Hiring Wisdom: 7 Common Mistakes With Referral Rewards Programs

Research repeatedly proves that employee-referred candidates are three times more likely to be a good match for the job.

This is because your employees give these candidates much more detailed information about the job and the working conditions than you would.

As a result, candidates are only likely to proceed with the selection process if they feel they will be a good fit. And because they’re a good fit and they already have a friend or acquaintance in your employ, referral candidates are also much less likely to quit or be fired.

7 common referral mistakes

Of course, most employers know all this and many encourage their employees to refer friends, family, former co-workers, schoolmates, etc. by offering an Employee Referral Reward Program as an incentive. However, if you already have a program in place, you may be sabotaging any meaningful results by making one or more of these seven common mistakes:

Not qualifying all leads — You fail to ask the referring employee: “Is this a referral or a recommendation?” While a referral implies the referrer and referee know one another, a recommendation means your employee is confident the person would be a good fit. This doesn’t mean you should ignore referrals because they’re still worth screening in or out, but go after the recommendations first.
Not narrowing your search parameters — When you ask your employees if they know of anyone they could refer, many will find it difficult to come up with a name or two out of the entire universe of people they know. However, if you make your request more specific (“Is there anyone you went to school with/worked with before/who goes to your church who might be interested in working with us?”), they may well think of folks they might otherwise not have considered.
Mistakenly thinking delayed gratification works — The referring employee doesn’t get the reward until the new hire has been on board 90 days. If you want a particular behavior repeated, you have to reward and reinforce it immediately. Also, when your policy is “If they don’t stay, I won’t pay,” it tells everyone you have little faith in the hiring decisions you make.” Is that what you really want to communicate?
No bang for the buck — When you do get around to giving the reward, you have payroll add it to the referring employee’s next check. Woo-hoo. The first thing that person will notice is that it’s not the amount promised because taxes have been withheld. And who else will notice and be motivated to earn a referral award too? No one. You might as well not even have a program.
Only awarding money — Money comes and money goes. What if the reward was a housecleaning service or the boss washing the employee’s car in the parking lot or donuts for everyone every Friday for a month?
Failure to create excitement/fun — The referred new hire comes on board and is welcomed (or not) just like every other new hire when what you should do is make a fuss. These new hires need to be introduced to their co-workers with an announcement like: “This is Michele and she was referred to us by Sanjay so we know she’s going to do a terrific job and be a wonderful addition to our team. Please make her feel welcome. And, Sanjay, thank you so much for referring Michele and I’m delighted to give your Employee Referral Reward right now.” And counting out the cash is one thing, but wouldn’t “spin to win” or pop a balloon or draw an envelope be more exciting?
Letting the program die of inertia — Your program is the same year after year when you could be changing it up to keep it exciting and to continually remind employees what’s in it for them. Maybe, for half a year, the names of all the referring employees whose referrals were hired go in a basket for a drawing for a huge prize at the end. Then, the next six months, everyone who refers anyone, whether they’re hired or not, is entered in a drawing for a $50 gift card.

This was originally published in the March 2015 Humetrics Hiring Hints newsletter.