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Making Your Employee Referral Program Work Smarter — Follow-Up Questions And Answers, Part I

by Jun 21, 2010, 5:36 am ET

Dr. John Sullivan and Master Burnett

The performance gap between the very best employee referral programs and the typical program is growing dramatically wider each day. Benchmark organizations dedicating resources and formally managing their programs are very close to producing 50% or more of all external hires from their programs — nearly double that of the average firm. They are also using their employee referral programs to accomplish objectives not directly related to closing requisitions, including increasing workforce diversity, and influencing their organization’s employment brands.

The increasing disparity in performance is largely attributed to the lack of management. Many recruiting leaders view ERPs as simple programs, requiring little in the way of resources and day-to-day management. They throw together a simple policy and call it a program. Unfortunately, such efforts lack formal design, formal goals, and often ignore a multitude of variables that lead to improved performance and prevent barriers to performance from emerging.

The end result is easy to see in organizations large and small: newly launched ERPs become stale and outdated within months of launching, their performance rising, leveling, and dropping off until someone steps up and once again opts to retool the program.

Based on the registration response and volume of questions submitted during a recent ERE webinar on Making Your Employee Referral Program Work Smarter, clearly many organizations have retooling their programs on their agenda. With nearly a question a minute coming in from the hundreds in attendance, responding to all simply wasn’t possible. What follows are the public questions that were submitted (grouped, combined, and summarized) and our brief response to each. Looking for more detail? Use the comments functionality following this article to let us know and we’ll do our best to develop future content along those lines.

Benchmark Research

Many of our perspectives on employee referral program design and performance are based on benchmark research conducted in 2006, 2007, and 2008. With a data set that includes more than 600 organizations dispersed across more than 26 countries, there is little we have not seen. This fall (September), we’ll repeat our core benchmark study, making summary results available for free to all organizations that participate. If you’re interested in participating, register here, and you’ll be notified when the process kicks off.

Social Media Integration-related Questions

Can you offer some suggestions on making smoother handoffs between the referral program or social networking program and recruiting?

As more and more psycho-social research about the impacts of social networks on relationships emerge, one thing is clear: social media tools dramatically increase the number of close relationships an individual can maintain. Some studies demonstrate that proficient social media users can maintain close relationships (relationships in which they know a number of recent personal details about the other person) with three times as many individuals as nonusers. These expanded networks are a rich resource that many organizations would like to tap, but early efforts to drive conversion from contact to applicant were rarely successful. One of the key drivers of failure in early adopter organizations was an assumption that the same old approach to communicating employment opportunities could be applied to social media communication channels. That assumption ignored the fact that social media tools were developed primary as a means for a close network of people to communicate with one another via a channel free from spam and noise. To better take advantage of social media within the enterprise and to smooth the handoff during conversion, organizations need to invest in three practices.

  • First, you need to develop a primer to help employees cultivate professional relationships online. This often entails educating them on how to identify valuable contacts, how to make a good introduction, how to establish a mutually beneficial dialogue, and how to determine if and when referring someone to the organization should be considered. We all know how employees feel about training, but to our surprise, 51% of 15,000+ employees surveyed in 2008 indicated that training on cultivating a stronger professional network was the No. 1 thing their organization could do to improve their ERP.
  • Second, you need to develop a way of communicating critical position vacancies to the segments of the workforce that are most apt to be able to refer a qualified person in a manner that isn’t spam. We all know what spam is; the vast majority of HR communications qualify! A good approach uses hyper-defined segments and crafts messages that go far beyond just detailing the openings. Great ERP communications explain why finding great talent for the open positions is important to the organization and to the recipient of the communication. They also include priming questions, or questions that can help the recipients more quickly identify who they may know, and provide interesting information about the role, the team, or the organization that someone may actually want to share in casual conversation.
  • The third practice you need to develop is allowing referrers to make a referral in a manner consistent with dealing with a friend, but that delivers value to you the employer. This involves making the submittal process easy but qualitative. You need information, and both the referrer and the referral need a way to provide it to you that isn’t cumbersome. The e-commerce model of sending a link to a referral that takes them back to the online application doesn’t fit this audience and should be dropped like a hot potato. Consider allowing employees to make a referral using a social network ID, and ask them to prequalify the referral using one to three questions.

Having developed these three practices, the organization needs to highlight successes visibly and frequently. Establish goals for both the ERP and the social networking initiatives, because goals give you an excuse to communicate and a target to track against. Reward successes, and provide a means for employees to easily share what is and is not working.

What are some alternatives to social networking sites if these sites are prohibited by the company legal department?

Obviously the most desirable approach is to make the business case to change internal perspectives/policies, but until that is accomplished, there are still some actions you can take. A number of tools make it possible for employees to publish content to their social networks via e-mail; tweetymail is a good example. While this approach will not enable the same rich networking experience as interfacing with the services directly, it can provide organizations with an effective way to use the services within the network policy of the organization. Many proficient social media users also connect to social media services via mobile devices, which your organization may have a policy against using on company time, but which is most likely ignored. Recognizing that adept networkers will always find a way, and developing tools or approaches that lend themselves to the alternative access methods, is a way to be supportive.

What technology have you found most successful in tracking the social media network referrals?

