12 Power Factors That Will Dramatically Improve Your Employee Referral Results

August 26, 2015

Is your employee referral program underperforming? Well most are, so it’s important to realize that when the competition for talent is intense, failing to invest in a powerful referral program may literally cost large corporations millions of dollars each year.

That’s because a well-designed referral program produces an amazing ROI, the highest performing hires, the fastest time to hire, low-cost hires and the highest volume of hires. One added advantage is that when it reaches its target of producing 50% of all hires, it helps recruiting by reducing hiring manager frustration, lowering the sourcing burden, and it saves scarce recruiting dollars.

Unfortunately, most corporate employee referral programs (a.k.a. ERP’s) are not well designed. In fact, even when they’re updated, the updates are only minor tweaks, which don’t include any of what I call “ERP power factors.”

So if you are a corporate recruiting leader and you have the courage to be bold, follow the advice of someone who has been called “the father of employee referrals” and consider implementing several items from this list of the power factors. Each one is guaranteed to dramatically increase your referral results by as much as 5%. The power factors are listed in descending order, with the factors with the highest recruiting and business impact listed first.

1. ERP leaders must make program decisions based on data:

The #1 shortcoming of most corporate referral programs (and many vendor-operated ones) is that they are not “businesslike.” Meaning that ERP actions and program features are not used based on proof that they work, but instead because they are historical practices and simply “the way that we have always done it.”

What is needed is a complete reversal to the point where all major decisions are instead “data-driven.” The key standout feature in a data-driven approach is that 1) data is used to measure the quality of referral applicants and 2) the increased on-the-job performance of referral hires is used to determine what ERP components are working and not working.

Once you measure the quality of applicants/hires, you can then determine what aspects of the ERP worked to produce them. If you tag or mark referrals, you can use data to tell you which employees produce top referrals, the best sources for finding referrals, the most effective rewards, the best way to communicate and which ERP rules and policies hurt by driving away top referrals.

A final component of a data-driven ERP is to quantify what’s the revenue impact of the superior hires that the program produces.

2. Assign the role of 24/7 talent scout to each employee:

You can’t really have a wildly successful referral program with low levels of employee participation, ownership and commitment. Rather than trying to motivate employees with rewards and constant reminders, a superior approach convinces them to accept that the role of “talent scout” should be part of everyone’s job. Having every employee continually seeking out top talent produces exceptional results, simply because there are never enough recruiters who could devote that many hours.

Start by setting talent scout expectations during onboarding by letting employees know that they are expected to identify talent whenever they are performing their every day job duties of learning, benchmarking and seeking solutions on the Internet.

Part of convincing them to accept the talent scout role and ownership of finding referrals involves educating employees on why they are actually superior to recruiters in approaching, identifying, building relationships with, assessing prospects and selling referrals. Use a phrase like “your colleagues probably don’t like talking to recruiters but they do enjoy talking to their friends” to get this point across.

If you are really bold, go the next step by setting a target number of qualified referrals for each quarter and make producing quality referrals part of every employee’s and every hiring manager’s performance appraisal criteria.

3. Helping others and not burdening coworkers should be primary motivators:

Once employees accept the role of talent scout, you next need to convince them to “help the team” by only turning turn in quality referrals.

Start by instilling in your employees that instead of being driven by selfish reasons of getting rewarded money and helping out a friend, the primary reason why they should refer top people is to help the team. If necessary, show them actual examples of where referral hires have already made a major contribution to their team.

Many of the top firms use only small or even no rewards because money has been shown to make employees act selfishly. Incidentally, if you do offer monetary awards, continue with the helping theme by allowing the employee to donate all or part of the reward to charity.

The next goal is to ensure that each employee knows the many negative consequences that come with weak referrals. They should already know that “the team with the best players wins," but also make it clear that if one of their weak referrals gets hired, that they are dooming coworkers to years of having to work alongside a Homer Simpson. Also make them aware that if a significant number of weak referrals are made, the performance of the entire teams will suffer, which may affect their employability and their bonus.

Lastly, let them know that making mediocre referrals puts an added burden on recruiters and hiring managers, because they must still screen and interview prospects that should’ve never been referred.

