HOW TO CREATE A GREAT EMPLOYEE REFERRAL PROGRAM

How to Create a Great Employee Referral Program | Connector Team Recruiting.png

From my seat as an Executive Recruiter, companies in this tight labor market are looking for creative ways to enhance their talent pipeline.  Referral programs are not a new concept at all; however, they work well with execution and attention. Your best brand ambassadors are your top employees.  Using them as  part of your HR recruitment plan is just smart business.

A great employee referral program can help you promote your employer brand and it’s no secret: Employee referral programs can greatly help your organization find and hire top talent. After all, where best to find potential new employees than by tapping into current workers, who share your firm’s values and who are already helping you run a successful business? “Employee referral programs can be an effective way to hire talented people, and they can also be invaluable in the current talent acquisition environment, in which open jobs outnumber qualified candidates,” according to SHRM. However, securing talent through a strong employee referral program doesn’t just help you hire strong new employees. It can also be a powerful tool to help you promote your employer brand.

 “These types of initiatives are extremely powerful tools that can help you promote your employer brand and attract strong talent into the recruiting process,” says Kathryn Budd, director of human resources for MRINetwork. “When applied consistently, employee referral programs can also be a great retention tool that translates into huge costs savings on recruitment and investment in employees over time.”

What does an effective employee program entail and how can you start one at your company?

SHRM notes there are several things you can do, including:

1. Give employees the tools they need to refer:

This can mean putting together a positive culture around employee referrals and being able to track these efficiently in an HR portal so that you can effectively review the entire referral workflow.

 2. Set expectations and guidelines:

Additionally, SHRM recommends that you should “make sure employees understand the referral program's guidelines and expectations, including who is eligible to participate in the program and receive rewards for referrals.” Also be sure to include EEOC language to make it clear that the referral program is not discriminatory in any way. 

3. Provide incentives:

To help boost employee support in referring all-star talent, you should ideally put into place monetary inducements (if someone gets hired and stays for a set period). Make sure these incentives are paid in a predictable, timely and public manner and. To facilitate this, HR staff should set up automated payments in their HR information system.

 Other guidelines to follow include holding leaders accountable and being transparent throughout the process with employees, providing feedback, and, importantly, marketing the program far and wide. This last guideline means investing in the marketing and communication plans to boost how many employees at your organization participate.

 This is extremely important when trying to promote your employer brand. But, how is the term defined? According to SHRM, employer branding “is an important part of the employee value proposition and is essentially what the organization communicates as its identity to both potential and current employees.”

Moreover, it includes many things about the company, including the “organization’s mission, values, culture and personality,” according to SHRM. “A positive employer brand communicates that the organization is a good employer and a great place to work.” Notably, the article also states that an employer brand greatly affects the “recruitment of new employees, retention and engagement of current employees, and the overall perception of the organization in the market.”

So, what are the specific ways referral programs can help?

First, a strong referral program, as noted above, includes clear expectations, guidelines and a powerful marketing plan of action. As a result of this communications push, employees will know in-depth how to speak with former co-workers and friends who they want to refer. This strong professionalism instantly makes your company look like a worthy organization and one that many will want to join because of this, leading to increased interest.

Second, your company should be investing heavily in communications and online content in order to promote your employer brand on your website, social media platforms, public relations and through other promotional materials. As a result, people will covet the chance to be referred and interviewed because they’ll know even more about the company.

“An employee referral program is a win-win situation for you and your organization,” says Budd. “You’ll create both a powerful commitment to hiring the best people as well as an employer brand that truly shines.” This will also signal to your firm’s clients and other external stakeholders that your organization has robust systems for attracting the talent that will drive performance, further establishing confidence in your products and services, and ultimately a more successful business.

Aubrey Wiete, talent management consultant for Cincinnati Children's Hospital, who offered tips for improving employee referral programs at the 2019 Society for Human Resource Management Talent Conference & Exposition.

