Updating Your Employee Referral Program – ERE Community Q&A, Part 5 of 5

By Dr. John Sullivan and Master Burnett

Here is the final installment of our five-part series on updating your employee referral program. Today’s questions are related to specific program features mentioned during the webinar.

How is the Friends Program (Cisco) an employee referral program? The Friends Program, introduced by Michael McNeal in the late 1990s and no longer active at Cisco Systems, leveraged employees in a specific role to communicate with and excite possible applicants for similar roles who had indicated a potential interest in joining Cisco Systems via the corporate website, an event, etc. As with all sourcing initiatives, a well-designed ERP accomplishes three things, including finding talent; pre-assessing talent; and selling talent on the idea of working for the organization. The “friends” concept was primarily designed to support selling talent on the idea of joining Cisco, although an argument could also be made that the conversations also supported assessment. The premise of any “friends” program is that your employees are the most credible and believable salespeople when it comes to convincing candidates that a particular job is exciting. In a large organization, administering such a program can prove logistically challenging, which is why we recommend that you modify the program’s scope to cover key jobs only. You have your best employees in a targeted job family volunteer to briefly communicate with prescreened talent of interest to answer their questions and to further convince them to apply for a position, to complete the interview process, and hopefully to accept an offer. While the employees in the program may not have sourced the talent directly, they play a vital role in convincing the talent that the organization is the right choice for them, which is why the employee gets credited with a referral.

Today there are additional ways to use your employees to help “sell” your jobs. Companies like Microsoft and Google utilize blogs as another method of allowing potential recruits to communicate directly with their employees. Asking your key employees to utilize their Facebook or LinkedIn profiles to provide information and to answer questions is another way to involve your employees in selling the company. Some healthcare organizations use a related concept known as “peer interviewing” where, rather than just talking to managers, candidates get to ask questions and talk to employees that “live” the job every day. If your employees love their work, it’s a good idea to provide them with an opportunity to share their enthusiasm and the knowledge that they have about this job (information and sales points that most recruiters and even some managers wouldn’t be aware of). If you’re concerned that your employees might add some negative comments about the job or your firm you might be surprised to learn that that is actually a benefit of any program that uses the “friends” concept. Why? Because any source of information that’s “perfect” is generally viewed as corporate propaganda and not believable. By including a small percentage of the negative factors, you increase the credibility of the overall message.
At what stage in the selection process is the best time to implement the “friends” program?
Under the old Cisco program, the “friends” contact was often quite early in the recruiting process. We recommend a narrower and more targeted approach. We suggest that you have a selection process for your “friends.” Being selective in who you allow to be “friends” assures that the individual employees that are helping sell your jobs are effective and enthusiastic communicators, as well as top performers. Use these “friends” to contact the most desirable talent of interest for mission-critical and hard-to-hire jobs. By limiting the jobs and the number of contacts, you reduce the likelihood that you will waste time on mediocre talent or unimportant jobs.
What’s a good benchmark company regarding to Employee Referral in FMCG Supermarkets?
Retailers specializing in fast-moving consumer goods often experience significant employee turnover, so leveraging an employee referral program to improve quality of hire and retention is a smart move. Companies with high-performing programs in this and related industries include: Domino’s Pizza, Kohls Department Stores, and Canadian Tire.
In the healthcare comparison example, is the $2,796 the bonus for the referral?
During the webinar, we introduced a side-by-side sourcing channel comparison for a major healthcare system that demonstrated that even though the cost-per-hire was greater for employee referrals, the ROI was greater due to markedly better rates in offer acceptance, voluntary turnover within the first year, voluntary turnover outside year one, involuntary turnover, and on-the-job performance. The cost-per-hire values used in the example are the total cost-per-hire, which includes the employee referral bonus as well as other hiring costs and program overhead.
Do you think that this (source comparison) is just reflecting the healthcare industry or are the numbers representing all industries?
Unfortunately, few companies go into that kind of detail when examining the “quality of hire,” but our research indicates that the differentials identified in the healthcare example are mild compared to some observed. Companies we deemed best-in-class back in 2007 have demonstrated that a well-designed and executed program can demonstrate significant positive impact on nearly all factors evaluated.
What is OPT?
OPT stands for “other people’s time”; it’s similar to the financial concept of OPM or “other people’s money.” Under the OPT concept, the recruiting function develops recruiting approaches that utilize the time and effort of your company’s employees (both on and off the job) as a substitute or alternative to utilizing your recruiter’s time. When budgets are limited, it’s critical that recruiting “leverage” its resources to produce the most impact without spending the recruiting department’s time and money. Employee referral programs effectively shift a portion of the work normally done by recruiters to the firm’s employees. Having another department’s employees identify, assess, and help sell candidates directly benefits recruiting without having to utilize the same amount of a recruiter’s time (as most other sources would require). Having executives write and give speeches about what it’s like to work at your firm, open houses, PDA “name capturing” parties, and recruiting at product events are just some ways to take advantage of other people’s “corporate resources” to enhance recruiting.
I did not understand the employee video idea…please explain this point further.
Videos are a powerful tool for effectively communicating any message. The Deloitte “film festival” concept is a simple one…why not involve your employees in identifying and capturing the exciting aspects that make your firm a wonderful place to work? By holding an internal competition or “film festival,” you can both excite and involve employees in spreading the word. In addition, your employees might find best practices and exciting aspects at your firm that even corporate HR was unaware of. Employee-generated videos are more believable because they’re not viewed by those who watch them as corporate propaganda. Videos may bring interested talent to employees, which can then build a relationship with the talent and later convert them to a referral.
Is there a source we can cite regarding the studies that bonus awards above 1,500 are not effective?
The concept of diminishing returns is one that is pretty simple to bear out in your own organization using pilot studies or even simple surveys. Our research conducted in 2007 is available as an addendum to anyone purchasing the Employee Referral Program Design Guidebook or that attends an AIRS Training program designed by Dr. John Sullivan. (AIRS funded our research into world-class program design.)
Could you expand on what Hollister is doing with customer referral programs?
Hollister Co. doesn’t talk a great deal about what they do, but the concept is discussed in online forums. The premise is relatively simple…people who buy the merchandise love the products, are enthusiastic about the company, and would probably be good brand ambassadors as employees. By leveraging the firms “customer loyalty” program, Hollister Co. can identify such individuals relatively easily by looking at the volume of purchases. What they purchase offers an idea of whether they would be knowledgeable salespeople; if they are fashion leaders, the concept also assumes that they are well-connected and therefore would draw customers to the store. Of course, you still have to put them through the standard assessment process. But many are likely to be thrilled to get the product discount and work at a place that produces products they love.
I want to see how you classify referral percentages that you showed on the beginning slides. Are you only classifying the referrals that you pay out/reward or do you also consider ones that select friend or relative option when they apply online?
This is an interesting question. Our research did find that a significant number of applicants will indicate they know someone who works for the organization, or that they were referred, even though the employee may not agree! When we report ERP hire percentages, we are referring only to the percentage of hires formally recognized by both the employee and the referral as a referral. If your organization compensates employees for referrals, the percentage of hires for which a referral bonus was paid would be a suitable data point.