Employee Referral Programs: Are they Worth it?
Updated: May 25
Have you ever spent hours sifting through tens if not hundreds of applications for high-turnover positions, only to come up with a few satisfactory applicants?
Are you uncertain as to how to design and implement an effective digital hiring campaign?
If you’re stuck on hiring, fortunately, there’s a simple answer which could work like magic...but only if you do it right: employee referral programs.
What are employee referral programs?
Employee referral programs essentially amount to internal recruiting, and they can take many different formats, but usually include some sort of incentive for successful referrals.
The key is to develop a program that actually works for your business, your recruiting goals and most importantly the employees who are doing the legwork.
What are the benefits and drawbacks of implementing employee referral programs?
According to CareerBuilder, over 80% of employers feel that employee referrals are superior when it comes to ROI, which might make you think twice the next time you go to post on a generalized job board or stick an old-school “we’re hiring” sign in the window.
Some of the reasons that using an employee referral program can benefit your ROI include:
Faster hiring time
A lower overall cost per hire
Better “fit” hires
A lower turnover rate
Higher offer acceptance rate
There are a few disadvantages to consider as well, including that there may be a longer implementation or setup time than simply posting a reused ad on Indeed. In addition, if you are not organized and clear about your program, it may just not be effective.
But putting a little more professional effort into the process at the front end is very likely to reduce your overall costs.
Does your company have an effective Employee Referral Program?
Employee referrals are a great way to improve your time, cost and quality of hire. If your company still doesn’t have an effective employee referral program, you’re way behind
How to Build an Employee Referral Program
I helped build a successful employee referral program at a regional airline. We had a constant need for Customer Service Agents (the individuals who check in luggage and load the planes). There had been a program for years but we were told that it was ineffective.
Within a few tweaks, it became our #1 recruiting source!
So where can you start when it comes to getting your employees to actively engage in recruitment? Here are a few things to consider.
1. The Reward Must Be Significant
Many things will factor in what the right reward is for your organization — it depends on a number of factors, including the type of role, location, and number of people you are hiring. It has to be significant enough to get employees to take that extra step to share with their network.
With the airline example above, for instance, we offered $500 to our customer service agents, but rewards may go up to 5K for hard-to-fill executive roles.
2. Give Your Employees the Right Tools to Recruit
Even if your employees truly love their jobs, you can’t assume that they will be effective salespeople! That’s why you need to give them the tools to find leads.
We had professionally designed business cards that we gave to our employees that had all the critical information — minimum requirements, how to apply, and the perks of being an employee.
We tried to make it as easy as possible to hand them out at grocery stores (if they had exceptional service) or to friends and family. Again, this would need to be tailored to your group — perhaps a well-crafted social media post or meme would also do the trick!
3. Be Proactive about Tracking and Payouts
In the airline program, they paid their incentives out after the new employee was hired and stayed for three months, so this required some tracking and follow-up — except that no one was tracking the referrals and proactively paying out rewards!
If your program gets the reputation that it doesn't follow through with its promises, you're toast!
These days, it’s easier than ever for people to tap into their networks, which are often full of people similar to them, so it can never hurt to simply ask your staff to reach out on your behalf. But truth be told they are much more likely to dig deep into their networks if they have the right tools and a lucrative incentive.
Setting up this type of system can take up time, energy, and creativity...that’s where I come in! If you need help creating a referral program that actually works, drop me a line and I’ll be happy to help you get the ball rolling in the right direction!