Posted on August 4, 2014

Why and How to Create an Employee-Referral Program

One of the most efficient ways to recruit new hires is to build a strong internal referral program that incentivizes your current employees for recommending promising candidates.

In a recent webinar, Paycor HR experts Karen Crone and Todd Rimer described the benefits of a robust referral program and the best practices for creating one at your organization.

Why referrals?

Employee-referral programs can reduce your time to fill open positions and also yield higher-quality candidates who need less ramp-up time once they’ve started with your organization.

Candidates generated from referral programs are five times more likely to be hired. 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 retention rates, and referral programs yield added diversity in your candidates and hires.

Because you’re meeting with top-notch candidates already vetted by someone who knows your business, you spend less time interviewing and can hire more quickly, with greater confidence that you have a culture fit.

Once a referred new hire starts, he or she tends to require less time to productivity. Referred hires often need less onboarding and training time, and the employee who did the referring generally steps in as a mentor and coach.

A referral program is also a great indicator of morale. If your employees aren’t happy, they won’t refer their friends! So your referral rate closely mirrors your employee satisfaction rates.

Added benefits

Referral programs also bring along some “softer” results that benefit your organization overall.

When employees are networking on your organization’s behalf, their messaging is more authentic than any online sales pitch or careers page. Their information is also probably more detailed and current than what a prospective hire will find from a Google search.

Your employee base also provides you with a broader sourcing network and organically spreads the word about your brand. That’s terrific, free PR!

If your employees know their top competitors in the field, those rivals might become your best hires someday. They know your industry and can walk in and get going right away, giving you an immediate competitive advantage.

Lastly, involving employees in a referral program allows them to develop a greater appreciation for the recruiting and hiring process. You make your associates true stakeholders with ownership of how the organization grows and develops.

Tips for your referral program

* Your recruiter will drive the referral program, initiating conversations with prospects, tracking results and taking candidates through the process. Each referral should get a call within a certain timeframe; at Paycor, it’s within 24-48 hours. A service-level agreement will keep your employees engaged and motivated to refer. If the candidate doesn't fit the need, let your employee know politely and educate him on what he can do differently to help in the future.

* Use internal communications tools to ask for and celebrate referrals to generate constant buzz. At Paycor, we offer a financial bonus for referrals after the new hire completes 90 days on the job. Reminding associates of that bonus is a great motivator!

* Conduct 1:1 meetings with managers in each line of business. They have broad networks and tend to meet potential candidates at trade shows or conferences. Also talk to recent hires and learn about their connections. Many would be thrilled to have former colleagues join them!

* Track your referrals to see who referred whom, what worked and what didn’t. You then can tweak your program after analyzing that data.

A referral program is an integral piece of any effective hiring and retention strategy. To learn more, download Karen and Todd’s complete webinar, 6 Tips for Recruiting and Retention.

And take a look at Paycor’s Applicant Tracking solution, which makes hiring more efficient and effective no matter where you source your candidates.