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The Complete List of Employee Referral Program Best Practices (Part 1 of 2)

by Aug 15, 2011, 5:49 am ET

I strive to be the world’s foremost champion of employee referral programs. As a thought leader in this field for more than 20 years, I have had the opportunity to assess and research hundreds of corporate ERPs, and most are pretty dull.

Too many organizations task management of the program to a loosely organized committee that rarely invests the time required to build anything more than a conservative, basic program. Despite the conservative approach taken, ERPs continue to outproduce every other external recruiting source (volume and quality of hire). In world class firms, the performance of ERPs is often double that of the average, but they often have dedicated management and a host of features few firms invest the time and resources to support.

If your firm is in the process of developing a new program or redesigning your old one and you are looking to move beyond the mediocre, this checklist should give a number of ideas for building a program that will give you a competitive advantage.

Each of these advanced features has already been proven to be effective, and they can work for you provided that you have the courage to implement them.

70 Advanced Employee Referral Program Features

This list of exceptional program features has been broken into nine different categories, including:

  1. Strategic features
  2. Features that improve referral program quality
  3. Features that help sell the organization
  4. Features that improve the effectiveness of rewards
  5. Features that drive program responsiveness
  6. Program communication features
  7. Features that extend the reach of the ERP — i.e. special programs
  8. Technology features
  9. Process management features

Firms that have done pioneering work with regards to each feature are cited in parenthesis.

I. Strategic ERP features

There are several strategic actions which serve as the foundation for any effective ERP.

  1. Prioritize your jobs — referral programs that focus their resources on attracting top talent, game-changers, and innovators produce the highest ROI. The best programs do not cover all jobs and instead prioritize high-impact and hard-to-fill jobs. Don’t waste employee time and burden your program’s administration with “junk referrals” and referrals for jobs that can be adequately filled through normal sources (Aricent).
  2. Link social media & mobile efforts with the ERP — since the explosion of social media, you cannot have a well-performing referral program without also having a strong social media effort. This close link is required because most of the connections and the relationships that your employees now build with other professionals occur via social platforms. Employees who spend dozens of hours building these relationships must be able to easily convert them into referrals and those referrals must of course be handled with a high level of customer service. Close coordination and smooth handoffs between the programs are essential (Sodexo Star Finder).
  3. Link employer branding with the ERP – having a strong employer brand makes it easier for your employees to approach and build relationships with other professionals. Having a strong employer brand and external image are also essential for convincing prospects to accept a referral. As a result, the two functions must work closely together to ensure that it is easy for prospects to find compelling stories and to locate information about the firm’s best practices and any best-place-to-work awards that the firm has won (Google & Sodexo).
  4. Prioritize your employee’s referrals based on their past success – the most effective programs identify employees with a successful track record of previous referrals. Referrals from those employees are prioritized and given expedited treatment. Employees with bad referral track records -or rule violators need to have their participation restricted (Accolo)
  5. Global referral capability is now essential as a result of social media, it is now easy for employees to make contacts everywhere, and since there is talent around the world, referral programs must now operate globally. In addition, remote work options now make it much easier for international talent to work anywhere. The very best programs allow for some level of regional customization (Accenture).

II. Increasing the Quality and Volume of Referrals

These advanced practices can make a significant impact on referral quality and volume.

