How to Build an Employee Referral Program
Posted on December 26, 2017
48% of businesses say their high-quality hires come from employee referrals.
HR and business leaders have told us that one of their biggest challenges is finding top talent. One solution that organizations often overlook is finding talent in your own backyard.
According to SHRM, employee referrals continue to be employers’ top source of hires, delivering more than 30% of all hires overall in 2016. Employee referral programs can reduce the time it takes to fill open positions and also yield higher quality candidates who stay longer.
Over the past decade, 28% to 30% of new hires in organizations have come from employee referrals, according to staffing strategy firm, CareerXRoads. That’s because your current employees know how to identify who will do well and who will fit in at your organization. Referrals also have higher engagement and retention rates, and referral programs yield added diversity in your candidates and hires.
Four steps for creating a successful employee referral program
1. Set your program goals
Think about what referrals mean to your current and your future employees. Empowering your employees to help hire good talent can be a very good way to engage them and make them more motivated and productive. Make sure to communicate the most important parts of your organizational culture to existing employees and ensure that they understand exactly the types of candidates you’re looking for.
2. Design a structured user-friendly process and participation rules
If you’re already using recruiting tools and software such as an Applicant Tracking System (ATS), employee referral programs can be incredibly simple. If you’re not using an ATS, a more informal process will work, too.
Ensure that the program is easily understood and regularly communicated to employees. Use internal communications tools to ask for and celebrate referrals to generate constant buzz.
Each referral should get a call within a certain timeframe, and your employees should be notified that they’ve been placed in the pipeline. A service-level policy agreement will keep your employees engaged and motivated to refer. Conversely, if a candidate doesn't fit, let your employees know why and educate them on what they can do differently to help in the future.
3. Make sure your referral bonus structure is well-organized
A solid referral program doesn’t have to break the bank. While cold, hard cash is typically the best motivator, there are other ways to provide incentives. If you go the money route, you could try a program like this: - A $25 gift card for a contact name - $300 when the candidate starts - $700 after the new employee has been with company for 90 days
Another tactic to try: People enjoy seeing their progress and they like to compare their results with others. Adding an element of gamification, such as a leaderboard, will encourage participation in your employee referral program. Other referral bonus strategies to consider include:
- A day off with pay for hourly employees
- A program where employees can exchange points for a prize
- Enter all referrers names into a hat for a quarterly drawing for a larger prize
- Public recognition in a company newsletter or staff meeting (You should always recognize employees, anyway.)
4. Measure, measure, measure
Measuring the success of your program is the first step toward improvement. It’s important to measure your employee referral program to figure out which parts work well and which don’t.
The primary measurement is your employee participation rate. If it’s on the low side, this means one of two things: Your employees don’t consider the bonuses worth it (either the money’s too little or the prizes aren’t effective); or your employees don’t think your company is a great place to work, which means you have an entirely different set of problems to consider.
Additional measurements you should be tracking include:
- Comparing the number of employees you hire as a result of your referral program versus other recruiting methods such as job boards and job fairs
- Your employee participation rate in the program
- The retention rate of referred new hires versus employees hired through other recruiting methods
Following these tips will help you successfully kick off a new employee referral initiative and start you down the path of hiring high-quality candidates at a lower cost.
Looking for more inspiration and best practices to optimize and build recruiting excellence? Visit our HR Center of Excellence Recruiting Hub.
 Global Recruiting Trends 2017; LinkedIn Talent Solutions