Your Employee Referral Program Guide: The Benefits, How-tos, Incentives & Tools
It’s hard to overstate the importance of recruiting.
Recruiting top talent isn’t just an important task within your company, in a way it’s what makes your company. After all, companies are little more than collections of talented people. All the hard problems your business needs to solve before it can scale – it takes a smart and capable person to solve it.
What if we told you the secret to a more effective recruitment strategy might be right in front of your nose?
It turns out, your current employees might be your best recruiting tool. It can be easy to forget, but your current employees are pretty awesome. And more often than not, awesome people know other awesome people. So it should come as no surprise that companies with the best employee referral programs have the best talent.
Tap into your employees’ talented networks with a strategic employee referral program. Here’s everything you need to know about employee referral programs, including benefits, how-tos, incentives, and tools.
The Benefits of Employee Referral Programs
Why should you start an employee referral program?
As we said above, current employees might just be the secret sauce of your recruitment strategy. Here are some stats on employee-referred workers to prove it!
- Are 10%-30% less likely to quit their jobs than traditionally sourced candidates
- Perform better on high-impact metrics than other candidates who share similar characteristics
- Take less time to hire
- Cost less to recruit when you factor in money saved on job postings, recruiter fees, and more
- Boost workplace engagement since they’re already close to existing employees
- Are about 15% more likely to accept a job offer than traditionally sourced candidates
- Onboard faster than traditionally sourced candidates because they will simply ask the person who referred them any and all questions they have
- Inspire the people who referred them to stick around
Referral Program How-Tos
How do you start an employee referral program?
Establish and record goals for your employee referral program.
Before you really get going on your program, you and your team should agree on exactly what you want to accomplish.
- Is it more important that you save money on recruitment or that you fill the newly created virtual reality team with qualified, committed candidates?
- Would you rather streamline the interviewing process or boost employee engagement?
There are many employee referral program benefits, but establishing key performance indicators will help you effectively manage and measure your program.
Allocate time, staff, and budget for the program.
Work with key stakeholders to figure out program specifics. Answer key operational questions, such as:
- Who will manage this program?
- Do we need to hire new staff/experts to make this program work?
- How much company time should we allocate to managing and growing the program?
- How much money do we have to spend on the program? (Are there other areas we can borrow from?)
Figure out how the program will actually work.
Now it’s time to figure out how employees will actually make referrals and how you’ll manage referrals as they come in.
Note: Below we’ve pulled together a list of tools that will make this step a breeze.
Most experts agree that a successful employee referral program depends on an easy referral process. Employees simply won’t refer their colleagues if there are too many hoops to jump through. You can accept referrals in lots of different ways.
- Take referrals through one of the helpful tools below.
- Create a simple online form for referring employees.
- Create an email template for referring employees.
- Accept referrals in the form of an emailed LinkedIn profile.
- Put a referral resume drop box in the Human Resources (HR) department.
- Plan a solicitation program that involves directly asking existing employees in the same age range and field of the target if they know any qualified candidates.
Take some time to map out the journey of a referred candidate from start to finish, especially if you have to integrate the process into an existing employee tracking system. This will help you find holes and speed bumps in your process
To seamlessly integrate employee referrals into your hiring process, you might want to add a few steps to your HR department’s existing candidate tracking process or timeline.
As you start your program, remember to be flexible about all your best-laid plans. You’ll need to see how it goes and make changes to optimize the program, and that’s okay!
Announce the program and provide detailed instructions or training materials.
Once you’re comfortable with all the details and processes involved in your new program, it’s time to spread the word to help it take off.
This step involves two simple, yet mission-critical, goals:
Make sure everyone knows about the referral program.
Work with your Communications or Marketing department to figure out a few techniques and channels you can use to announce the employee referral program idea in style. You’ll want to create an initial announcement and a plan for ongoing communications, especially communications that publicize your incentive structure (see tips below) and maybe even highlight successful referrals.
Collect metrics on any online communications so you can try to gauge interest.
Make sure everyone knows how to make referrals.
Create a video, web page, or downloadable PDF with instructions on making referrals. You can use any format you like, as long as employees can easily reference the collateral when they want to make a referral.
Establish an incentive structure for inspiring employee referrals.
We’ve created a whole separate section for this complicated step. See our referral program incentive ideas below.
Create a plan for communicating with referring employees.
In addition to communicating with candidates, you’ll also need to communicate with referring employees throughout the hiring process. The Society for Human Resource Management says this step is critical to getting as many referrals as possible. After employees put themselves out there by referring a candidate, they will want to hear how the process is going, whether the news is good or bad. Employees will stop making referrals if they believe their recommendations simply vanish into a void.
Track your referral program’s success.
Develop a reporting structure that measures the quantitative and qualitative success of your program.
- How many referred employees were hired?
- How many employees are making referrals?
- How many positions are you filling with referrals vs other tactics?
- Are the numbers in the previous questions increasing or decreasing over time?
Plan surveys or one-on-meetings to gauge the program’s success in ways metrics can’t measure.
- How do referring employees feel about the program?
- How do referred employees feel about the program?
- How do managers of referred employees feel about performance?
- What’s stopping some employees from making referrals?
- How does the company as a whole feel about the program?
Work in time to review your reports with key stakeholders and discuss potential program improvements.
Referral Program Incentives
How do you get people to participate in an employee referral program?
Offer financial bonuses.
To create this easy and effective incentive, work with your Finance and HR teams to figure out what might be realistic given your budget and the positions you want to fill.