  1. Create a targeted pool of likely connected referrers — do not spam all employees with referral requests. Instead, develop a targeted pool of referrers (a referral database) that can be proactively searched in order to identify and approach the small number of individual employees who have a high likelihood of knowing individuals with the required skills and experience for a particular job. This group should include the externally “well-connected” and “super knowers” that know about the established relationships of your employees (Accolo).
  2. Diversity must be emphasized – despite some frequent misconceptions, referral programs do not usually have a negative diversity impact. However if you desire to have an even higher percentage of diversity referrals, you need to focus your program and make it clear to your employees that diversity candidates are a high priority. Consider increasing the bonus for successful diversity hires (Sodexo).
  3. Provide referral cards – providing your most visible employees with a paper or electronic referral cards can be powerful. The card should praise the type of person receiving the card and note that you have decided that they would be an exceptional fit at your firm. Electronic referral cards can include a tracking code to ensure that the employee gets credit for the referral. Encouraging your employees to wear “ask me about xyz” buttons (e.g. ask me about working at Cisco) at major industry events can also be effective in beginning relationships (Accenture & Southwest).
  4. Proactively approach employees formerly employed at “target firms” — if your hiring managers are specifically seeking employees from desirable target firms, proactively approach your employees that used to work there.
  5. Referral events – periodic open houses, ice cream socials, videoconferences, or lunchtime events can aid in highlighting your program and its current needs. Recruiters can be present to provide training, accept spot referrals, to do instant assessments, and even to offer rewards for exceptional names (Agilent, Monster, & Aricent).
  6. Allow managers and HR to refer – because managers and HR individuals are also well-connected, it’s a mistake to prohibit them from making referrals. In cases where there is a perception of a conflict of interest, allow them to opt out of the bonus or to donate the bonus to charity (Accenture).
  7. Expand eligibility to include non-employees – non-employees who know your firm well are often willing to provide referrals. Consider including corporate alumni, retirees, vendors, spouses, references, strategic partners, and even customers. Work with finance to find the easiest administrative ways to reward non-employees (Internosis).
  8. Hold smart phone/social media/rolodex events – periodically hold short fun “contact gathering events” for small employee teams. During these events team members are encouraged to review their contacts and networks in order to identify potential referral prospects (Booz Allen Hamilton).
  9. Search the “visible” competition — in industries where potential targets can be approached in person (i.e. the retail and hospitality industries), hold periodic internal competitions among your employees. Challenge them to visit competitor locations during a particular month and to interact with employees and managers in order to identify the very best working at competitor firms.

III. Features That Sell the Organization

You must provide your employees with “sales tools” to help them to convince prospects to become a referral.

  1. Educate employees on how/where to find prospects — many employees simply don’t know where to look for prospects and how to convince them to accept becoming a referral. Educate your employees by providing them with a simple toolkit that directs them toward the best approaches and helps them to avoid learning by trial and error (Whirlpool, Aricent, & Acumen Solutions).
  2. Provide a story inventory – the most powerful tool for selling referral prospects are authentic compelling stories about the firm. The first step is to develop an electronic story inventory so that employees can easily access your compelling stories. You should also develop a process that allows employees to contribute new stories by creating a spread-the-love website or wiki. The goal is to provide employees with access to an abundant number of stories, best practices, and examples for use in selling prospects. (Zappos & Microsoft)
  3. Provide videos of the team – if a picture is worth 1,000 words, then a video can be priceless. Short informal videos can be a powerful supplement to stories. These videos can be put together by the hiring manager or employees and highlight key employees, the current work of the group, and the exciting aspects of the new opportunity. By providing this video, you increase the chances that the prospect will fully understand the opportunity and thus agree to become a referral (Deloitte & Microsoft).
  4. Guarantee an interview to top prospects – by providing top performers and top referrers with the opportunity to guarantee an interview for anyone who they refer, you dramatically reduce their fear that their candidate won’t even qualify for an interview. Removing this fear of rejection by both the referring employee and the potential candidate you can dramatically increase the number and the quality of your referrals.
  5. Develop a powerful slogan – although most referral programs have a slogan, very few of them are compelling, memorable, and drive action. The best program slogans are pretested to ensure that they provide the maximum impact. Examples include “A players know other A players,” “Help us catch a rising star,” “You recommend … we hire,” or “Help us build a great team… so we can all win.” (Microsoft – “Do you see yourself in others?”; “Google — Good people know other good people”).
  6. Offer a friends program — employees in the same job family can be great salespeople. Solicit employees to become referral volunteers who agreed to briefly talk to “A level” referrals. This practice can decrease dropouts and increase offer acceptance rates (Cisco).
  7. Improve your job descriptions – at some point in every referral relationship, the prospect will want to see the actual job description. Work with Compensation to ensure that the position descriptions are written in such a way that they actually excite potential referrals. Also compare your job descriptions for an open position to the competitors’ in order to ensure that yours are more compelling (Cisco).

IV. Reward and Bonus Related ERP Features

World-class programs never pay “equal” bonuses for all jobs, and some extremely effective programs offer no significant cash bonuses at all.

