The XYZ's of ERP's

Don’t Derail your Best Source of External Hires: 5 Surefire ways to screw up your Employee Referral Program

It’s no surprise that CareerXroads’ 8th Annual Source of Hire Study finds Employee Referrals are the best, most cost effective sources of external hires. I was surprised to learn that 31% of the 45 participating companies (all with 5000+ employees) claimed to make 1 hire for every 1-4 referrals. That’s pretty impressive.

It’s been well-documented that people (employees, vendors, alumni etc) make more qualified referrals because the people they refer are seen as reflections of themselves. But Employee Referral Programs also contribute to reducing turnover. People that “sell” others on their company are also subliminally “re-selling” themselves by continually reciting all the reasons they like working there. It keeps the Employer Value Propositions top of mind.

Successful employee referrers also contribute to creating a better internal culture. Chances are, they’ve just received a sweet wad of cash for successfully recommending their friend or former colleague, and now the two may be found happily exchanging productive ideas or work anecdotes at happy hour.

So why would HR want to mess with such a sure-fire formula? While no one would ever admit to intentionally thwarting the almost guaranteed efforts of a referral program, I’ve seen it happen time and again when consulting with major companies. Instead of going for the win-win, the program flounders.

Here’s how yours can too:

1. Don’t give employees selling tools
2. Keep them guessing about the status of their referral
3. Make referral rewards as small as possible, and make employees wait forever to get them
4. Overcomplicate the process of referring candidates
5. Set it and forget it

I’m sure your own company’s program doesn’t share any commonality with the list above. Here’s what’s considered best-practice:

1. Accentuate the positives. Don’t just wait for award season- over-communicate what makes your company a great place to work and break it down by geography, discipline or compared to your greatest rival. Send messages out as frequently as possible, and put together an integrated strategy that combines an online toolkit with table-tents in the cafeteria. Make sure your employees are the first point in the communications cascade for all your Press Releases and open-to-fill so they have an understanding of business strategy and talent needs.

2. Don’t forget to say “thank you.” Keep referrers in the loop about where their candidate is in the process. No one likes the black hole. The best-in-class employee referral programs offer a small incentive just for referring someone- even if their referral isn’t hired. It doesn’t have to be elaborate, but hopefully it’s something that can stand out in the workplace- like a branded jar of candy- to get people hungry for one of their own.

3. Pay a bonus worth giving. Employee referral bonuses might range anywhere from below $500 to above $5,000 depending on the difficulty level in finding the candidate. It doesn’t have to be the same reward (or even a cash reward) for every level – you can tier prizes for exempt/non-exempt and even “heat-up” the prize at mission critical times. Think about how much you would pay a recruiter for finding you a candidate. While it may be higher than you’d pay someone internally, be generous. And pay out half on the referree’s hire date and half at the 3 month anniversary. Don’t be a buzz-kill and make people wait a year for $100.

4. KISS (Keep it simple stupid) Tie referrals into your ATS and keep your rules and regulations to a single page (or virtual equivalent). Signatures and special forms just slow things down.

5. Make your program fun and refresh often. There are so many fun ways of engaging everyone collectively around employee referrals. Posters, pay stuffers, online widgets, social networking badges, screensavers and quarterly drawings are just a few of the things you can incorporate into your program. Send out a notice with the offer letter and galvanize the spirit of your new hire by letting them become your company’s brand ambassador.

If you've already got the basics down, consider these suggestions to turn up the heat:

• Open your program to external sources- Pay awards to friends of friends- people who know people but may not be employees.
• Donate to my favorite charity- Enable employees' bonuses go directly into their charity of choice.
• Tier it up- Add quarterly bonus drawings and increase the prize based on total referrals for the period. This is a sure-fire way to get everyone working together.
  

The tangible and intangible benefits from a successful employee referral should make revamping yours first on your to-do list. BRANDEMiX can help.