Building an Employee Referral Program: 3 Things You Should Know

January 14, 2015

I have been working on building and developing the LinkedIn Employee Referral Program (ERP) for the past year. Based on my experience, I don’t think there is a one size fits all approach for building a well-oiled program. However, I do think there is one big key to success – keeping your target audience, the employees, in mind. This means involving them in the process of designing the program and getting their feedback every step of the way in order to optimize it.

As a part of this push, we ran a survey of 2000 LinkedIn employees in order to figure out what they expect from the ERP and how to best tailor the process to that. Here are a few findings we walked away with:

1. People don’t refer for a bonus - but they do expect one

employee referral program incentives

Our survey revealed that only 40% of participants were motivated to refer because of a monetary reward. Meanwhile, 68% claimed they submitted a referral because they wanted to help their company (participants could select more than one answer). Interestingly, despite that, the expectation of a bonus was not lost and 96% felt a cash reward was appropriate.

employee referral program reward

These results confirmed that offering a referral bonus is a must and it’s an important way to signal how valued the referral is by the organization. However, be careful -- positioning reward as the most important feature of your program can emphasize quantity over quality. Instead, focus on communicating the value of referrals by creating a culture of referrals.

One way to create a culture of referrals is by building recognition into the process – this is what your employees will truly value and the good news is it needn’t cost anything. A well-timed note from the hiring manager or head of department to say thanks for the referral or a call out in the company newsletter or a department meeting are both great ways to share your appreciation and communicate how much quality referrals are valued.

2. Communications are the most important thing to get right

The key theme that comes up again and again when speaking to dissatisfied referrers is the importance of good communication.  Our employee survey showed that 83% of referrers wanted an update at the point where we hire or reject the candidate, 76% indicated they wanted acknowledgement of receipt, and 60% felt that there should be an update to them at every stage of the process. Less than 1% of our referring employees felt that no in-process communications was appropriate.

employee referral program communication The reality is that most recruiting teams are swamped with resumes and maintaining such a deep level of communication may mean that you are overcommitting your team to spending all their time updating referring employees. Instead, look for opportunities to automate communications and set clear expectations on communication frequency.

A good approach is to acknowledge the referral and then set expectations on next steps and when the employee will hear from you. Then close out with the referring employee when you close the process with the candidate. If an employee has a bad experience with the referral process, they are less likely to approach that superstar they used to work with and get them interested in working for your company.

Remember that trust = consistency over time. If you design the process with this in mind – provide a consistent experience, with clear communications that tells your employees what to expect and when they will next get an update – over time you will instill the trust that encourages employees to approach and refer the superstars in their professional networks.

3. Monitor non-direct employee feedback like participation rates and referrals to hire ratios

While the employee survey data has been tremendously helpful for us to build out our ERP, there are many other ways to use data and trends to capture the employee experience and improve your ERP performance.

For example, have you noticed if some teams refer more than others? Are some individuals giving all the referrals? Some great metrics to measure your effectiveness beyond the actual hire volume are:

  • The participation rate (what % of your employees take part – indicates how well you are socializing the program and how engaged your employee base is).
  • Referrals to hire ratio (how many of your referrals do you actually hire – even a small improvement in this number will ensure your employees are referring the right people).
  • Hiring manager and candidate satisfaction (typically done in larger companies).
  • Satisfaction of the referring employees (this will help you identify opportunities to improve, build the credibility of your recruiting function, and map back to building trust in the process).

What objectives are your company, and consequently your TA team, focused on right now? Is it cost-per-hire? Time-to-fill? A well-run ERP will map nicely to any of these goals and support achievement of those objectives. Use this data to gain greater investment in the program and get the exec team engaged in your recognition initiatives.

Conclusion

Even if resources are limited and you cannot build an all-singing, all-dancing employee referral program, taking these three factors into account can help you refocus your ERP to be customer centric and mapped to your overall TA goals.

Not only is a well-functioning ERP a great source of quality talent, it also strengthens the perception of your talent acquisition team within the company. Think of the experience you create for employee referrals through your ERP as your brand within your organization.

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