4. Educate your employees so they are more effective in making referrals:

It turns out that most employees and especially technical ones simply don't know where to look for referral prospects and how to convince them to accept becoming a referral.

Be proactive and educate your employees by providing them with a simple “referral toolkit” that reveals the best approaches, sample profiles and tips for avoiding typical referral issues.

And finally you need to educate your employees that the most powerful tool for selling referral prospects are "authentic compelling stories” about the firm. HR needs to take the first step by developing an electronic story inventory covering the great things about your firm, and then giving your employees easy access to this story inventory.

Encourage employees to continually add stories to the inventory that cover individual employee success, best practices and great benefits.

5. Responsiveness and speed are critical if you want continued participation:

A lack of responsiveness to employee referrals is the #1 program killer that will permanently reduce employee participation rates.

Top programs start out by making submitting and tracking your referrals easy, by ensuring that every aspect of the referral program administration is accessible using their mobile phone.

Next you must “tag” all referrals in the ATS system, so they can be identified easily. The best programs save time by accepting a LinkedIn profile as a source of screening, rather than waiting for an updated resume.

Next, set a target of getting feedback to the employee and the referred individual within 48 - 72 hours of submission. Some firms even offer on-the-spot resume screening, which is where an employee brings a high quality referral to a designated referral recruiter for instant acceptance/rejection.

The best programs also have expedited interviewing by guaranteeing that the decision to offer the referral an interview will be made within five working days.

I also recommend that you offer referrals a superior candidate experience and that you let the employee know “why” if their referral didn’t get selected for an interview.

6. Use a proactive, targeted and personalized approach:

Most referral programs are “passive” in that they spam referral requests to the complete employee population and then they wait for responses.

If you want to dramatically improve your results, you need a completely different three-step proactive approach. Start by identifying and then targeting the small group of employees that are most likely to have the relevant contacts for a key opening. Select your target employees based on their job title, whether they previously worked at a targeted firm, their history of making successful referrals in this job family, and their performance level (top performers produce the highest quality referrals).

The second step involves sending these targeted employees personalized messages, because spamming employees with job opening messages with the same format and content will quickly get your messages ignored.

Finally, you supplement your messaging with a proactive visit (or call). Which is where you approach these targeted employees individually (and sometimes also their manager) and specifically ask for their help on filling a critical job. Because this approach is personalized, targeted, and proactive, the response rate and the referral quality will be significantly higher.

In the cases where HR has already identified the name of top talent that they want to recruit, they “assign” the referral to an individual employee who is most likely to already have a relationship with the recruiting target.

7. Discourage low-quality referrals with rules and requiring information:

It’s critical that you develop a process that avoids clogging the referral queue with what are known as “junk referrals.”

Start by stating your high expectations, which should include “throughout the referral process… we expect you to put the firm’s best interests first”. Next make it clear that except in extraordinary cases, you do not want referrals from relatives or individuals who approached you and asked to be referred. Lastly, let them know that “We only want the superior referrals… so we expect a max of 3 referrals per employee per month."

Although typically you don’t want referral applications to take a long time, it’s essential you make sure that your employee really knows the work of the person they’re referring. So on the referral application from your employee, require the following six bits of information.

  • The job title or req # you are referring them for.
  • Show you know and have assessed their actual work and that it is superior.
  • Assess, rate and then tell us about their skills and knowledge and how they are superior.
  • Assess, rate and then tell us about their cultural fit so they do not dilute our culture.
  • Assure us that you have sold them to the point where, if asked, they will accept an interview.
  • Honestly rate them with an overall A+, A, or B+

Requiring this level of information and assessment helps to make the employee own the quality of their referral because it forces them to thoroughly research everyone before making them a referral.

8. Expand program eligibility to include managers and non-employees:

One of the most effective ways of improving ERP results is to expand eligibility to everyone that has great contacts and also knows and loves the firm. It’s a mistake to exclude from eligibility executives, managers and HR professionals, because they are some of the most connected individuals. If you’re worried about a potential conflict of interest, suggest that they forgo the reward or donate it to charity.

