Building an employee referral program

A modern guide to help you create a referral program culture that works.
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Build an Employee Referral Program

It’s no secret that your network is one of the best assets in a business. It’s much easier to have confidence in the recommendation of someone you already know and trust rather than to take your chances with a complete stranger. That way, you can weave together powerful (and productive,) friendships that has compounding benefits.

A Rutgers University study cited in the Harvard Business Review found that workplace friendships —also known as “multiplex  relationships”— "significantly increase employee performance", and increase the likelihood of employees cooperating with each other to ask for advice or access information.

“Employees with close friends at work reported being in a good mood more often, which could spill over into positive effects on the work being performed.”

Bringing in new hires who have one or more warm, pre-existing relationships speeds up this process, allowing you to quickly establish a productive social dynamic. Over time, these subtle synergies add up to a serious competitive advantage and an environment where employees respect, promote, and advocate for each other.

However, most businesses largely underutilize their networks when it comes to People Ops and Talent. Would it surprise you to learn that only 7% of all candidates in a company’s talent pool come from network referrals, whereas 30% of hires come through the employee referral network?

This means that talent that comes to you through referrals is 7 times more likely to work at your company than any other source. Just think about that for a second. We use technology and tools for every other aspect of business and meticulously track our progress to improve results:

  • We use tools like Salesforce to optimize sales productivity and outreach.
  • We track our marketing email campaigns, open rates and click rates through platforms like Hubspot.
  • We track our candidate pipeline with an applicant tracking system.
  • We use these tools to make functions that are critical to business trackable, predictable, and scalable.

But when it comes to referrals, the #1 source of talent, the most critical part of your business, the best that most of us do is to share a job post on LinkedIn, Twitter, or distribute a referral form & send an email with a JD to employees.

This is why you need to embrace Employee Network Recruiting in your organization. Employee Network Recruiting focuses on strategically building and utilizing the company network instead of the tactical filling of individual job positions.
But where should you start? What steps should your company take to maximize its network and find the best talent? Read on and find out!To build a great business, you need a great team. The best talent gets constantly inundated with messages from recruiters at all of the big-name companies (and probably your competition). The only way that you can get out of the rat race for recruiting tactics, recruiting spam, and inflating compensation packages is to double down on a strategy that no one can imitate.

Build a referral culture

It is your employees that manage operations, develop innovative products, drive sales and ultimately define the long-term trajectory of your organization. Studies show that companies with inclusive cultures are twice as likely to meet or exceed financial goals, three times more likely to perform at high levels, six times more likely to be innovative, and eight times more likely to achieve better outcomes. 

As a recruiting leader, it is imperative that you help employees understand this new reality and appreciate how vital hiring is to the success of the company. Delivering on this comes down to your company culture: 

“Every employee has to feel that attracting and recruiting the best talent is part of their job description.”

When employees vouch for your company to people in their network, you not only grow your talent pipeline, you also make your employees more invested in the success of your company. Employees want their referrals to succeed because their reputation, both within the company and within their inner circle, depends on it.

Build a strong referral brand 

  • A strong employer brand is key to driving your employees to refer top talent and fundamental if you want to attract top talent into your company. 
  • Audit your employer brand to learn about what your employees like the most about working for your company and what they can improve. 
  • Use your website, social media and your employees to promote your company brand.

Include employee referrals in your new employee onboarding process 

  • Bring new employees into the referral process as soon as they are hired and use the onboarding process to communicate how important hiring is to the success of the company.
  • Set the expectation that every employee drives the culture and represents the company in sourcing and recruiting.
  • If you’re using a SaaS employee referral hiring platform, like Intrro, (wink, wink, nudge, nudge,) connect their social networks so recruiters can immediately source candidate’s from new employees contacts.

Get your incentives right

The most motivating and cost effective way to incentivize referrals is to recognize referring employees for their work. Share their efforts and stories during team meetings and recognize them publicly. Valuing employee referral efforts not only shows employees that you appreciate them, but reinforces your referral culture.

If you decide to implement a reward-based approach, you’ll have to decide how to distribute your rewards. These rewards can be cash, non-cash, or a combination of both. Let's find out a little more about it.

