employees' interest in the content,” he said. “‘Wicked Hot Jobs’ or ‘These roles are on FIRE!’”
4. Focus on Building a Strong Culture
It might seem obvious, said Rakusin, but having a strong culture at your organization is key to a successful referral program.
“If folks are not happy where they work, they are not going to encourage their networks to apply,” she explained.
And, according to that LinkedIn report mentioned earlier, employees who enjoy their jobs want to protect that corporate culture. As such, they only refer candidates they believe will be similar in work style and ethic to themselves.
5. Follow-up With Referred Candidates & Current Employees
Following up with referred candidates and relaying information to the referrer is extremely important, said Cucinelli.
“If you upload referral resumes into a ‘black hole,’ then employees will lose interest in the program quickly,” he said. “Setting SLAs [service-level agreements] around reaching out to referrals should be part of the program. Typically, around 7 business days.”
Beyond reaching out to referrers and referred candidates, Cucinelli said companies should also reach out to all employees to get feedback.
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“Sending regular surveys should be conducted to solicit feedback and suggestions from employees on how to improve the referral program and enhance the talent acquisition and retention strategies.”
6. Set Goals for Diversity & Inclusion
To avoid homogeneity in the workforce, organizations need to set clear and strategic goals for diversity and inclusion, said Cucinelli.
And for that to happen, he added, “you also need to understand what that means to the organization and why you want to achieve those outcomes.”
You can also educate and empower employees to refer diverse candidates, according to Cucinelli. “Support and consistent communication is important.”
Related Article: Corporations Are Reevaluating Their DEI Programs
Crafting Effective Employee Referral Incentives
Most employee referral programs come with an incentive encouraging current employees to participate. According to Cucinelli, effective programs have a healthy monetary incentive and some form of recognition either publicly or privately, depending on the employee’s persona.
But Rakusin said in her years of experience, cash always wins over any other incentive. At her company, employees receive $2,000 for referring someone to be hired.
“When we are doing our budgets for the year, I look at how many new roles are being approved and what our retention rate is — from there, I look at the historical referral to hire percentage and add a line in my budget to reflect what I estimate we might pay in referrals.”
Varying the incentive to something the office is currently buzzing about is another option, said Cucinelli — like playoff tickets, an extra PTO day, dinner for the employee’s family at an exciting new restaurant or a comedy show for the team.
Another avenue, he added, is showing appreciation and recognition when applicable.
“This can be done by sending personalized thank you messages, gift certificates, tickets to events/movies/concerts, or you can recognize and celebrate their contributions in a public forum, such as company newsletter, team meetings or at an event,” he explained. “This can help employees feel valued, appreciated and motivated to help again!”
Metrics to Measure Employee Referral Program Success
Before you can measure the success of your employee referral program, first you need to understand the baseline data, said Cucinelli.
Once you’ve done that, you can look at metrics like:
- Referral per employee or department
- Interviews per referral
- Referrals per job opening
- Time to fill
- Hires per referral
- Referral email engagement
Rakusin also recommends looking at:
- Demographics of referrals
- Employees’ ease and satisfaction with the program
If done correctly and in partnership with the technology team, said Cucinelli, much of the above can be pulled from the online referral page. “The online referral page should be quick and easy but also offer opportunities to simplify your data collection strategies.”
Related Article: AI Is Here to Help. Recruiters Aren't So Sure
Blueprint for Success: Harnessing the Power of Employee Referrals
The talent acquisition landscape is complex and increasingly competitive, but employee referral programs offer a way to hire high-quality talent quicker, easier and cheaper. By embracing the key strategies for crafting a successful program, companies can transform their current employees into valuable recruiters and foster a sense of ownership and collaboration within the organization.
