Increase Quality Hires With Effective Employee Referral Programs
It is time to build the most powerful and sustainable talent attraction engine for your organization. One that will sustain your growth no matter what the economy, competitors, or job boards do.
The employee referral flywheel.
Almost every organization says... "Oh yeah, we have an employee referral program."
But most of them are running at less than 25% of what they could be.
I commonly see management teams that don't talk about it, haven't bought into it, and don't know how important it is. Their employees barely even know the referral program exists. AND if they do, they've been a new hire for a while, so there's no real excitement around it... making it hard for the employees to share.
That's why today I'm going to lay out how to set up an employee referral flywheel (for both large and small budgets).
An effective employee referral program is something that will continually deliver high-quality hires. It's something that your team can constantly improve, optimize, and make changes to ensure it's producing the best possible results.
First off... let's talk about why it matters.
Employee referrals are one of the highest quality sources of applicants.
Building an Employee Referral Flywheel
Establish a thriving employee referral program that will generate quality applicants.
If you go and look at your data and compare hires vs. applicants by source...Employee referrals generally produce 5x better power.
Not only do employee referrals generate 5x better-qualified applicants... but it takes 5x fewer applicants to hire 1 person from employee referrals versus a job board (or any other source out there).
More importantly... if it's something that your company owns and controls, nobody can charge you for it. Nobody can get in the way of you doing it. Just you and your organization have complete and total control over the levers you pull to maximize the results.
Employee referrals are not just a source of applicants.
A healthy sustainable employee referral program is a predictor of the overall health of your culture.
Bottom line, if employees hate working for you, they won't refer people to work for you.
Remember, employee referrals are a virtuous flywheel.
The prerequisite of an awesome employee referral program is awesome employees who love working for you. If you have a great place to work and you've done your best to make sure that your employees are happy, successful, and taken care of... then it's time for you to cash in those deposits by creating a referral engine that will drive you into the future.
Here's our first measurement...
If at least 40% of all your new hires are not coming from employee referrals, it generally means one of three things.
- You don't have a program... (or nobody even knows it exists).
- The system is broken. The flywheel for employee referrals is either not spinning due to too much friction, or there's not enough fuel. (All things we can fix).
- Your employees hate working for you. (Again, we should fix that).
To be honest, I have companies with no employee referral program and no payouts at all... yet their employee referrals are still one of their best sources of applicants. It's not always about the money.
Some common misconceptions I hear about employee referrals...
1. It's all about the money. It is not.
People refer others to your organization because they want to help and they want to be seen as helping... not because of the money.
This doesn't mean that you can stop paying. You still need to pay for referrals because it's the right thing to do, but paying for referrals is not the fuel that drives the flywheel... Giving credit is.
2. It's all about recruiting your best friend and strong connections. That's false.
A healthy employee referral program generates best friend referrals, old friend referrals, and weak-connection referrals.
If your system is generating mostly strong connection referrals, you're missing a large number of potential referrals. You don't have the right system for generating the weak connections.
3. Employees and managers know how important employee referrals are yet I never see great results. Do they really know if you're not shouting it from the rooftops?
Your employees should know that what is important, gets talked about.
When you never talk about employee referrals, when you never bring it up, then employees assume that nobody cares about it... so they shouldn't either.
My solution... Turn your employees into job marketers, not recruiters.
You do this by launching an employee referral flywheel that's focused on helping your employees share your jobs on social media. It moves sourcing from being an HR job to being a team sport that everybody at the organization can take part in.
Now, before anything else...
You have to get buy-in.
An employee referral program is not an HR priority or an HR project. This is an entire company project, specifically from management.
To get buy-in, begin by pulling data (you can borrow some of ours) to show everyone the power of applicants that come from referrals. You're looking to show them...
- the conversion rate
- the percentage of applicants who get hired
- the number of applicants needed per hire
This helps management. They begin to understand the benefits. If you apply pressure on employee referrals flywheel, you will get more applicants and spend less time reviewing/interviewing people. It will be easier to make a hire because the quality of those people will be so great... right?
After this, you ask them for specific help and tell them exactly what you want them to do.
You want management to start talking about employee referrals all the time... in every meeting... in every situation... every stand-up... ALL.THE.TIME.