Cash 

You can have a “one-size-fits-all” reward structure, or it can be a “scaling” one, depending on how difficult and how urgent it is to fill the role. The general principle to follow (according to companies that give out cash bonuses), is that it ought to be high enough to incentivize work, but not so high that you jeopardize the quality of employee referrals. According to this research, 69% of companies offer cash bonuses that fall between $1,000 - $5,000. 

Double-sided reward 

You can even choose a double-sided reward, both for the employee and the candidate. Although these are less commonly implemented, this academic research shows that double-sided rewards are the most effective form of referral reward. 

Maybe splitting the referral bonus to employee and a charity of their choosing? And how about creating a system that rewards employees who refer high-quality candidates and provide small bonuses at different progressive milestones? Like: when referral accepted, when onsite interview, offer accepted, candidate joined, passed probation, and even perhaps, promotion?

Experiences 

Or even consider non-monetary rewards, such as dinner with the CEO, time off or vacations, and Lay-in passes. Example: To keep the referral program top-of-mind, InMobi parked a motorcycle at headquarters as a prize for successfully referring an engineering manager. 

The reason why some organizations such as Google found that rewarding referrals with experiences were a better way of incentivizing their employees, was the difference between the way a person views a cash prize versus a non-cash prize.

Cash prizes are evaluated on a cognitive level and are seen through practical eyes, meanwhile, a non-cash prize conjures up a different feeling. Non-cash awards, whether they are experiences or gifts, trigger an emotional response, whereby recipients focus on the fact of what they get to experience, rather than calculating values. 

Social rewards 

Often, competition and social rewards are more effective than money at driving engagement and participation. Tap into this motivating force by creating a public leaderboard, to show who has reached out to the most people in their network submitted the most accepted referrals and made the most referral hires. 

The “right” incentives will vary based on industry, open requisitions, company size, region, and of course, company culture, so you’ll have to do your research and experiment to get the right mix for you. 

Empower the employee referral process

Empowering your employees to represent your brand gives your talent team a crucial competitive advantage in the battle for hiring top-quality talent. But you have to keep in mind that not all your employees have innate recruiting skills. 

You want to make it as easy as possible for employees to make referrals, so build the right processes and find tools that help do the heavy lifting. Optimizing your referral process and removing barriers to participation will increase the volume, quality, and conversion rates of your employee referrals. 

The best practice here comes from Laszlo Bock, former SVP of People Operations at Google: 

“We increased the volume of referrals by more than one-third by jogging people’s memories, just as marketers do.”

In its early years, Google’s biggest source of hire was referrals: at one point, they made up half of Google’s hires. They found that the most effective method was “nudging” Googlers more to refer, by asking specific questions which compelled them into action. 

Make it easy for employees to refer the right candidates 

Don’t force your employees to manually search through their networks to come up with connections that match with open roles. Instead, find a tool that can match your high priority requisitions to qualified candidates from your employees’ connections (yeah, like Intrro). 

This keeps things low intensity for your employees and makes it easy for them to remain engaged in the employee referral process. It also makes referrals more powerful and relevant, so that you don’t have to screen through piles of irrelevant or unqualified candidates.

Use technology to your advantage 

Data science and automation are your allies here. The best tools will allow you to search across all of your employees’ social networks through one interface and will make it easy for employees to introduce candidates to recruiters. 

Obviously, you can do that with Intrro, that also has a Slack bot that will help you and your employees to manage communications and reminders.

Create a talent pool from your employee's networks 

Don’t expect for referral candidates to come in organically. Instead, make sure your employee referral platform allows your recruiters to proactively source for passive candidates in your employees networks and request warm introductions directly from employees that own that connection. 

This will work across the whole hiring spectrum, from volume tactical hires, to senior level/executive hires. Indeed, the best talents are not applying to job listings, they’re being sought after and recommended through their networks.

Whilst these roles have traditionally been filed by external search firms, you can save money and time by using employees networks to find and engage candidates. This works particularly well with your senior level employees, who are most likely to have the strongest networks of seasoned talent. 

And last but not least: remember that getting your leadership team involved in your referral culture is a great way of leading by example.

Optimize employee outreach

We've already mentioned that the best candidates in your employees’ networks will most likely be passive talent, so a warm introduction is key to starting a conversation. But let's face it: like we've also said before, the employee who has the best connection with your desired candidate may not have the strongest recruiting skills. What can you do to optimize you're employee's outreach.

Providing support and guidance to

your employees. The talent team should be the driving force of your employee referral program.