Wiete, along with Jenna Filipkowski, Ph.D., director of research at Human Capital Institute (HCI) in Cincinnati, shared six guidelines for crafting effective employee referral programs:

6 Tips for Effective Employee Referral Programs:

Wiete, along with Jenna Filipkowski, Ph.D., director of research at Human Capital Institute (HCI) in Cincinnati, shared six guidelines for crafting effective employee referral programs: 

1. Use your employees to promote the company brand.

Using employees to promote your company brand can be helpful when done right. "The first step is acknowledging that, if you want to build a referral program that really works, you need to have a referral-worthy culture," Wiete said.

Lululemon, an athletic apparel company headquartered in Vancouver, Canada, treats every employee as a brand ambassador and provides all employees with the information and tools they need to fill that role.

"We ask all new hires to provide us with a list of 10 names from their personal network," said conference attendee Marissa Davenport, a talent advisor and recruiter at Neighborly, a global service-based franchise company in Waco, Texas. When the company has open positions, hiring managers review these contacts. If there's a potential match, managers ask the referring employee to introduce the potential applicant to both the company and the employment opportunity.

2. Set clear guidelines and expectations.

Make sure employees understand the referral program's guidelines and expectations, including who is eligible to participate in the program and receive rewards for referrals.

According to HCI research, of the companies it surveyed:

  • 78 percent provide the same reward for a referral whether the open position is executive level or entry level. 

  • 60 percent allow all company employees to participate in the referral program.

  • 58 percent give preference to candidates who are referred by current employees.

  • 55 percent accept referrals from nonemployees, such as customers or clients.

3. Offer incentives that motivate.

HCI research indicates that 74 percent of employers offer referral incentives. Of those, 92 percent offer cash, with a median award of $1,000. Awards of $500 are the most common.

Consider the timing of the reward as well. Most employers hinge payment on a referred hire's staying employed with the company for a set period. Only 27 percent of employers offer a full reward immediately upon a referral's hire.

Aim for parity in these rewards so that a referral for an executive job doesn't pay substantially more than a referral for a lower-level job.

"We don't want the perception that one job is more important than another," said Davenport, whose company recently revised the amount of its incentive payouts for referrals to help achieve parity between departments.

4. Market the program.

Filipkowski recommended treating the employee referral program like an ongoing marketing campaign. Investing in marketing and communication plans for the program can increase the likelihood that employees will participate.

Groupon, a worldwide e-commerce marketplace based in Chicago, has a unique marketing approach for its employee referral program: Referred candidates get a coveted green Adidas track-style jacket after working for one year at the company. The jackets remind everyone that employee referrals have an impact.

5. Hold leaders and HR accountable.

One common complaint about referral programs is that HR sometimes fails to communicate with the referring employee and the candidate about the job status. To avoid frustration, share information with both parties, and keep them updated about the hiring process. Consider responding to every candidate referral within a set time, such as 10 days.

Senior leaders need to believe in the program and be a part of the design. To get this buy-in and find a program champion, give leaders data and feedback on the program's outcomes. Make sure executives understand the current competition for talent and the need to capitalize on employee networks. "The stakes are so high, and there is not enough talent to go around. How do we get these people in our door?" Wiete said.

6. Provide feedback on outcomes.

"Measure that [the referral program] is working or not working, and make adjustments as needed," Filipkowski said. Common metrics to capture include:

  • The number of employees hired through referrals, compared to other methods.

  • The number of qualified candidates obtained through referrals, compared to other sources.

  • The rate of employee participation.

  • The retention of referred hires compared to other sources.

  • The performance of referred hires compared to other sources.

So, there you have it, some great tips for creating an effective referral plan.  If you have a plan and or tips and tricks on making your program work, send me a note and I’ll spread the word in my next blog.

Blog Post by: Bill O’Malley, Chief Recruiting Officer at Connector Team Recruiting.  Connector Team is recognized by leaders and leading consultants as the premier search firm in the Furniture | Electronics and Sleep vertical space. Connector Team is an affiliate office of MRINETWORK recently ranked in 2019 as a Top Recruitment Firm by Forbes Magazine.