Don’t have an employee referral program? Here’s why you should!

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Employee Referral Program guide

Many HR professionals keep saying that Employee Referral Programs are your best bet for improving the most important hiring metrics such as time to hire, cost per hire, employee retention and turnover rate and quality of hire. Do you have a structured employee referral program?

What exactly are employee referral programs?

Research has proved many times that referrals make the best employees in many ways: they take shortest to hire, they require least money and they stay longest with companies.

Unlike sourcing, employee referral programs are internal methods used for finding and hiring high-quality job applicants.

How can companies benefit from having Employee Referral Programs?

Many of you already know that finding talent is one the the biggest, if not the biggest, recruiting challenges . Trying to solve that problem, many modern recruiters have started involving their existing employees in the process of recruiting and hiring.

Soon after trying this method out, employee referral programs have become one of the favorite and most productive methods for finding talent.

Trends of data-driven recruiting have resulted in the need for optimizing the most important hiring metrics. Since employee referral programs are known to reduce time and cost to hire and improve retention and quality of hire, many recruiters have turn to referrals looking to improve their hiring productivity.

How can Employee Referrals improve quality of hire?

In companies with structured employee referral programs, existing employees are involved in recruiting processes by suggesting candidates from their networks.

Because your existing employees know best who your ideal candidate, or candidate persona, is they are the ones with the biggest potential to recommend candidates who make the best cultural fit for your company.

How can Employee Referrals reduce turnover rates and improve employee retention?

Employee retention is highly related to quality of hire. The better the quality of hire, the better employee retention.

If you hire someone who is not a good fit, they will leave sooner. Candidates that come from other sources such as job boards, don’t know about you as an employee as much as candidates who talk to your current employees.

In addition, there is a lot of interesting research that proves that employees who have successfully referred a candidate for an open position, stay longer with the company than employees that haven’t.

How can Employee Referrals reduce time and cost to hire?

Time to hire and cost per hire are highly related HR metrics. Hiring referrals is much easier because recruiters not only get candidates’ contact information, but also go through he whole selection and on boarding process, making it much shorter.

Faster selection process also improves a new very important HR metric- Candidate Experience.

Shorter time to hire also reduces cost per hire. Labor expenses get lower and much less human hours are needed to fill a position. Less time spent on selection and on-boarding, usually means more time devoted to strengthening relationships with candidates forming high-quality talent pools.

How can Employee Referrals strengthen Employer Brand?

According to research done by LinkedIn more than 75% of candidates read about your company’s brand and reputation before they hit “apply”.

When you engage your employees and ask them to refer, they talk to the candidates first. Trust me, these are mostly nice words about you as an employer and your Employee Value Proposition.

Job seekers trust employees’ words much more than brands’ or CEOs’ words. This is why your employees are your best advocates.

Steps for creating a successful Employee Referral program

Step 1. Understand your own goals

Think about what referrals mean to your current and your future employees. Empowering your employees can be a very good way for engaging them and making them more motivated and productive.

Most companies who use referrals use them because they have proven to be the best fit for their companies. In this case, make sure to communicate the most important parts of your organizational culture to your existing employees. Make sure that they understand who exactly are you looking for.

Step 2. Write a clear job description

Even though your employees may know the requirements for the open position, it is important that you make sure that they do. Same as you write clear and precise job descriptions for job boards, you should also share them with your employees.The better they know the requirements, the better chances for finding the perfect fit.

Step 3. Make the process organized and streamlined

For companies who use recruiting tools such as Applicant Tracking System, employee referral programs are effortless and incredibly simple. This is important because the harder it is for employee to refer someone, the lower response rate will be.

To save your time, you can use our HR resources page to get referral email templates such as:

Step 4: Make sure to have a well-organized Employee Referral Bonus program

When we talk to HR professionals about employee referral bonus programs, they often think of something very expensive. However, there are many other ways, different than money, that you can incentivise good referrals with.

Also, rewards for a successful referral can not be the same as for providing a contact to a potential candidates.

You can do something like this:

  • Give a $10 gift card for a name or contact.
  • Give $200 when they start.
  • Give $700 after they have been with company for at least 3 months.

Here is the list of some most popular Employee Referral reward ideas.

Step 5: Give feedback and communicate with referees

Many employers ignore this step. However, I consider it as a base for a successful long-term Employee Referral program.

A research done by LinkedIn showed that 8 out of 10 employees who referred a candidate expected a feedback if their candidate got hired. It is very possible that, if you ignore this step, employees get less engaged or stop referring completely.

Step 6: Measure your program

Measuring is first step towards improving! That being said, it is important to measure your employee referral program to understand what works well and what doesn’t. There are many HR metrics that are great indicators of your productivity and efficiency.

It is beneficial to measure the participation rate. If your rate is low, this means that you are not incentivizing enough or with the right types of bonuses. Remember, for some employees recognition means more than money.

Filed under: HR

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