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How to create an effective employee referral programme (Plus 3 best case studies)
October 21, 2021
An employee referral programme is an integral part of any business, irrespective of the industry. Hiring quality talent who are a perfect fit for your company can be cumbersome and tedious. This is where employee referrals come in. Referrals also offer many benefits to your company, which in turn contributes to your company's success.
Today, this article will help you understand why referral programs are so important and how to make your referral program effective. Also, we included some case studies at the end.
What is an employee referral programme?
As the name suggests, a referral programme allows employees to refer potential candidates or someone they know to their company. The referral programme can be formal or informal.
Informal referral programmes usually involve only one employee referring another employee. However, when referral programs are formalised, they tend to have more structured policies governing the referral process in detail and the incentives offered to employees.
A referral programme is also referred to as an employee referral scheme and referral bonus programme. It is part of an attractive employee benefits plan.
What are the benefits of an employee referral programme?
There are many advantages or benefits for companies that set up referral programs, such as:
Improves the quality of hires
According to John Sullivan research, referral programmes produce 88% more qualified candidates than other methods. That's because referral hiring focuses on hiring someone the employee knows and trusts, which ensures that the referral is closer to a culture fit and/or has seniority in the same field. In a way, the employee has qualified the candidate on your behalf.
Reduces turnover rate and improving employee retention
Referral schemes see about 46% retention compared to 33% of retention of hires from career sites. This is likely because referred employees are more culturally fit.
Related: 10 innovative ways to attract and retain Gen Z talents
Reduces time and cost per hire
Referral schemes have saved a company $7,500 per hire and reduced the time taken to fill a position up to 50%! It's usually cheaper to hire referrals because you don't have to outsource recruitment to agencies. The hiring process is also faster because you get to reach out to each of your employee's networks easily.
How can your referral programme be more effective?
Having a referral programme is great for your company, but you need to implement them effectively. The success of a referral programme is not always derived from the programme itself but also from how your company implements it.
Here are some 5 tips on making your referral programme effective:
1. Explain job requirements and who you're looking for clearly
Employees need to know what your company is looking for, in terms of skills, experience, and attitude before referring someone. If employees don't understand the referral criteria well enough, it'll be difficult to submit referrals.
Ensure that the job description and your expectations are clearly written and accessible by all employees. Also, consider creating conversations to address any questions your employees might have about the vacant role.
2. Acknowledge and appreciate good referrers
Identifying and appreciating the referrers shows your employees that their referrals actually mattered. For example, thank them in a referral newsletter or mention them at an all-employee meeting.
You can even reward referrers with rewards such as cash vouchers, gifts and company swag. In short, make your good referrers know that what they did matters. On a side note, this method also increases employee engagement.
3. Offer a mix of monetary and non-monetary incentives
Monetary referral incentives are usually seen as more attractive than non-monetary referral incentives, but you should still consider offering both. The more choices you offer, the more likely your employees will be motivated.
Here are some examples for inspiration.
Monetary incentives: Bonuses or cash prizes
Non-monetary incentives: Dinner vouchers, cash vouchers or points redeemable for goods and services, paid time off, better employee benefits, recognition.
4. Advertise your referral programme well
If referral programmes aren't publicised properly, no referral will come your way. You can do so by incorporating referral schemes in your staff intranet or by adding referral logos on your job posts and e-recruitment ads.
You can also include referral messaging in your company emails, such as newsletters or your email signatures.
5. Experiment with a variety of employee referral tactics
When devising referral programmes, it's important to remember that different referral tactics work for different industries. You can run referral contests with all sorts of themes. When you approach referral programmes creatively enough, you'll be able to find what works for your company.
Related: 5 biggest recruiting mistakes every recruiter makes (and how to avoid them)
3 best employee referral case studies
Salesforce
Salesforce organises "recruitment happy hours" and encourages workers to bring their friends and networks to the events. It's a lot of fun for everyone (save for the gallons of beer they have to clear at the end). They go above and beyond to surprise hundreds of employees with attractive incentives, such as a pair of San Francisco Giants tickets. And, they also offer a modest bonus to their referrers.
Hewlett Packard
Praising your employees is one of the most effective strategies to get the most out of your employees. HP has recognised this and incorporated it into its employee referral program by publicly recognising individuals who bring in good hires. And they did it by posting on social media about it. Notice the picture in the tweet? The company also rewards certificates to their good referrers. Praise is the candy!
DigitalOcean
The DigitalOcean team has a good social mentality when it comes to internal referrals. The firm pays the referring employee a set amount and donates another amount on behalf of the employee to a charity organisation for each successful referral hire. This has assisted the company in attracting top talent, with 40% of their new hires coming from recommendations.
This style emphasises both personal and social benefits, making your workers feel good about themselves as they contribute to a friend's employment and the community.
Conclusion
Employee referral programmes are great ways to incorporate into your hiring process so you can find quality candidates faster.
You can ensure your referral programme is successful by making it appealing to your employees, promoting the referral system well and experimenting with different referral tactics. Not only will you be able to find the perfect candidate for you, but also motivate your people with referral incentives in creative ways.
Next read: When should you hire internally? Plus 5 innovative internal recruitment methods
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