Once we have buy-in, everyone is excited because everyone benefits from the program.
Let's outline the 6 steps to the Employee Referral Flywheel...
Step 1... Stress the importance
You need management to understand it's important.... and you will need to make sure employees know that employee referrals are the most important source of growth for your company.
One part messaging, one part consistency... Say it enough times that everyone gets it.
Step 2... Create a contest
This is about an initial kickoff of your new employee referral flywheel where you put together some contests.
I usually suggest removing some of the focus away from payout per hire. Move it to a contest or reward for the top 5 or 10 people who generate the most applicants. Now you can contain it.
For example, here at ApplicantPro, each month the top 10 referrers get a $50 Amazon gift card. So, this might cost you $500 depending on how aggressive you want to be.
Step 3... Establish a drip
To remind employees that you have an employee referral program, drip emails to your employees every single week. Remind them how the contest is going and give them the list of jobs that are open.
Step 4... Shareable links
This is the biggest hurdle for most organizations.
Employees need to be able to share the job on social media in a way that ensures they get credit for anybody applying. Your options are...
- You actually get a robust system where each employee gets their own unique link that they can share that they automatically get credit for.
- Teach them how to share it in a way that includes their name as the source. It is the inferior way but it still works. If you don't remind them of this, they won't get credit for it.
Step 5... Scoreboards and feedback
You have to be telling the company and showing them who is referring to the most applicants.
If you're focused on a contest where you're competing, you have to come up with a handful of metrics that show the progression. This might be a number of applicants that come from referrals on a weekly basis that show your goal and the trend line so everybody can see it's improving.
You just have to decide... is this a shared initiative where everybody's working for a common goal? Are you throwing a party? Is it a competitive initiative, where you're putting a scoreboard in place where people want to be on top?
You can do either... or both of those, or really whatever works for you.
But you do need to do SOMETHINGand then report back about the progress.
I would focus your scoreboards on applicants... not hires. Focus the team on driving the leading indicator of success, not the lagging.
Step 6... Give credit
You have to put the process in place where you're properly giving credit to the employee who referred somebody, I'm not talking about the payout.
Give public recognition that a new hire came from an employee.
Embed credit or public recognition for new hires into your announcements. Preferably they should shared by your CEO or management team's mouth. At the very least, every time you announce a new hire and tell your organization about them, you show or explain who referred them... and say thank you to that person.
This is one of the biggest drivers of virtuousness in this flywheel. This is what spins the idea that you are highlighting not just the new hire... but the person who referred them... and in a public way where you say things that make them feel good.
It is also important for other employees to see the efforts that they created and the efforts that they put in while helping the organization now.
Those are your steps to launch. Now...
How do you keep it going?
2. Have a solid plan
If things get unexciting for your team -- adjust your reward, alter your competition, make it new and make it good.
AND DON'T STOP TALKING ABOUT IT.
This has proven time and time again to be the most powerful way to create long-term sourcing for your company... and to be honest, this becomes a competitive advantage for your organization long term.
It is one of the most overlooked and underutilized hiring sources. Yet it has been proven time and time again to be one of the most successful, affordable ways to hire.
In most organizations, they believe employee referral programs create bias. However, what I've laid out above actually reduces the amount of bias in the employee referral program. It puts the emphasis on employees as marketers, sharing the links everywhere, not just to their inner circle of friends.
In other small organizations, they believe they don't have enough employees to actually make the flywheel run. If you only have 10 employees, that also means that you're probably only hiring a couple of people. Yet if you have 1000 employees, that would mean that you're probably hiring a couple of hundred people.
No matter what your employee referral program looks like today, I would love to help you establish a program. One that spins with minimal initial effort yet churns great success.
Get more applicants!
6 Steps to building a powerful employee referral flywheel!
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Itís easy to point fingers and blame the applicants, employees, or competitorsÖ But maybe itís time to take a deeper look at you and your company.
Fill your job openings quickly and reliably. Set up an employee referral program without bias today to see a surge in qualified applicants tomorrow.
With little effort, employee referrals can give you the biggest boost to your applicant flow! Your employees can be job sharers and a credible applicant source.