  1. Do-it-for-the-team should be the primary motivator - instill in your employees that the primary reason that they should refer people is because the team wins “when it has the best players.” It is a superior motivator over monetary rewards, because it turns referrals into an opportunity to provide their teammates and themselves with the very best coworkers. By emphasizing the superior capability of employees to make contacts, to build relationships, and to assess potential candidates, you can educate your employees about the critical role that only they can play in filling the team with top performers and innovators (Accenture, Google, & Cisco).
  2. Offer a charity donation option – some employees are concerned about the appearance of making referrals for self-enrichment. It is wise to offer the option of donating part ($175 – $900) or all of the reward to charity, as this can excite employees who are more concerned about helping others and being altruistic (DaVita & Accenture).
  3. Offer prize drawings and non-cash rewards a cheaper but almost-as-effective alternative to offering cash rewards for every referral is to hold a quarterly prize drawing where every employee who has made a successful referral during the period is eligible. Automobiles or car leases make great prizes because they get everyone’s attention. Unusual vacation trips are also powerful but if you have no money, consider making the prize a ticket to a once- or twice-a-year dinner with the CEO to celebrate all employees who made successful referrals. If you can’t afford or don’t want to offer large prizes or pay cash rewards, also consider providing a product sample, a handful of free movie tickets for the whole family, a plaque, or an award pin or T-shirt. Other no-cost prize options include a reserved parking spot, lunch with the CEO, or first-choice of vacation or shift schedules. Also consider placing their picture in the lobby or work with advertising to allow individuals who successfully refer an opportunity to appear in regular company product advertising (Tenet Health).
  4. Settle for names only — often top employees do not have the time to thoroughly research and to capture a resume from a hot prospect. Consider offering a small reward (up to $100) for simply providing the names of obviously qualified candidates. In some cases, top employees are willing to provide names only without any bonus. In these cases, regular recruiters can pick up the follow-up and the prospect selling (Children’s Hospital & Google).
  5. Periodically adjust your bonus amounts consider varying the bonus based on the salary of the position. Offering the same rewards without variation almost always gets stale. Periodically experimenting with different approaches can allow organizations to accurately scale their incentives and to modify eligible position openings on a continuous basis. The best practice is to adjust your rewards periodically based on economic conditions, the current response rate and relative to what the competition is offering (CACI International)
  6. Offer a “hard to hire” bonus supplement for “hard-to-fill” key or hot jobs, offer a higher kick-up bonus or contest prize for a brief period of time. In some cases, hiring managers are willing to pay this bump up bonus (Aricent).
  7. Gross up your bonuses – grossed up bonuses (where the tax on the reward is prepaid) can be stunning because they allow employees to receive and keep all of the reward (Agilent).
  8. Supplement the bonus based on performance offer supplemental award for referring those who after hiring turn out to be top performers (based on an above average performance appraisal score at the six-month assessment). Also consider increasing bonuses for longer-than-expected retention or if the hire happens to be a key employee from your competitor’s firm (Amazon).
  9. Reward employees for referring top prospects who are not hired offer a small reward to employees (up to $140) for all of their referral candidates who are good enough to be invited in for an interview. Also consider a small reward for employees who provide referrals who make it to the finalist list (even though they are not hired). This can further excite employees who “come close” but don’t actually have their candidate hired (Accenture).
  10. A handwritten thank-you note — a personalized note or call from a senior executive thanking the employee who made a high-impact referral is cheap but powerful (Amazon).
  11. Consider a “prize patrol” approach to celebrate referrals consider making a public display and celebration out of awarding an individual referral prize both to excite and to increase competition (Quicken & Amazon).
  12. Offer small rewards for “first-time” referrals – consider a small reward for employees who participate in the referral program for the first time. Potential small rewards might include a $25 gift or Starbucks card.
  13. Offer small rewards to your applicants consider small rewards or product samples for all referral interviewees who are not hired, to thank them for their time (FirstMerit).
  14. Stunning bonuses can get everyone’s attention — in order to garner everyone’s attention, consider periodically offering an exceptional bonus amount ($20,000) for extremely hard-to-fill positions (DNAnexus).

Next week, Part II of “The Complete List of Employee Referral Program Best Practices.”

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.