Quick Tips on Building an Employee Referral Program

February 25, 2014 at 10:00 PM by Kathleen de Lara

Good news: You already have your most valuable recruiting tool. Or actually, “tools,” for that matter.

We’ve said it before. In case you need a refresher: Your employees are not only great because they’re the vessel to your organization’s goals, but because these team members most likely have an impressive network that can be harmoniously merged with yours.

Cue the employee referral program, of course.

About 80% of employers said that employee referrals generated the best return on investment than hires made through any other source. An employee referral program is a system that helps companies find qualified candidates through recommendations from current employees, making the hiring process convenient and cost-effective. (Don’t you like saving time and money?)

Applying an ERP improves the quality of candidates coming into the hiring process. It also helps decrease time-to-hire and turnover rates by funneling a higher number of qualified candidates into your talent pipeline, keeping the darn thing brimming with potential hires — a nice problem to have.

Build out an ERP that’s straightforward and easy to understand.

Keep it simple, silly. If your ERP comes off too complex, employees will ignore it and won’t participate. Do the rules and procedures make sense? Is there any language that’s hard to interpret? Do employees have access to an online network that allows them to submit referrals? Make it clear which positions are most important by creating different tiers correlating the demand and importance of the position with the level of compensation. Typically, incentives are usually lower for roles that aren’t immediately needed.

For example, a company may be prioritizing the hire of more engineers. All other positions are necessary, but not crucial at the moment. The ERP is divided into two referral buckets: the engineer bucket that’s worth $5,000 per hire, and the “everything else” bucket that’s worth $2,500 per hire.

Communicate the program and incentives.

Introduce the ERP by hosting a meeting, sending out an email campaign, or creating a recorded webinar employees can view later. In addition, have a channel on the internal network where details on the ERP rules, procedures, incentives, and organizer contact information can be accessed. This can be in the form of a slide deck, PDF file, or a separate web page. An ERP motivates your team to help you find the talent your company needs. Make sure they have the tools needed to know what they’re doing, how to do it, and the fact that the ERP exists.

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Implement a tracking system to organize referrals and progress.

Once your team realizes that their network can help them earn a nice bonus, things are bound to get a little messy. Using email and a spreadsheet or two to keep track of referral submissions can eventually muddle candidates into one giant blob of unsortable information. Consider using a third party platform to manage details like submission dates, résumés, candidate contact information, and hire dates. Larger companies may find good use in programs like YesGraph, RolePoint, Work4, or SuccessFactors. Smaller organizations can look to Greenhouse or their own internal applicant tracking system. Use a dashboard to keep an eye on your employees’ referrals, and don’t forget to acknowledge receiving them. That’s just good manners.

Evaluate the results.

Track your company’s hiring successes and ROI from diverting to an employee referral program. How has your cost per hire changed or improved, and how does it compare to hiring through other sources? Has your time-to-fill decreased? Does the program help with improving company culture? Measure how long the referred employee stays with the company and if the turnover rate has decreased across the board because of the ERP.

Remember to keep the referrer in the loop of the hiring process, whether or not the candidate ends up being hired. This helps employees feel like they’re part of the process, keeping them motivated and engaged to continue referring quality talent. Regardless of how talent is sourced, all candidates should go through the same hiring process. Giving referrals the white glove treatment is a big don’t, as it can create internal biases, spoil your company’s values, and create unnecessary office politics.

Overall, be sure to convey the heart of the matter — an ERP is a win-win situation: Team members help the company find great candidate, and if a referral is hired, the employee who referred the new hire will receive appropriate compensation, including a talented, likeable coworker.