Drift, a tech company for B2B sales, tested different referral strategies to find out what works. They tested a $10,000 referral bonus, a $30,000 referral bonus, a gift-based referral bonus, and so much more. They learned that trips make the best employee referral incentives because trips and experiences fit their culture.
Factor referrals into annual reviews.
Get leadership to factor employee referrals into annual reviews as a value-add item, not a core metric. Employees who make referrals show they have the company’s best interest in mind. They’re invested enough in outcomes to find the best talent for the job. Additionally, the ability to recognizing when someone will be a good fit demonstrates leadership skills that should be rewarded.
Offer high profile networking opportunities.
Inspire more referrals by offering the benefits of some rare, high-profile networking. Maybe after a referred employee sticks around for 6 months, you can invite the referring employee to a one-on-one event with the CEO.
Grant a wish.
Most employees want something, and it’s often not what you would assume. Reward employees for their contributions to the company with an open-ended negotiation session. Referring employees can bring a few requests to the table, and designated negotiators (such as the HR department) can work with them to reach an agreement. Sometimes, employees want simple things like work-outside afternoons or a later start time.
Provide vacation days.
A vacation-based incentive might even inspire more referrals than plain old cash bonuses; free time is absolutely priceless.
Make a lottery.
Instead of giving everyone who refers a new employee a reward, try creating a lottery. Everyone who makes a referral will be entered to win a big prize during a quarterly drawing or wheel spin.
This is a great way to motivate employees while staying within a budget. This is especially wise if you aren’t sure how well a referral program will be received. If you offer a prize and can’t afford to give everyone the promised incentive, the program could wither on the vine.
If your budget is super tight, you could think of a non-cash prize, like a dinner with the head of recruiting.
Offer a prize for the person or department who produces the most referrals. You might be surprised by the power of a little healthy competition.
Send them to an event.
Sometimes, you need to offer a concrete reward to get results. Everyone loves cash, but it might be hard for them to picture what they’ll actually do with it. Consider getting tickets to a concert, sporting event, or swanky party to get those referrals flooding in.
Let them choose a charity.
If your company does a day of volunteering, then the ability to choose who you volunteer for could be a compelling incentive to make referrals.
Recognize referring employees.
Keep it simple and develop a low-cost way to recognize employees who make referrals.
Here are some ideas:
- Give them a profile in the newsletter
- Give them a plaque in the conference room
- Post about them on your company’s social media pages
- Announce them at the town hall
Let them set a rule for a day.
Everyone has to talk like a pirate on Friday the 13th. Clearly unenforceable, this incentive is just for fun, but fun is priceless.
Let them shadow a person of interest.
Maybe the referring employee has always wondered what an Art Director does. Offer a one-day shadowing program as an incentive for referrals. Obviously, you’ll need to put a structure in place to make sure everyone involved is okay with the arrangement.
Help them develop new skills.
Put together a list of educational or talent development offerings for employees to choose from.
Referral Program Tools
What tools help manage an employee referral program?
Your company’s current Applicant Tracking Software (ATS).
Make it easy to integrate the referral program into your company’s existing recruiting strategy. Schedule a meeting with your HR team to come up with a way to handle referrals within the Applicant Tracking Software (ATS) they already use.
Boon leverages semantic matching algorithms to identify relevant candidates in the collective network of all your employees. They include machine learning to improve matches over time, and they also offer mobile referring capabilities to maximize referrals. Their platform keeps all interested parties in the recruitment loop.
Rolepoint software streamlines the employee referral process. It tracks your incentives and provides analytics and insight into how your referral program is performing. That means you can spend less time data mining and more time hiring.
Employees can dive right into this friendly platform to see what jobs are open and easily submit referrals. There are even one-touch buttons employees can use to automatically crawl their LinkedIn profiles, Facebook accounts, Twitter feeds, and email accounts to find potential job matches. It also helps recruiters manage the referrals with organization, sorting, and communications tools.
Jobshakers enables employees to make quality referrals using their smartphones. The intuitive mobile application lets user cross-reference a job posting with their contact list. It gives them tools they need to sort, match, and refer people to a position.
The ZAO system makes referrals easy from start to finish. You can post and easily distribute an open position and add an associated reward for a referral. When applications start streaming in, you can easily look in the system to see who referred the candidates.
Jobvite provides a centralized, easy-to-use platform for all your recruiting needs, including adding an employee referral strategy to recruitment activities. The tool makes it easy for everyone in the recruitment process. Jobvite’s Engage feature is perfect for building a campaign around referred candidates. The tool even integrates with a variety of social media sites, candidate engagement platforms, and more.
Smashfly is all about helping companies “connect with people who fit.” They don’t just mean that a given candidate has the precise matrix of qualifications you’re looking for, but they also mean helping companies find people who believe in the brand vision and goals, people who will be truly invested in success. To achieve this, their platform incorporates a mix of data and relationships to give recruiters valuable insight.
Firmplay offers social recruiting solutions that tap into employees’ social networks to drive awareness and hires. The integrations make it easy and effective by taking advantage of tools employees and candidates already use regularly—their social networking sites. It also automates the process to ensure adoption. The tool pulls in content the company posts on social media and feeds it to employees to share on their networks. It’s about putting what you already do to even better use.
Repify lets you find candidates in existing networks using custom filters. Search by industry, company size, seniority level, role, and more. It even has a functionality that encourages candidates to seek referrals, making sure you get connected with people who really want the job.
Have you implemented an employee referral program recently? We’d love to hear words of wisdom from your experience! Share your tips with us below so we can all hire better.