The 5 Elements of a Top Employee Referral Program

February 1st, 2018
Jon-Mark Sabel
Recruiting Teams

Employee referrals are consistently the top source of quality hires. 

They’re also the most expedient and cost-effective. It takes 2x as many interviews to hire from an external source (job board, agency, etc) vs internally (referrals, career sites). SHRM puts the average cost per hire at around $4,100, though 16% of starting salary is a more specific estimate. 

A properly implemented referral program pays dividends. These are the five elements you need to make yours one of the best.

1) Remove Barriers to Referral

Referrals tend to fall into one of two buckets. They are either close friends and colleagues, or they are friend-of-a-friend coworkers from two jobs ago. 

Getting current employees to refer their friends and close colleagues is not difficult, particularly when there is a compelling financial incentive (more on this below). They’ll push through whatever forms your ATS requires they fill out because they want to work with their friends.

But what about referrals who are, at best, LinkedIn acquaintances?

It’s easy to dismiss these. After all, is it really a recommendation if the referrer has never met the person they’re referring? 

Yes. While a few people might try to play the numbers game, referring as many vaguely qualified folks as possible, most will be recommended because the referrer thinks they have a genuine shot at getting the job. With the time and cost savings that come from referrals in general, it should be as easy as possible for your employees to refer. Even if they aren’t close acquaintances with their referrals, they’re still doing your sourcing for you. 

In situations like the above, asking referrers for detailed information about their referrals isn’t really an option. A LinkedIn profile or email address should be all they need to create a profile.

A Step Further: Personalized Referral Links

Some applicant tracking systems and social recruiting tools take it a step further. They let employees generate their own unique referral links, so they can contact their entire network en masse. For well-connected individuals with large networks, this gives you access to a huge pool of qualified applicants. 

Personalized referral links come with another benefit: more of the workforce will leverage their social media to share your openings. This addresses a classic employer branding problem. While there are always a few evangelists willing to promote your brand, mobilizing a large portion of the workforce is significantly more difficult. Incentivizing social sharing helps bring your more passive employees on board with EB initiatives. You’ll need to check with your ATS provider to see if this functionality is available.

2) Reward Upfront

Most referral programs are prorated. They pay out a certain percent of the bonus once the hire is made, then progressively more of the bonus as the referral stays with the company. 

Removing these contingencies - rewarding upfront vs. on a schedule - gives employees a greater incentive to refer. At HireVue, we saw our number of referrals increase after switching to an all upfront payment schedule. 

If budget is a concern (though again, given the time and cost savings that come from referrals, it shouldn’t be) consider this: GoDaddy decreased its referral reward to $1,000 (from $3,000), and actually increased the number of referrals it received.

A Step Further: Non-Cash Incentives 

Cash is the classic way to reward and motivate. But cash’s greatest weakness as a motivational tool comes from its greatest strength: it means different things to different people. Some referrers will immediately turn their cash bonus into a downpayment on a new car. Others will pad their IRA. And still others will just “see what happens.” 

It’s hard to build a compelling story around an incentive that means so many different things to different people. And while it might be counterintuitive, a non-cash incentive sticks in people’s minds more than a few extra zeros on a paycheck.

“Experiential” rewards, like vacation packages and recreational classes (creating pottery, for example), are a great alternative.. These have the added bonus of being “shareable”: while most people won’t share pictures of wads of cash, they will share their earned experiences.

3) Showcase Referrers Internally

Showcasing your referrers internally does two things:

  1. It further incentivizes employees; and (most importantly)
  2. It reminds the workforce that the program exists.

Chances are, any referral program is pretty top-of-mind for HR and recruiting staff. They’re the ones tracking and following up with the referrals on a daily basis. It’s easy to forget that the rest of the company is not so involved. They need a steady stream of reminders.

Monthly referral updates showcasing top referrers are an easy way to do this. If you hold company meetings, add five minutes to the agenda and showcase the total referral bonuses paid out that month (or the different experiences earned by referrers). Company or department-wide emails and chat groups work as well.

A Step Further: Build Your Referral Program Into Your Onboarding

To make employee referrals a priority, embed it into your onboarding. Spend 15-20 minutes discussing the program and answering questions with each class of new hires. If they are coming from a similar workplace, relevant referrals will come to mind quickly.

4) Broadcast Referrals Externally

You should also use your referral program to widen your talent pipeline. Most job blasts go ignored on social media. 

Instead of just linking to your job openings on LinkedIn, encourage potential applicants to reach out to someone in their network who already works for you. Your employees, in turn, are more likely to share your job openings because they are positioned to gain if a member of their network reaches out.

5) A Referral-Worthy Workplace

This is the elephant in the room. It's the one thing all great referral programs have in common. Very few people refer their friends and associates to an organization they don’t like working for. If you’re starting from zero, building a referral-worthy workplace is the most difficult step to achieve on this list.

Generally speaking, people want five things from their work:

  • Higher salary; (Paychex, 2016)
  • Career growth; (Glassdoor, 2013)
  • Health, dental, and vision benefits; (Fractal, 2017)
  • Flexible hours/working; and (Fractal, 2017)
  • Culture and values. (Glassdoor, 2017)

Addressing them all at once is a recipe for failure. 

Start with a single initiative (like internal mobility) that has the potential to impact more than one of those five categories. For example, by facilitating career growth and a path to a higher salary, internal mobility also positively impacts company culture.

Learn an unconventional strategy to build an internal mobility program that works - and engage your workforce in the process.