As mentioned earlier, converting social network contacts into referrals can be a daunting activity. Early research has shown that the last thing you want to do is take a newly developed or cherished online contact and force them into the torture process that is the online application. Conversion rates of social media contacts to applicants can be as much as 10 times higher when alternative application methods are used, mini-registration forms on micro-sites and landing pages being the most common. Five years ago there were not many software systems available specifically developed to help administer ERPs, so many best practice firms built their own solutions internally to support their programs. Today, firms like SelectMinds (webinar sponsor) and Jobvite provide tools that can not only help you drive awareness of opportunities, but also track the response. An alternate method involves using a CRM system such as Salesforce.com or Avature and evoking the web-to-lead functionality. Web-to-lead lets organizations rapidly create a number of online forms that funnel data on respondents back into the CRM as leads, which can then be tracked through a defined workflow. The later approach would let you create different referral forms for departments, social media campaigns, locations, etc.

Program Administration-related Questions

My company requires a waiting period after hire of the referral, before paying any referral bonus. I am not sure it serves any legitimate purpose. Thoughts?

Never ever delay payment. It’s a program killer. I do not know where this silly practice originated from, but it is a useless policy that will severely dampen enthusiasm. Unless your organization does an incredibly poor job selecting who to make offers to, 99.9% of the time the referral will outlast the waiting period, saving the organization nothing and penalizing the employee in the process! Delaying the reward just adds another administrative issue, expanding the process time significantly and forcing developing of a tracking element. Most reasons for early turnover are related to the manager or are related to issues beyond the new hire’s control and have nothing to do with the referring employee. If you do have an employee consistently providing bad referrals, coach them. If an individual manager has high early turnover rates from any source of hire, coach the manager.

If you can’t develop a business case to stop delaying payment, consider repositioning the reward. Instead of communicating that the reward is withheld until completion of a probationary period, give the referring employee a small reward at time of hire and alter your reward structure to provide a larger reward for all referrals that result in a hire that obtains above-average performance ratings after six months. This approach will encourage the referring employee to support the referral during the early stages of employment and possibly even reduce overall program costs. Our 2008 research revealed that 58% of employees are comfortable with ERP rewards that vary with hire performance and that another 13% are neutral on the issue.

It seems difficult or ambiguous to tie referral credit to someone blogging. How do you identify who deserves credit, especially if the referral wasn’t a warm referral at the first point of contact?

There is a quite simple solution to identifying who gets credit for a referral. Ask the referral who played the biggest role in getting them to apply! If they list a specific blog, video, social network contact, etc. you can use that information both to allocate the reward and to educate your employees about “what works” and what does not.

I understand that it is very important to respond to every referral within an acceptable period of time, but is an automated response enough?

It is certainly acceptable to send automated acknowledgments that a referral has been received, but that should never be the only communication sent to all parties involved. When automated responses are used, they should help establish expectations by outlining the referral process and estimated timeline. All referrals need to be closed; i.e., result in a hire or a decline. A personalized communication needs to be sent to every party involved at each stage of the referral process until the referral is closed, with the first personalized communication occurring within 24 to 72 hours of the referral submission. Think of it like an employee suggestion system; if a suggestion that an employee has worked hard on gets only a generic response, it is unlikely that you will get future well-thought-out suggestions either from them or their colleagues.

What should you do if the referral is clearly not qualified for the position?

This happens much more frequently in programs that lack a design element requiring referring employees to pre-assess or qualify their referrals. You must respond to all referrals, but in the case of outright rejections, it helps to provide the employee with feedback so that they know what they did wrong or the general reason for the rejection. This might include a checkbox list including insufficient education, insufficient experience, or lacking specific skills. If you do not have the resources for customized responses to all, you should at least provide specific feedback to first-time referrers, to well-connected individuals, to senior managers, and to individuals in the hard-to-fill positions.

Is there any research that demonstrates that companies make employee referrals a priority? If yes, how do they maintain two different recruiting processes?

In our benchmark research, we isolate the top 40 performing programs evaluated as our best-practice sample. In 2008, all but one of the firms in the best-practice sample maintained a separate recruiting process for referrals that fast-tracked evaluation and scheduling. Prioritization is becoming more common as more organizations acknowledge that treating all roles and organizational units equitably doesn’t mean equally. Business leaders expect prioritization even though they may not be happy when it negatively affects them. From an economic perspective, ERPs produce the best hire yield for external hires: 1:3 in best practice firms. So prioritizing flow from ERPs is a logical resource optimization tactic that drives not only efficiency, but effectiveness.

Other factors driving prioritization include the fact that all high-quality applicants (and referrals are top-quality candidates), once identified, should be given expedited treatment because they remain in the job market for such a short period of time. Prioritization also encourages your employees to continue referring, by providing a positive experience that validates that their input is valued. Incidentally, prioritizing referral applicants does not imply that they will undergo different screening or assessment, only that the process will trigger faster.

What should happen if a referral that was made for a position that involves a bonus … ends up being a better fit for another position that does not have a bonus attached to it?

Generally referral bonuses are tied to a specific job or requisition number because they are hard-to-fill jobs or are mission-critical. As a result, filling another position with a referred candidate would not automatically result in a reward.

What do you do when two employees refer the same candidate? Do you reward the earliest referrer or split it between them?

Generally, referral bonuses are paid to the earliest referrer but referrals can be set to “expire” after six months or one year. However, even the best-designed referral programs run into conflicts, so the best practice in those rare cases is to have the referral identify who played the biggest role in them joining the organization.

All referrals are important but how do you balance the fairness of someone who really worked hard to get a referral to someone who did not?

The foundation principle behind employee referrals is that employees will only refer those folks whom they desire to work alongside and who can do the work. Rewards primarily focus on results, not effort. I am not aware of a single firm that measures or rewards the amount of effort that the employee puts in to get a referral. Obviously, well-connected individuals can more easily make referrals, but they have over time invested in developing those connections. However, if all employees are given a wealth of information, templates, and best practices, you can certainly narrow the gap between the effort required by the well-connected and less well-connected.

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.