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Advanced Employee Referral Programs — Best Practices You Need to Copy

by Jun 14, 2010, 6:04 am ET

Organizations that collect data on sources of hire consistently find that employee referral programs produce a high volume of high-performing hires with longer retention rates, and in most cases, at relatively low cost.

Unfortunately, when it comes to managing ERPs, there are a handful of organizations doing it really well and a lot of organizations doing it dreadfully bad.

After more than a decade of collecting program performance data, researching program design, and writing a book on ERPs, I can attest that there are many factors that differentiate a great referral program from an average one.

Many recruiting managers with woefully under-performing programs think they have great programs and are somewhat shocked when they learn that, on average across all industries, 1:3 hires come from employee referral and that it is no longer uncommon for more than half of all external hires to come from employee referral in organizations with leading talent management functions.

If your organization doesn’t have an ERP, or has one that produces less than 30% of all external hires, now is the time to benefit from the learning of organizations like AmTrust, Accenture, Amazon, Google, Tata, Aricent, DaVita, and Edward Jones to improve your efforts.

40 Practices That Distinguish Great from Average

The following list is separated into eight categories, based on what the composite practices are trying to accomplish. Benchmark firms are highlighted in parentheses.

Improving the Business Case for ERPs

The best referral programs are well-funded because they have convinced business leaders and managers on the business impact of employee referral programs.

  • ERP metrics — top programs emphasize metrics that cover the performance of new hires, retention rates, diversity, participant satisfaction, and program ROI. (DaVita, AmTrust, and Aricent)
  • Calculating the dollar impact — using business impact measures, leading ERPs calculate their program’s financial impact on the organization to increase executive and management support.

Improving Program Responsiveness

The No. 1 factor contributing to poor referral-program performance is a lack of responsiveness to inquiries and referrals.

  • Rapid response — the best programs provide qualitative individualized feedback to the referrer and the referred individual within 24 – 72 hours of submission. (Aricent and AmTrust Bank)
  • Priority processing — referrals are given a priority for processing over other sources to ensure that the employee and the referral feel like they are special. (Accenture)
  • Expedited interviewing — make a promise to interview all employee-referral candidates within a certain number of days. (Owens Corning)
  • An “on-the-spot” evaluation — when referrals are collected at referral events, provide on-the-spot screening and evaluation with instant feedback (Tata)
  • Online tools — offer online assessment and/or self scheduling of interviews. (Alaska Airlines)
  • 24/7 help desk — always-open referral help desks to provide information and to answer questions. (Tata and Aricent)

Changing Who’s Eligible

Second-generation referral programs often broaden the scope of who is allowed to make referrals.

  • Manager eligibility — because managers and HR professionals are well-connected, allow them to refer for roles outside their organizational unit. (Accenture)
  • Non-employee referrals — allow consultants, customers, references, corporate alumni, and other stakeholder groups interested in driving the success of your organization to participate. (Internosis)
  • Internal referrals — internal referrals are encouraged to expedite internal movement and ensure that under-used talent doesn’t get overlooked by other internal systems. (Booz Allen)
  • Discourage weak referrers — ban individuals who do not follow program guidelines or who consistently produce weak referrals from further participation.

Improving Program Motivators and Rewards

While many top-performing programs use program rewards, rarely are financial incentives the primary motivator.

  • Motivate without bonuses — several firms have successfully produced 50%-plus referral rates without using cash bonuses. The key is to excite participants about building an effective team and communicate how hiring top talent leads to job security and improved company performance. (Edward Jones and AmTrust Bank)
  • Increase recognition — publicly recognizing employees and managers for participating using personalized thank-you notes from executives and special lunches exclusively for referrers can dramatically improve participation.
  • Charitable donations — providing donations to a charity of the referrer’s choosing for successful referrals can be a significant motivator in organizations with a strong social responsibility mission to employees not driven by bonuses. (Accenture and DaVita)
  • Reward all referrals — while most referral programs reward only for a successful hire, a growing number of top programs are offering small rewards for the introduction of any quality candidate to encourage more referrals. (Accenture)
  • Manager targets — individual managers are given specific targets for the referral volume of their team and themselves to motivate and spur internal competition. (Acumen Solutions, Yum Brands)
  • Develop an SLA — the very best programs increase the responsiveness of line managers by instituting service-level agreements that spell out expectations. (Aricent)

Increasing Proactive Referrals

While traditional referral programs rely on the erratic flow of referrals subject to the whim of the employee population, many top programs use proactive components that create flow as needed.

