Your Next Hire Should Be a Referral

One of the greatest challenges being faced by business leaders today is how to attract the best talent for open jobs.  If you are doing a great job of engaging and retaining your current employees, over 40% of your new hires should be referrals from your current employees. If that is not your reality, it may be time to upgrade or totally revamp your internal Employee Referral Program.

referralsAs a leader, you must hire the best talent to achieve goals and objectives. You can customize your internal Employee Referral Program around the information you are receiving during stay interviews, which reveal the reasons that your employees enjoy working for you and your company.

Most of the people who work for you know other people who could become great employees. The difficult question is how do you encourage them to share the names of these contacts and friends?

Unfortunately, more internal Employee Referral Programs fail than succeed. To help differentiate programs that succeed from those that don’t, I want to share a case study about Carson who had worked as an HR Professional for most of his career. Carson knew the people he attracted, hired, and retained and helped his company hit or surpass goals and objectives. It was getting more difficult in this candidate-driven market for his recruiting team to attract top talent to fill many key positions.

He decided to establish an Employee Referral Program. He knew there would be an established level of trust with a person who was referred. He also understood that the onboarding process and employee engagement process would be easier because the new hire personally knew another employee.

Carson spent six months creating an Employee Referral Program with the support of the Leadership Team. The company announced the new Employee Referral Program through the company’s intranet and company bulletins to encourage participation.

For lower level positions the referral fee was $1,000, for middle management positions $1,500 and upper level positions $2,000. All paid out after six months of employment. An annual bonus of $2,500 would be paid to the person with the highest number of referrals.

Six months after launching the Employee Referral Program, Carson realized it was not working. The number of employee referrals had not increased, and the Human Resource Department was still struggling to keep up with the demand for top talent. He decided to survey the employees to see why the program was not working.

He was shocked to discover that most of the employees didn’t know about the Employee Referral Program. Most of the employees who were aware of the program were confused by the amount of referral fees paid for specific positions. Most of the employees didn’t know who to refer so they didn’t refer anyone. There was also confusion about how to qualify for the annual bonus. Was the award based on the number of hires or the referral fees themselves to win the 2,500? Several employees complained that they were not sure who to contact to submit resumes or CVs on their referral.

After the failure of the Employee Referral Program, Carson studied successful programs offered by other companies. He surveyed employees to see what would motivate them to provide referrals, changed the referral fee structure and provided training to the employees to teach them how to ask for referrals. He also published a list monthly to inform employees of jobs that were hard to fill, so they knew where to put their efforts. He then put one person in charge of the program who came up with a theme “Got Friends” and monitored the program.

In addition to the referral fees, the referring employee was featured in the company newsletter, received a plaque, thank you notes, and had lunch with the executives of the company. The individual referring the most hires received a cash bonus, had lunch with the CEO, and was given an executive parking place for one year. These changes resulted in a dramatic increase of employee referrals that were hired and retained and much higher level of participation in the program.

Employee Referral Programs that were the most successful included the following:

It’s Not Only About the Money

The amount of money paid isn’t the only contributing factor to the success of a referral program. Employees must clearly understand what’s in it for them to participate.

Program is Managed By One Specific Person

The referral program should be delegated to and managed by one specific person. This person should survey employees to see what would motivate them to provide referrals of future employees.

Easy to Remember “Theme”

The program should have a theme that is easy and memorable similar to “Got Friends?” Southwest airlines provided employees with a referral card that resembled a boarding pass.  They promoted others to board Southwest as a new employee.

Set Clear Guidelines and Expectations

Make sure employees understand the referral program’s guidelines and expectations, including who is eligible to participate in the program and receive rewards for referrals.

  1. Program was assigned to one person
  2. Training was provided to employees
  3. Metrics were tracked, and revisions were implemented
  4. Strong level of recognition 

Give Employees What They Need to Refer

Using employees to promote your company brand can be helpful especially when you have a referral-worthy culture.  If your employees are engaged and happy, more than likely they know others who could also become engaged and retained.

Employees must be trained and informed to know how to ask for referrals and what type of employees need to be hired.

Offer Incentives that Motivate

A study by World at Work found that 63% of companies offered some sort of referral bonus program. More importantly, 92% of those without an Employee Referral Program were looking at implementing one 2022. That’s a little more than 96% of all companies that either have a program or want one.

Most companies offer cash, with a median award of $1,000. Awards of $500 are the most common. In the current candidate-drive market some companies have dramatically increased referral fees especially for hard-to-find talent.

Establish Timing

Consider the timing of the reward as well. Most employers hinge payment on a referred hire’s staying employed with the company for a set period of time. Only 27% of employers offer a full reward immediately upon a referral’s hire. 

Promote the Program

Your Employee Referral Program should be an ongoing marketing campaign. Investing in marketing and communication plans for the program can increase the likelihood that employees will participate. Swag can also add to the enthusiasm level for your referral program. 

Hold Leaders and HR Accountable

One of the greatest complaints about internal employee referral programs is the lack of communication. The referring employee and the candidate should be kept informed about the status of the open job on pre-determine follow up dates.

Company leadership should be involved in the design of the program, should participate, and acknowledge the efforts of employees.

Study Results and Provide Feedback

Each quarter the person in charge of your internal Employee Referral Program should review what is working and what is not so adjustments can be implemented. Common metrics to review could include the following:

  • The number of employees hired through referrals, compared to other methods.
  • The rate of employee participation.
  • The retention of referred hires, compared to other sources.
  • The performance of referred hires, compared to other sources.

A strong Employee Referral Program greatly enhances other talent acquisition efforts, and it is worth your time to participate and promote.



Barbara Bruno

Barbara Bruno

Barbara Bruno, author of HIGH-TECH HIGH-TOUCH RECRUITING: How To Attract And Retain The Best Talent By Improving The Candidate Experience, is an internationally recognized recruiting expert who has a proven track record of helping recruiters and talent acquisition professionals become more successful and less stressed. She has created several popular LinkedIn Learning courses and is president of Good As Gold Training, HR Search, Inc., and Happy Candidates.

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