Next be aware that non-employees that know your firm well are often willing and capable of providing quality referrals. So consider expanding referral eligibility to your temps, contractors, ex-employees, retirees, vendors, spouses, references, strategic partners and even your customers.

Work with finance to find the easiest administrative ways to reward non-employees. This non-employee eligibility is even more impactful at smaller firms, where the employee population simply isn’t large enough to generate enough referrals.

9. Supplement your main ERP with effective subprograms:

In addition to providing a broad employee referral program, it is also wise to consider implementing some specialized subprograms.

It’s important to use data to determine which referral subprograms produce the highest quality and volume of hires in your organization. However, if you want to learn from others, many firms have found the following subprograms to be extremely effective:

  • College hire referrals – because of their widespread usage of social media, college students are well connected globally with other students in their field. Take advantage of that connectivity by developing a college ERP process and encourage everyone that knows top students to refer. Those that you should approach for referrals include current students that you are recruiting, your interns, last year’s college hires, grad assistants, interested faculty and your employees.
  • On-boarding referrals – recent hires are almost always willing to make referrals in order to show commitment to their new firm. Make it a regular part of on-boarding to ask each new hire to immediately provide top referrals, especially from the firm they just left.
  • Boomerang rehire referrals – if you want low-risk but high-quality hires, focus on re-recruiting your former employees that were top performers. Make your current employees aware of which former employees you are targeting and encourage them to build a relationship with them and to encourage them to return when the time is right.
  • Reference referrals – this low-cost and highly effective approach emphasizes making a candidate’s references a referral source. During the reference call, simply ask the reference at some point “Do you know anyone else that is equally or better qualified?” If they provide great names once, consider calling them periodically for additional referrals.

10. Encourage friendly internal competition:

Internal competition can have a dramatic effect on referrals.

Start by using an approach similar to “the United Way” by setting team referral targets for each month and making progress toward their goal highly visible. Because managers have a significant impact on referrals from within their team, increase their awareness by providing them and each of their team members with a monthly scoreboard report listing the number and the quality of referrals as well as the number of hires from referrals by each employee.

Providing all managers with a monthly ranked “embarrassment list” (from best to worst), comparing the performance of every manager on referrals, is also guaranteed to energize their competitive spirit.

Continue to encourage a competitive mindset among your managers by offering rewards for early bird referrals (i.e. the first submitted). Also periodically hold contests between rival business units and teams, covering topics like who can get the most referral hires from our most admired competitor firm.

11. Prioritize your jobs:

The best ERP’s do not cover all jobs, they instead prioritize and focus primarily on high-impact and hard-to-fill jobs. Don't waste employee time and burden your program’s administration with referrals for jobs that can be adequately filled through normal recruiting sources.

Also be aware that referral programs that focus their resources on attracting top talent, game changers and innovators produce the highest ROI and the most business impacts.

12. Provide referral cards:

Referral cards are simple but effective. They work best when you are seeking to hire service workers.

You might be surprised to learn that providing your most visible employees with a paper or electronic referral card can be extremely powerful. These cards work because your employees in their off-hours are continually interacting with service providers, so they often actually “experience” great service. The card (similar to a business card) is handed to individuals that your employee has just witnessed performing outstanding service work. The card should praise the work of the person receiving the card and also let them know that you have determined that they would be an exceptional fit at your firm.

Electronic referral cards can also be provided to employees for use in recognizing those who impress them on the Internet and in social media. Include a code on the card, so that the employee can get credit if the individual that they gave it to eventually applies for a position.

Final thoughts

It’s certainly important to continually tweak and continually improve your program by doing little things like eliminating any delay in paying the reward. But if you expect a quantum increase in program performance, you need to take major bold strategic steps like those outlined here.

If you were surprised and are not familiar with the presented power factors, it may be because that most people who write, consult, and provide vendor services in the areas of ERP are simply not data-driven. Once you make that jump to a data-driven function, you will quickly find, like I have after nearly 20 years of work in the referral area, that the power factors presented here are the best way to dramatically transform your referral program results.

Dr. John Sullivan is an internationally-known HR thought leader from the Silicon Valley who specializes in providing bold and high business impact; strategic Talent Management solutions to large corporations.

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