  • Onboarding referrals — ask new hires to make referrals during onboarding. (Eli Lilly)
  • Referral activities — visit top performers and coach them through a talent discovery exercise to generate referrals for a particular need. (Quicken Loans)
  • Alerts — send targeted alerts to the most relevant employees or those who have signed up in order to make them aware of current need. (CACI International and Quicken Loans)
  • Follow-up interviews — following a successful referral, interview the referring employee to thank them, find out how they sourced the hire from their network, and to ask for additional referrals. (Amazon)
  • Referral cards — provide both paper and electronic referral cards to highly visible employees in order to increase referrals. (Accenture and Southwest Airlines)
  • Referral events — hold referral events and hiring parties for referrals in order to garner attention, to educate, and get spot referrals. (Monster.com)
  • A referral database — develop a pool of referrers who can be proactively approached. Select these individuals based on their past referrals and the likelihood that they know someone with a particular skill set. (Accolo)
  • Provide feedback on quality — provide employees with honest feedback on the quality of their referrals so they can continually improve. (Accenture)
  • A diversity emphasis — emphasize and proactively seek out diversity referrals, using metrics to track what is and is not working.

Using Social Networks

The lack of a robust social recruiting strategy in most organizations means that employee networks and social media tools are often not being usedeffectively to support employee referral.

  • Educate and encourage — fight corporate policies that discourage social media participation and educate employees and managers about how to effectively use social networks for professional purposes, then encourage mass participation. Build online training resources that instruct on quality profile creation, information sharing, online networking, and converting network contacts to referrals. (KPMG, Acumen Solutions)
  • Give them something to talk about — most professional social network activity relates to the sharing of valuable information or interesting stories. Make content that features your organization available in formats that are easy to share. Publish shortened links to new stories, blog posts, product announcements, article shares, etc. to Facebook and Twitter so that employees only need acknowledge the post to share it amongst their networks. (Microsoft, Facebook, PepsiCo, and Zappos)
  • Create learning networks — one of the best ways to take advantage of micro-blogging tools like Twitter is to create learning networks where people inside and outside the organization can share links to articles they find of value professionally. Source micro-bloggers posting relevant content to specific groups within your organizations and encourage employees to follow them and to comment of shared content or possibly contribute complimentary or contradictory content.
  • Provide help — the social media landscape changes daily, so getting started can be daunting. Consider hiring an ERP coordinator dedicated to helping/coaching top performers on establishing and leveraging their social networks.
  • Accept social media profiles — few things can kill conversion of a referral initiated via social media more than forcing the individual through the ATS application from hell. Consider maintaining the social media experience by accepting complete profiles on social media sites in lieu of a resume or online application. (Sodexo)

Changing the Program Scope

Many organizations either over-restrict the scope of their ERP or don’t provide enough program structure.

  • College referrals — referrals work even better among the college population because they are well connected through social networks. An advanced program must include referrals for college hires and interns. (Endeca)
  • Executive referrals — include executive openings and encourage executives to make referrals across the board.
  • Boomerang referrals — devise program elements that focus on top-performing employees who quit or were laid off. Corporate alumni can also be the source of referrals. (DaVita, Deloitte, and Booz Allen)
  • Global referrals — do away with regional barriers to participation and open up referrals from anywhere to anywhere. (Tata)
  • Limit the scope — the very best programs do not treat all jobs the same; instead they prioritize key, mission-critical; and revenue-producing roles. (Accenture)

Improving Program Administration

One of the key differentiators between average and exceptional programs is program management.

  • Employees can track their referrals — allow employees to continually track the progress of their referral using an ERP portal or stage-triggered communications. (Accenture and Aricent)
  • Require the employee to pre-assess — exceptional programs require the referring employee to submit an assessment of the applicant being referred. By requiring employees to actually know the work of referrals and to assess them based on skills and fit, you help eliminate junk referrals. (Aricent)
  • Website customization — provides detailed information to first-time referrers and those seeking assistance, but provides fast-track option for submitting referrals for individuals with prior experience. (Accenture)
  • Hire a dedicated program manager — every one of the top performing programs I have evaluated had a dedicated program manager and many had dedicated supporting staff members. Establish program performance goals, and hold the program team accountable for producing a program design capable of meeting/exceeding them. (Tata, Owens Corning, Amazon, and Aricent)
  • Avoid program killers — the very best referral programs avoid common program-killing features, like delayed or partial bonuses, failing to update marketing materials, and extensive program rules.

Final Thoughts

The “build-it-and-they-will-come” mentality that many organizations approach their ERP with is silly. In recent years, employee referral programs have become the dominant source of external hires, and they deserve a level of program strategy and management commensurate with that status.

Exceptional referral programs are extremely sophisticated and require highly coordinated resources. If your program is woefully out of date and under-performing, I’m sorry to inform you that buying new creative from your recruitment advertising agency will not bring it up to par. Program excellence comes from design, and now is the ideal time to rip out your existing program and replace it with one that can produce results in the incredibly challenging years to come.

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.