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Building Employee Referral Programs that Work

by
Joe Slavin
Mar 27, 2001

Even in a slowing economy, the war for top talent remains as competitive as ever. Enlisting employees in the recruiting process is a smart – if not essential – practice for recruiting the best and brightest. Candidates hired through employee referrals stay longer and assimilate faster than those hired through other methods, including the Internet and headhunters. While many companies have outlined employee referral programs (“ERPs”) in their HR manual, awareness of and participation in them can unfortunately be very low. Some organizations have wisely increased finder’s fees to make these programs more appealing. And, we’ve all read more than a few stories about companies offering generous grand prizes, such as sports cars and luxury vacations, to lucky employees who successfully refer top candidates. While the lure of sizeable bounties and flashy prizes can be excellent ways to generate excitement and encourage referrals, there are other ways to build a top-notch employee referral program. Following are suggested techniques for building an ERP capable of doubling or even tripling the success rate of your current ERP:

  1. Start at the top: If senior management is not committed to the success of the program, it won’t work. ERPs must be clearly communicated from the top down to make it clear that it’s everyone’s job to actively search for talent.
  2. Keep rules to a minimum: Complex submission rules, coupled with six-month length-of-stay requirements, are the easiest way to limit participation in ERPs.
  3. Let everyone participate: Why exclude senior managers from referral programs? Doesn’t it make more sense to share a $1,000 referral fee with an SVP than to pay a contingency search firm $25,000? Also, consider allowing HR staff to participate. As long as they are not directly involved in hiring for a specific opening, why not benefit from their network of contacts?
  4. Involve and reward outsiders: Alumni are great sources for talent, as are vendors, customers, and people who have turned down offers. How about your employees’ friends and former business associates? They can all lead to top candidates, so it’s advisable to involve them in the program and reward them for their efforts. Casting the referral net a little wider can yield better results.
  5. Give VIP status to resumes: Pay special, fast track treatment to resumes referred by employees. Employee-referred candidates should be called quickly. (Find the time to do this by following the next rule…)
  6. Let employees track progress: Rather than bombard the recruiter with calls and emails to see if a friend has been hired, let employees check the status of referred candidates themselves on the Web. Along the same lines, send employees emails to let them know how their referred candidate is advancing in the hiring process.
  7. Make it easy to refer: Employees should be able to look at available openings and “push” them out to their friends with the click of a mouse. If they need to copy and paste job descriptions into an email, your referral numbers could suffer.
  8. Promote constantly: Weekly “hot job” emails combined with emails announcing the list of employees who have referred successfully, are great ways to keep ERP momentum strong. Motivate staff with company-wide, congratulatory emails from the CEO about those who took the time to make referrals. Posters on the refrigerator and in the bathrooms work well too.
  9. Pay a decent bonus: These days, $1,000 is a good minimum bonus. Bonus for top jobs, however, can go upwards of $10,000. More than $10,000 just might be too much, as employees begin to get skeptical that the bounty will ever in fact be paid.
  10. Pay it fast: When an employee is entitled to a finder’s fee, pay it on time. Don’t force employees to follow up on fees that they have earned.

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This article is provided for informational purposes only and is not intended to offer specific legal advice. You should consult your legal counsel regarding any threatened or pending litigation.

  1. Eric White

    Excellent advice. The encouragement of allowing alumi and HR staff to participate is a big plus. You may want to also suggest having a quarterly drawing of referrals that were hired within that period for an extra cash payment. The payment should be equal to or greater than the original referral payment.

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