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4 Reasons to Implement an Employee Referral Program

4 Reasons to Implement an Employee Referral Program

There is no denying that many businesses are happy to pay exorbitant recruitment fees or go through lengthy internal recruitment processes without realising that one of the most cost-effective means of talent attraction is sitting right in front of them – their existing workforce.

Incentivising your current staff to find new staff is a widespread practice that has gained much credibility especially in the past few years. After all, if you have great talent on your team, it’s likely that they are connected with other great talent – either as personal friends, university alumni or via professional industry networking.

Every employee is a walking job advertisement. So if you’re not tapping into that potential, you’re missing out.

A well designed and operated Employee Referral Program can bring qualified candidates directly to your door.

So how does it work? Well, basically, you let your employees know that if they use their personal networks to find candidates who they think will fit with the company culture and have the skills and qualifications to do the job, then you will reward them in some way for their efforts.

This reward could be any number of different types; one company I know offers $10,000 after the new employee successfully passes their probation period. Another company offers a weekend holiday to an exotic island for the employee and a friend.

Employee Referral Programs should be designed to fit in with the culture (and of course the budget) of the organization, rewarding employees in a way that is personally motivating.

With the rise in social media use, most people have built up large networks of contacts which are just waiting to be tapped into. Facebook, Twitter and LinkedIn are all great sources of potential candidates who may be actively looking for a new job.

By having your employees ‘put the word out’ when a new position needs to be filled, or always keeping an eye out for potentially suitable talent, you are able to cast a wider net than any one recruiter could ever hope to match and, if your employees are educated on the qualities you are seeking, the referrals they bring to you have a good chance of being qualified leads.

There are a lot of good reasons for establishing an Employee Referral Program. Large organisations such as Google, Microsoft and Amazon have seen the benefits of ERPs for years and many companies in the USA are able to attract up to 50% of their candidates in this way.

Here are 4 of the top reasons why you should consider setting up a an employee referral program in your organisation:

1. Cost

Compared with traditional recruitment fees, the outlay for such a program is minimal. If you opt for financial incentives (and money is often the juiciest carrot), you are only looking at a few thousand dollars every now and then. If your incentives are non-financial, it’s even less than that.

In return, you have a small army of recruiters out there talking up your organisation and screening potential candidates on your behalf. Many of your employees network every day with people in similar roles to theirs at meetings, conferences and also in a social context. You have a multitude of eyes and ears already out there!

2. Brand

Having your employer brand talked about on social media is every company’s dream (providing it is positive, of course). So even if your employees fail to bring in any qualified leads, they are still spreading your employer brand in the meantime. And because they are out there, they are also in a better position to counter any negative views that may be circulating about your company.

If you make it even easier for them by having regularly updated company news stories and blogs on your website, Facebook and Twitter, they will have something topical to get the conversation started.

If your employees are committed to the program, they will be actively trying to sell your company as an employer of choice and because they are on the inside, speaking from experience, they are more likely to be taken seriously than any recruitment messages you produce yourself.

3. Quality

Studies in the US have shown that well run ERPs attract a higher level of quality candidates, due to the fact that employees pre-screen them for skills and ‘fit’ with the company culture long before they get to the interview process.

This translates into a greater number of referrals being hired than those traditionally recruited. Statistics also show that, once hired, a greater percentage of referrals are retained than normal hires, precisely because they are a better ‘fit’.

4. Morale

A good ERP can also lead to higher employee retention rates amongst your current staff. This is because, in order to gain successful referrals, they need to learn more about your company’s goals and achievements and why it is such a great place to work (this information should be provided as part of their referrer’s education).

The result is that they develop a greater sense of loyalty and team spirit and this, when combined with the more tangible incentives they receive for their referrals, translates into a greater desire to stay with the company.

There are lots of good reasons why a good ERP can benefit your organisation, but the key word here is ‘good’.

There are certain rules you need to follow to ensure everyone gets on board and stays there, including:

  • Providing feedback on all referrals, whether successful or not;
  • Publicly recognising those who provide successful referrals;
  • Promptly paying, if financial incentives are involved;
  • Providing education on how to improve referral rates;
  • Keeping the process simple, with not too many rules;
  • Encouraging participation rather than demanding quotas; and
  • Including everyone, in the ERP, regardless of position.

I remember seeing Sir Richard Branson interviewed once and he said, “Treat your people like your ambassadors. They will help propel your brand to excellence“.

It’s true. Your greatest marketers are your employees.

They know who would make a successful employee just as much as the leadership or recruiting team. Encourage social sharing. Encourage employee referrals. Leverage your people.

After all, their networks spread way past your company network. But just remember to say thank you to anyone that referred a successful candidate to your business. You know how hard it is to find that diamond in the rough. So if an existing team member helps you out, they deserve to be recognised.

Cofounder at RecruitLoop. I've been a hands on recruiter, manager, trainer, coach, mentor, and regular speaker for the recruitment industry for 20 years. Follow me @paul_slezak.