Employee Referrals – An Obvious Solution

Employee Referrals – An Obvious Solution

by Caleb Larkin

Employee referral applicants often produce the most qualified, long term employees. Yet referred applicants tend to be few and far between. Referrals are undoubtedly the most valuable source when it comes to the numbers.

According to applicant tracking system researcher, Software Advice, 40 percent of new hires come from current employee referrals, yet referrals make up only 7 percent of the total number of applicants. That means for every 5 employee referrals you hire 2 of them. That is a huge difference from applicants who find out about a position through a job board where you hire only one or less out of every 100 applicants.

40% of new hires come from current employee referrals.Yet referrals make up only 7% of total applicants.

Referred applicants tend to also stay for a longer time period than other applicants. Your current employees will refer people who they will enjoy working with, boosting morale in the office and increasing productivity. Ideal employees, with good work ethic, punctuality traits, and proven reliability associate with others with similar characteristics. So the best way to improve your company’s reputation and work environment is to seek referrals from your ideal employees.

How to take advantage of Employee Referrals?

Now that we’ve established employee referrals are the most time effective use of your recruiting efforts and will also reduce the headache of turnover, the question becomes: How can you take advantage of them?

Software Advice found that most employees don’t refer someone to a job is because they do not know anyone who would fit the position.

There are two important ways to address this issue. First, emphasize the value of qualities and characteristics in addition to experience for the position. Employees associate with people who have similar ethics, values, and characteristics, but not necessarily the same qualifications. If employees see the position values hardworking, ethical, reliable people, they are more likely to refer others with those qualities.

Second, and likely more important, allow social media referrals. Encourage your employees to advertise your positions on their social media pages. The results are similar, your employees are connected with others who possess a similar work ethic and will have a high hire rate and low turnover rate. Yet social media gives the opportunity to advertise without having a specific individual to invite. Tracking on social media postings on the ATS side, who is posting and producing which candidates, becomes vital for integrating social media.

What’s the Cost?

No matter how easy you make it for employees to advertise for you and refer others to your open positions, without incentive employees won’t get involved. Money motivates people.

Without incentive employees won’t get involved. Money motivates people.

So the ideal situation for any recruiter would be to have one applicant for each job that is the perfect candidate to hire. Yet most recruiters spend so much time, effort and money on getting a huge quantity of applicants and place much less emphasis on quality. An incentive program for employee referrals is the most cost-effective way to produce quality applicants and long-term employees.

Some positions are more difficult to fill and should have a higher incentive value. Remember an incentive budget should weight against the job posting budget and candidate screening time combined. So it’s ok and effective to have high incentives.

Ryan Kohler, ApplicantPro’s chief innovation officer, said, “It may be uncomfortable for HR to pay out 5,000 dollars for a new programming hire, because 5,000 dollar is a lot of money to an HR person. But the head of programming would pay 5,000 dollar in a second for a really good programmer. It really is a supply-and-demand thing.”

The Bottom Line

350 dollars for a one 60-day posting produces hundreds of applicants, hours of screening time, and still a higher potential of quick turnover. 50 dollars as incentive for one hired applicant, with a short time to hire and stays with the company long term becomes an irresistible deal for any recruiter.

To learn more about how to optimize your hiring process and get the best candidates in the door, click here to download our latest eBook.

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