Why Your No. 1 Recruiting Source Is Underperforming (Fully Explained)

Article main image
Jan 13, 2020

Consistently, the top source for producing high-performing hires is an organization’s employee-referral program. Unfortunately, because most current programs were designed years ago based on a 20th-century ERP model, there is a high probability that your stale program is a prime contributing factor to your organization’s current talent and skills shortage. Its design flaws are likely to be costing even medium-size firms millions of dollars.

As the father of employee referrals, I’ve been the leading champion of them for over three decades. And when examining most current efforts, I have found that there are seven major design features that are unfortunately absent from today’s mostly stagnant corporate referral programs. 

The Strategic Design Features of Leading-Edge Referral Programs

If you want to dramatically improve both the quality and the volume of your referrals, here are the required strategic design features that are likely missing from your current program. The features with the highest impacts are listed first.

1. Sculpt the Program’s Design Using Data

The No. 1 most essential design feature is shifting to a data-driven model, where all program features are selected based on data. A data-driven approach is required in order to continually excel because it is more effective at identifying roadblocks and determining which program innovations have the highest impact.

The essential starting point is to measure the on-the-job performance of all referral new-hires (quality of hire), and then to make all major process-design decisions based on objective data that reveals the design feature’s impact on new-hire quality. The quality of hire can be measured simply by asking each hiring manager after six months, if given the chance, would they rehire the same individual.

The most important referral-design areas that must be data-driven include rewards, program marketing, position prioritization, and the minimum standards for accepting a referral. Gathering and sharing data on global referral best practices is also critical. Metrics and reporting must be used to track and improve response rates for each covered hiring manager.

2. Make “Help the Team” the Primary Motivator

By far the most effective motivator for referrals is to encourage employees to make referrals in order to help their team. It is critical that your employees be thoroughly convinced that they can significantly contribute to the team by acting as 24/7 talent scouts. In that role, they can best help the team and its performance by using their network to identify and refer only individuals whom they know have superior skills and capabilities.

Small rewards can also be added; however, over-relying on rewards can incentivize some individuals to make a high volume of mixed quality referrals, which can clog your system.

3. Require Employees to Prescreen for Quality 

Employees must be educated on the importance of making only quality referrals. If you want to limit low-quality referrals, you must place responsibility on employees to do some pre-assessment. As part of the referral application, require employees to assess and then report that they have evaluated prospects completely. The four key assessment areas include: 

  • Do they have superior skills?
  • Have you evaluated their work and found it to be superior?
  • Do they “fit” the organization?
  • Have you sold them to the point where they will accept an interview offer?

This pre-assessment is necessary because as many as 60% of all referrals are barely known by employees because they proactively approached them and asked to be made referrals as a favor.

4. Be Highly Responsive 

Because responsiveness is literally the No. 1 critical success factor for maintaining a high volume of quality referrals over time, it is essential that staffing levels, resource allocation, and program-success metrics all focus on white-glove response time and treatment. Often that means a 24-hour response to both the employee and the prospect after a referral is received.

An additional goal is to make an interview decision on a new referral within a week. After a failed referral, feedback to the employee needs to be fast and brutally honest.

5. Prioritize High-impact Referral Areas 

Avoid straining your employee-referral program by limiting or focusing your referral efforts on the highest impact teams, jobs, and skills. Then customize and focus your referral responsiveness, program marketing, reward amounts, and your referral-needs announcements on those high priority areas. Make sure that your ATS has the capability of tagging referrals so that they can receive the highest priority.

Internally, be very careful about over-relying on automating referral administration because it seldom has a strategic impact on referral quality.

6. Proactively Approach Well-Connected Employees 

Most referral programs solicit referrals from employees using a broad one-size-fits-all impersonal approach. However, be aware that the commonly “spamming for referrals” will likely hurt your efforts. Instead, utilize the most effective approach for soliciting referrals, which involves proactively approaching well-connected employees that work in high-priority jobs or teams.

Under this approach, recruiters proactively seek out one-on-one meeting opportunities with top-performing employees in the target field (data reveals that top-performing employees submit the highest-quality referrals). Employees/managers are then asked for their help by providing the names of a handful of exceptional individuals that fit a targeted set of criteria. Because the approach is personal and targeted, the response rate and referral quality are significantly higher. 

7. Quantify the Impact of Referrals in Dollars 

The language of executives is money, so if you want to get their attention and full support, you must unambiguously show how your employee-referral program has a direct impact on corporate revenue.

Start by working with the CFO’s and the COO’s offices to determine how an increase in on-the-job performance of referred new-hires directly increases revenue in already measured revenue-generating positions like sales, CRM, and collections.

Next, estimate the dollar impact of higher-performing referral-hires in product development, marketing, and revenue-impact positions.

Lastly, demonstrated to executives how the extremely high ROI of referral programs positively compares to the ROI of other businesses and HR initiatives. 

Final Thoughts

In order to maintain continued success, referral programs need continuous updating and modernization. To ensure that this happens, I recommend that you put together a design-audit checklist and use it to periodically assess your ERP program and to identify any potential problem areas.

In addition, high-impact program features should also be added periodically. Those additions often include building and giving employees access to an organizational story inventory. Continuously refreshing your program’s marketing and rewards is also necessary. Finally, a focus on boomerang referrals and encouraging diversity referrals can also have a high impact.

Author’s Note: If this article stimulated your thinking and provided you with actionable tips, please take a minute to follow and/or connect with Dr. Sullivan on LinkedIn and subscribe to ERE Daily.

Get articles like this
in your inbox
Subscribe to our mailing list and get interesting articles about talent acquisition emailed weekly!