HOW TO CREATE A SUSTAINABLE REFERRAL PROGRAM
We believe there is no better time than now with today’s tough labor market to re-energize your employee referral program. Why not set out with a new goal of creating a truly evergreen style program that will focus on creating a sustainable funnel of referrals that can pay dividends for years to come.
Ask yourself this, what is the value of creating a program that can produce a pipeline of new employee recruits and referrals? According to an Indeed survey, 74% of employers said candidates sourced from employee referrals were extremely qualified for the role.* In addition, according to a study by SHRM the average cost-per-hire is $4,129. An employee referral program cuts this cost significantly, even after considering the cost of designing and implementing the program.
The key to making any program self-sustaining is to build a solid foundation.
Here are some of our recommendations to jumpstart your program again or create it for the first time.
Rotate leadership - give one of your top-performing leaders the ball and let them run with it. Rotating the leadership can create some fun and allows for some of those competitive juices to flow.
Allow for Creativity - Provide wide latitude and allow your leaders to get creative. Tell them they have responsibility for program consistency, tracking, and using positive reinforcement as they market and promote the program. This includes sharing results and success stories across the company internally and also externally on social media.
Provide Smart Incentives - To help boost employee support in referring all-star talent, you should ideally put into place some monetary rewards coupled with recognition. Make sure these incentives are paid in a predictable, timely manner. Consider a quick payment upfront on the date of hire with the balance say six months later. To facilitate this, set up or use an automated payment system.
Reach out to Legacy company contributors and alumni - Keeping track of who retired recently or key employees that left the company on great terms is another channel you can tap into to create and build referrals. In my past positions in retail, I used the list of alumni to get returning talent back for big sale events and for obtaining referrals when an opening exists. Don’t forget to include these valuable contacts in your outreach.
One of the plus benefits of getting your leadership team and top performers involved includes the value of reinforcing your message. You are telling them how vital their role is within the organization. Think about the competition and esprit de corps you can build within your team if you can create a great Employee or People Referral program.
Here are some other ideas: You can run naming contests, conduct referral contests quarterly, semiannually, and also have an annual winner.
I believe it is really hard to quantify the true value of a well-run referral program and what it can bring. What if you can reduce your time to fill down to 10 days from 30 days, what if you get 2-3 referrals a year and one goes on to become a top 5% sales performer? I believe there is an intrinsic value with this type of program and it is very hard to quantify. Sometimes you just have to believe the data and follow your gut instincts.
To back this, in 2019 we highlighted research done by the Human Capital Institute and published by SHRM the Society for Human Resource Management. Here is a summary that offers more advice and guidance on how to set up a winning program: 6 Tips for Effective Employee Referral Programs
Jenna Filipkowski, Ph.D., director of research at Human Capital Institute (HCI) in Cincinnati, shared six guidelines for crafting effective employee referral programs:
1. USE YOUR EMPLOYEES TO PROMOTE THE COMPANY BRAND.
Lululemon, an athletic apparel company headquartered in Vancouver, Canada, treats every employee as a brand ambassador and provides all employees with the information and tools they need to fill that role.
2. 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.
According to HCI research, of the companies it surveyed:
78 percent provide the same reward for a referral whether the open position is executive level or entry level.
60 percent allow all company employees to participate in the referral program.
58 percent give preference to candidates who are referred by current employees.
55 percent accept referrals from nonemployees, such as customers or clients.
3. OFFER INCENTIVES THAT MOTIVATE.
HCI research indicates that 74 percent of employers offer referral incentives. Of those, 92 percent offer cash, with a median award of $1,000. Awards of $500 are the most common.
4. MARKET THE PROGRAM.
With the continued uptick in companies leveraging marketing across digital platforms your referral program is ideal for social media. I believe you should use the referral program to recruit across all of your platforms giving it added weight and importance and reaching across your organization. In fact, in the article Filipkowski recommended treating the employee referral program like an ongoing marketing campaign. Investing in marketing and communication plans for the program can increase the likelihood that employees will participate.
5. HOLD LEADERS AND HR ACCOUNTABLE.
One common complaint about referral programs is that HR sometimes fails to communicate with the referring employee and the candidate about the job status. To avoid frustration, share information with both parties, and keep them updated about the hiring process. Consider responding to every candidate referral within a set time, such as 10 days.
6. PROVIDE FEEDBACK ON OUTCOMES.
"Measure that [the referral program] is working or not working, and make adjustments as needed," Filipkowski said. Common metrics to capture include:
The number of employees hired through referrals, compared to other methods.
The number of qualified candidates obtained through referrals, compared to other sources.
The rate of employee participation.
The retention of referred hires compared to other sources.
The performance of referred hires compared to other sources.
So, there you have it, some ideas, and resources to help you reach the goal of what I stated earlier in the article about crafting an Evergreen-like referral program. By definition, this means it will continue to grow over time plus with a little bit of attention by senior leadership, it will perennially provide you with new sources of recruits and or prospects! It can become nearly self-sustaining.
Feel free to share with me your thoughts and ideas on your own program and let me know what works for you.
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Bill O’Malley is President of Connector Team Recruiting a firm headquartered in Charlottesville, Virginia specializing in the Furniture | Appliance and Sleep verticals. Connector Team is an affiliate office of MRINETWORK, Philadelphia, PA. Connector Team is a full service Search Firm offering permanent placement recruiting and interim staffing solutions.
Feel free to contact Bill at bill@connectorteamrecruiting.com.