For many companies, employee referral hires prove to be top quality hires. Research shows that referral hires assimilate more quickly, have greater engagement, and stay at the company longer than non-referral hires. In general, referral hires tend to be among the best hires a company can make. Thus, you want more of them.
According to our research at HireClix, 71% of companies have formal referral programs. Yet, only 2% of those companies report actually meeting their referral hiring goals. Many companies have dedicated staff to manage, promote and evaluate the referral program. Over 80% of companies with referral programs pay cash bonuses averaging over $1,000 to employees who refer successful candidates. Thus, you are spending significant resources, yet not getting the results you want.
Why is this happening?
There are 5 primary causes of poor performing referral programs, and you can control all of them.
Your employees don’t know what jobs you have open, which makes sense. You, as a recruiter, tend to be super-interested in what roles need filling. Unless it impacts them pretty directly, it's generally not your non-recruiting colleagues' responsibility to keep track of all of your open positions. So, they are often only aware of open positions in their immediate work area. They could have friends, former colleagues or relatives who fit requirements in another part of the business, but they aren’t aware of the need, so they don’t refer anyone.
Honestly, most recruiters and TA leaders can’t list all of the current openings at your company and it is their job to hire people. How can you expect employees to know who you are looking for? There are lots of referral solutions in the market that will communicate your needs to your employees and identify individuals in their social networks who could be a fit. However, you don’t need one of these solutions to help your employees. Regular communications in the method that works best in your company (intranet, email, text, staff meetings, etc.) will help understand your hiring needs. However, avoid just sending a list of jobs as those will just get ignored or deleted. Share the hard to fill jobs and expand on who you are looking for. Be specific about the skills or experience you need. Suggest some types of people they might refer (former co-workers and classmates, vendors and other external partners, etc.).
You make it too hard for employees to submit referrals. Your official method of submitting a referral is typically through your applicant tracking system. You require the employee to have the candidate’s resume, know all of their contact info, and identify the jobs that are the best fit for the referral. You require multiple steps and clicks and it isn’t mobile friendly. Employees can’t complete your process easily, so they don’t complete it at all.
The key to success is simplicity. It is not your employees’ job to recruit for the company, so don’t make them do too much work. Ask for the referral’s name and email address. If the employee has a specific open position in mind, ask them to provide it. If not, allow general referral submittals. And if you absolutely have to know how the employee knows the candidate, give them a drop-down list to select from. Don’t make them write an essay about the person. Check out your ATS configuration options. Most will automatically email the referral candidate and ask them to provide their resume and complete the apply process. Employees are connecting you with candidates you don’t currently know (or have been lost in your ATS for years), so make it easy for them to add the candidates to the pipeline.
You don’t respect the employee or the candidate. Once a referral is submitted, it often falls into a “black hole.” The candidate is never contacted and the employee can’t find out what is going on. The employee is frustrated and embarrassed and doesn’t ever refer another person.
Communication is key here. You don’t have to update the employee on every step of the process. At a minimum, acknowledge the referral and thank the employee. Let them know what types of updates they can expect and when to expect them. This can be a simply email correspondence that is automatically sent when a referral is submitted. If you ATS has the capability to provide a dashboard or notifications for the employee, turn it on. Providing this proactive communication saves everyone time as employees are often trying to track down someone in TA to find out the referral’s status.
Your program rules are designed to make it difficult. You exclude entire groups of employees from participating. You make employees wait to receive their referral bonus. You split the bonus into multiple payments. <Please pause a moment while I get out my soapbox for this one.>
When we work with clients to launch or update a referral program, we advocate for inclusion and timely rewards. If your list of employees excluded from receiving awards is longer than this:
1. Talent Acquisition Professionals
2. The hiring manager for the specific position
It is too long. Don’t exclude all of HR, especially those who don’t have anything to do with hiring. Encourage that benefits specialist or training administrator to refer people and reward them like everyone else. Don’t exclude leaders. Encourage them to bring forward people from their network as they likely have pretty robust networks of people with the skills you need. If you are worried about employees spending too much time “sourcing” candidates in order to get a bonus, then you either aren’t hiring the right people, aren’t paying them enough, don’t have enough work for them to do, or have some absurdly high referral bonus amount that will encourage them to drop their personal lives and look for candidates.
If you delay referral award payments until the candidate has been at the company for a certain period of time, stop. Just... stop. I encounter this existing policy at every client I work with. There is some strange inherit belief that if a referral candidate doesn’t stay for 6 months, 1 year, some other random interval, that it is somehow the referring employees fault for referring them in the first place. This is some of the most flawed reasoning I encounter. If a new hire leaves in the first 6 months / 1 year, what are the likely causes? Here are the most common reasons:
-Poorly defined job requirements
-Poor interview process that didn’t identify if the candidate was the best fit
-Poor hiring decisions
-Not enough onboarding or assimilation
-A bad supervisor
Notice that none of those reasons have anything to do with the employee who referred the candidate. If you hired someone from an Indeed sponsored job and they left within 6 months, do you go back to Indeed and say you want your money back? Of course not. Why would you treat your employees worse than a vendor?
Additionally, making people wait and/or splitting the payments across time really only creates extra administrative work for someone on the TA team. It moves the reward very far away from the actual behavior of referring the candidate, so you aren’t really reinforcing the behavior you want repeated. Depending on the size of your referral award, many employees won’t notice 50% of a $500 reward even showed up in their paycheck 6 months later.
*(Before everyone in call center, retail, and other high turnover environments starts typing comments about how this doesn’t work for them. Yes, you are right. You may need a different approach than everyone else. Drop me a note (firstname.lastname@example.org), I’d be happy to give you some ideas.)
You don’t recognize employees who refer a successful candidate. Yes, they may receive a cash bonus in their paycheck, but you don’t communicate their success throughout the organization.Thus, they don’t feel fully appreciated and other employees are unaware of the program and results.
Use this opportunity to celebrate referral hires and the employees who refer them, while also generating additional internal marketing buzz for the program (two wins in one).
Here are some of my favorite celebrations that we’ve helped clients create:
-Take a big Publishers Clearinghouse-like check and balloons to their office or staff meeting. Throw confetti, play music, dance around.
-Run an internal contest (department vs. department, location vs. location, ERG vs. ERG, etc.) and publish results on your intranet. Print the names of the employees and referred new hires. Give out a prize to the winning team (Taco Tuesday, ice cream social, a Stanley Cup-like trophy that moves from one winning team to the next). Get creative and have fun.
-Public recognition in a company-wide town hall by your CEO.
-Recognition of the referral hires during orientation. This brings attention to the program for new hires and encourages them to refer.
-Some highly-coveted company swag that can only be received via the referral program.
Creating referral program hype going like this keeps the program top-of-mind for employees and encourages more referrals.
In the end, the formula isn't terrifically hard, and the net result is significant. Stick to this idea, and have fun with it: your referral program will be more successful if you communicate often and well, make it simple to follow, reduce the policies and rules, and celebrate successes.
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