Essentials of a Great (Not Good) Employee Referral Program

We have a little saying that I’m sure you’ve heard at least a thousand times from our writers, project managers, and even Shaun himself: “People do business with people they know and like.” While we focus on enhancing that relationship with our clients and yours, you could change the phrase just a bit for employee hunting as well—Employees refer great employees to companies they know and like.

Think of it this way—when it comes to expanding your clientele, warm leads nearly always trump cold leads. You can generally expect better retention and an increased purchasing power from warm leads over cold leads, and in the end, a warm lead has a much greater probability to become one of your best clients. The same is true of ‘warm’ recruits—you can usually expect better quality employees to come from evangelists who are just crazy about their job. But how do you engender that kind of enthusiasm? It all comes down to an effective employee referral program.

Now, this doesn’t merely mean providing kickbacks for employee referrals (however, that can definitely play a part), instead, an employee referral program has much more to do with how you coach and encourage current quality employees to bring in people who share that same spark your company promotes. Ideally, your employee referral program should bring in 30% or more of all new hires (so sayith referral guru Dr. John Sullivan, who you’ll hear more about in this week’s Weekend Reading). If your current program falls short, or you don’t have one at all, these are the essential factors that distinguish great employee referral programs from the good, the bad, and the ugly:

Culture Shock: It all starts with your company culture (as do all things!). A thriving company culture should encourage referrals from the ground up. Again, we’re not strictly talking incentives. Yes, hierarchy is important, but if your internal relationships are based upon a respectful friendship, your employees are more likely to feel the desire to bring in others who share their passion and drive.

Metrics: Your employee referral program should track elements of performance, retention, and satisfaction for each new hire to better ascertain your ROI. What is the dollar impact of your program? Are your hard-to-place positions being effectively filled when needed? This helps you to allocate funds and improve upon the systems you have in place. After all, if you’re not tracking your progress, you can’t expect improvement.

Responsiveness: Employee inquiries and referrals should get top billing in the quest for new hires. Of course, this doesn’t mean ignoring great cold candidates–it simply means that when an employee sends someone your way, you should follow up immediately. Your response should also include contacting both the referred and referring parties. There are some great online tools, such as Jobvite, to make this process easier, but no matter what systems you have in place, near immediate response should be key to the deal.

Motivation: While you can certainly motivate without offering a bonus or incentive reward, your company culture will need to shine with some serious extra sparkle in this area. However, you do not need to lead with financial carrots to drive your referral culture. Try offering donations to referrers’ favorite charities, displaying public and personal recognition, or a creating a ‘frequent hire club.’ If you do choose to monetize referrals, make the point to reward for retention rather than just for a hire. Maybe initial onboarding is recognized with a complimentary lunch, and the new hire’s six-month anniversary is rewarded with a very tempting bonus. Remind your people that everyone is in it for the long haul.

Whatever your program becomes, remember to customize it to your mission, values, and needs. There’s no ‘one size fits all’ in the world of employee referral programs, but yours can certainly be stellar when you and you team go the extra mile!


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