It can cost around $4000 to find and hire a new employee—and as many as 33% leave within 90 days. Employee referrals are an effective way of securing top talent who are more likely to be a match for a business' culture and needs. This article will explain how employee referral programs can help businesses find top talent and share some tips on how you and your team can build a better referral programs.

How employee referrals help companies hire better

Employee referral programs can help you optimize your hiring process. Instead of looking through dozens or even hundreds of strangers for the right fit, you can get a head start by having candidates already vetted by your own personnel. They most likely will recommend someone they think is a good fit for your organization, and someone they would like to work with. 

Referred employees tend to receive more mentoring through the hiring process by their reference person, who usually advises them on the nuts and bolts of the organization. New hires will have more personalized information about what’s expected of them beyond the usual onboarding process. 

Finally, your employees already understand your organization’s mission, vision, and values, so they usually refer candidates who also share those values and can enrich the company culture. Culture fit is a critical component in attracting and retaining the best talent for your team. 

Here are top 5 tips for improving your employee referral program.

1. Organize employee referral campaigns

When designing your referral program, understand why your employees might refer a friend or former colleague. Some may be driven by the opportunity to earn a financial reward, while others may want to help their department or company,  give back to their community or help a friend find a new job. Understanding what motivates your employees is a must when creating a program that will encourage them to participate.

Use the following ideas to motivate your team to participate in your referral program:

Choose incentives and advertise them

Incentives are a key component of a successful referral program. While financial incentives can be effective, they are not the only option. Other incentives, such as extra time off, exclusive events, or recognition programs, can also be effective. The most important thing is ensuring the incentive is meaningful and attractive to your employees. When choosing incentives, consider what your employees value most and design the program around that.

Another important aspect of a successful referral program is communication and promotion. Your employees won’t refer their acquaintances if they don’t know about the program. Promote the program through all channels, including company emails, newsletters, internal communications, and company events. You can also hold informational sessions to explain the program and answer questions from employees.

Send updates, reminders and instructions frequently

Every employee has a network of friends, family, and former colleagues you can tap into for top talent—and they know what you need and who is likely to be a match for culture, personality, and work ethic. To keep the referral program in your employees’ minds, acknowledge and showcase employees who participate, and be sure to let people know when there is success in hiring a referred candidate. Recognition and celebration are critical for employee engagement. When you celebrate the submission of qualifying referrals, the referral program can gain momentum among employees

Make it a contest

Many companies incentivize referrals through competitions and contests. For example, you could carry on a hiring contest among your employees where the person who refers the most qualified applicants wins a prize. Hotel chains are known to do this often, with different locations competing against one another. Incentives could include a trip to a spa or other hotel location. 

West Monroe is an example of an organization that uses this model, and they report that up to 38% of their new hires come from referrals. 

Leverage talent sourcing events

A fun way to encourage referrals is to host an event centered around finding new talent. Your company’s recruiters meet with a group of current employees, perhaps over lunch, and work with them to browse their networks for suitable candidates. 

2. Train and encourage participation from your hiring managers

It’s best if the referral program is fully supported from the top down. Encourage your team leaders and hiring managers to share information about the program, potential benefits, and incentives with their employees. Consider hosting informational sessions quarterly or before the busy season, especially if you are in a seasonal industry like hospitality.

3. Automate the process

Making the referral process as simple and straightforward as possible is also important. Your employees should be able to easily identify open positions, learn about the requirements, and submit referrals. An online platform can be a convenient way for employees to submit referrals and track their progress.

Talent acquisition systems are responsible for any successful automated employee referral process. Most automation solutions enable a candidate applying for a job to input a referring employee’s name somewhere in the application. The referring employee is tagged, and the hiring manager will know the candidate is coming through a referral. 

You can also customize the system so that referred candidates appear at the top of the list. That’s because referrals are very valuable to your business and your employees. As Nasser Oudjidane, CEO of Intrro, says: 

“Your employees genuinely want to see their companies succeed, work alongside the best people, and help their network get good jobs.” 

Your employees have insights about a candidate and know whether they would be a good fit for your organization. 

4. Provide follow-up and feedback

The follow-up process is also critical to the success of your referral program. When an employee submits a referral, keep them informed of the status and whether their acquaintance has been selected for an interview. If the referral was not selected, provide feedback on why they were not successful and how the employee can improve their suggestions in the future. When a referral has been successful, be sure to mention it to the employee and thank them.

An employee referral program may improve your ROI 

An internal referral program can be valuable for encouraging employees to refer their friends and acquaintances for open positions. When designing the program, consider what motivates your employees, offer meaningful incentives, promote the program, make the referral process simple and straightforward through automation, and provide follow-up and feedback. With a well-designed referral program, you can tap into a valuable source of new hires, improve your overall hiring success, and positively impact your company.

About the author

Dean Mathews is the founder and CEO of OnTheClock, an employee time-tracking app that helps more than 15,000 companies all around the world track time. 

Dean has over 20 years of experience designing and developing business apps. He views software development as a form of art. If the artist creates a masterpiece, many people’s lives are touched and changed for the better. 

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