You must grant support and guidance at the right moments to optimize employee outreach and minimize the effort it takes to participate.

Provide a strong message copy

Not everyone in your company is a strong writer, and most people won’t know how to write a copy that converts. 

Offer a customized message for different channels in specific open roles that employees can easily edit, personalize and send to their contacts with a personal touch

Provide a great hiring experience to candidates

If your outreach efforts have paid off, you’ll begin to get a steady stream of candidates coming through the door. But keep in mind this: the candidate experience can make or break someone’s decision to join your company. 

87% of candidates said a positive interview experience could change their minds about a company they doubted, while 83% said a negative experience could change their minds about a company they liked. 

What does that tell us? That candidate experience also has an impact on the employees who participate in your referral program. If they see that the recruiting team is providing a positive experience for their personal contacts, they’ll be much more motivated to continue to make referrals. 

And candidate experience is a significant driver of your employer brand, that will impact how candidates represent your brand to other people in their networks.

Follow up with the referral candidate in a timely manner 

  • Communication during the recruitment process is key. 
  • Make referral candidates your top priority when it comes to response times and transparency, as their experience will also affect your employees. 
  • Contact every single referral on the same day they were submitted to you to ensure that you are starting off on the right ground. 
  • After each interview or communication let them know when they can expect to hear from you again – and follow through. 
  • Let each candidate know when they are no longer selected for the role and let them know you’ll consider them for future opportunities. 
  • Top talent is interviewing you as much as you are interviewing them, so treat candidates like you would like to be treated. 
  • Interviewers should arrive on time, be well prepared, and give the candidate their full attention.

Ask for candidate feedback 

  • Create a survey to collect feedback on your candidate experience and ask everyone you interview to complete it (whether they were hired or not.).
  • Praise your team for things that they have done well and fix the problems that you discover. Each piece of feedback can help you optimize the candidate experience, so you get more about of your referral program.
  • Plus it will help you stand out as an employer of choice, 78% of job seekers say that they have never been asked to give feedback on their candidate experience.

Create a system of record

If you’re putting in all this work to get employee referrals, it’s important to spend some time thinking about how you’ll record and track them. Employee referral programs fail when they’re not properly tracked, which causes both employees and internal stakeholders to lose confidence. 

Referred candidates should never go into a black hole—employees want to know that their efforts are valued and that their professional relationships are taken seriously by the company. You also need to track and share metrics with internal stakeholders to prove the value of your referral program and keep it running. 

54% of employers said the ability to track the referral throughout the recruitment and application process was extremely or very important.

Give employees transparency 

  • Once an employee refers someone, they feel a responsibility for that person and have an expectation that you keep them updated. 
  • Let your employees know where their referral candidates are in the process. 
  • Update employees if their candidates didn’t make it to the next step and explain why. This will help your employees gain a better understanding of what you’re looking for.

Prove your ROI 

  • Track your referral candidates so that you can understand your programs return on investment.
  • Understand how your referral program compares to other sources of hire in terms of your recruitment key performance indicators, time to fill, cost per hire, quality of hire etc.

Track Metrics

Track metrics and calculate conversion rates for each step of the referral funnel: 

  • What is the total size of the sourcing pool? 
  • How many referrals were requested?
  • How many referrals were accepted?
  • How many emails went out to those candidates with an opportunity?
  • What was the response rate of those emails?
  • How many referral candidates made it to phone screen?
  • How many referral candidates made it to on-site interview?
  • How many referral candidates received an offer?
  • How many referral candidates accepted your offer?

Final Words

The future of work is now. The best talent no longer searches on job boards. Mission and culture are just as important as compensation. The average job tenure is going down. Freelance and remote work is on the rise. Technology is exploding. 

The one constant in hiring will always remain human connection and the best strategy in hiring will always be employee referrals. To use referrals as a business strategy, they have to be saleable, trackable and measurable. That starts with data. 

Now you’ve got the strategies you need to build a successful employee network referral program at your company. Our hope is that by implementing the strategies contained in this article, inspired from the world’s most innovative organizations who do it best, you’ll be able to drastically improve your own referral program, which effectively turns your entire workforce into recruiters helping you bring in the absolute best talent. 

If your company doesn’t have a referral program, and you’re interested in setting one up, schedule a free consultation and we’d be happy to help out!

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