The Future of Employee Referral Programs

In the face of growing worldwide skills shortages, organizations will increasingly attempt to activate their employee base as the main engine of their recruiting efforts. This will eventually blur the line between where the recruiting department ends and employee referral programs begin. Furthermore, our traditional notion of what makes a great employee referral program is poised to change dramatically.

Recruiting in the Year 2015

Imagine the year is 2015. The first wave of 78 million baby boomers started turning 65 four years ago. Headlines and lead news stories reference skills shortages in IT, engineering, nursing, and consulting, among other fields. Help-wanted signs begin to pop up everywhere. Productivity growth slows and potentially declines as valuable intellectual capital and productive workers are lost to retirement. The U.S. economy has shifted even further into a knowledge-driven economy — less capital- and more human-intensive than ever before — expanding the competitive set for talent in many industries. In past skills shortages, America has been able to turn to immigration to solve our challenges. This time is different. The United States is no longer seen as the land of opportunity, having been recently supplanted by countries like China and India. As suggested in the new, must-read book, Flight Capital: The Alarming Exodus of America’s Best and Brightest, tight immigration laws designed to fight terrorism and rising economies in places like China and India restrict our ability to import highly skilled workers away from their homelands. Many companies will turn to employee referrals to fill the void. This will not just be based on the fact that referred employees stay longer and perform better once hired, but based on desperation to find someone ó anyone ? who can do the job.

“We’re All Recruiters”

As Cisco demonstrated in the tight IT labor market in the late 1990s, it’s possible to turn your entire company into a recruiting force for you that generates up to 50 to 60 percent of new hires, increases productivity, and lowers time to fill. With larger volumes of active candidates and the ubiquity of the Internet driving large volumes of resumes, the Cisco Friends approach (where candidates could connect with a Cisco employee in their field instead of applying) would be a difficult strategy to undertake today without a tight screening process in place. Yet considering the time, when Internet usage was not as prevalent as it is now, labor markets were tighter, and Cisco was still establishing a name for itself, the Friends program was nothing short of brilliant. Cisco employees acted as an extended sales force, helping convince on-the-fence and passive candidates that the company was a viable (and friendly) employer. John Chambers, its CEO, measured referrals as a key performance indicator and kept employees on track with the program when numbers slipped. And the mountain of press generated about the innovative program helped turn it into a magnet employer. Today, most employees see recruiting as the job of one department. In the future, this will need to be seen as a company-wide initiative. Every employee will need to know that they are responsible for recruiting great people into the company, and how their activities will benefit them and the organization.

The New Employee Referral Program

Article Continues Below

What will it take to boost employee referral hires to 50 to 60 percent in 2015? How will employees be engaged in your recruiting efforts to help you get an edge over the competition? Here are five key employee referral initiatives that will help you achieve employee referral success in 2015 and beyond:

  1. Extend employee referral programs to passive job seekers. Your target hires in 2015 will be even more likely to be employed than they are today. In the future, employees will be encouraged to drive leads and prospects vs. resumes and applicants, and recruiting processes will be better prepared to support this. They will also be your best networkers, opening up their rolodexes or actively building relationships that will lead you to great talent. Extended or multi-level referral programs that reward indirect referrals (for instance, a friend of a friend of a hire) will become very common.
  2. Use employees to help you convert passives to actives. Just like Cisco proved, employees can be great salespeople. Someone will (or already has) come up with a scalable version of the Cisco Friends campaign — one that won’t overwhelm employees with inquiries, while allowing them to focus up to a half-hour of their time a week building relationships with great potential hires.
  3. Leverage employee relationships and affiliations to get ahead of hiring demand. Relying on employees to refer jobs to friends or submit their friends for jobs is at most 10 percent of the battle. What about the people your employees know who could be great for future openings? Realizing that passive talent is incredibly valuable but does not always lead to immediate hires, employees will not only help you engage and build relationships with passive talent, they’ll also be rewarded for these activities, not just the longer-term outcomes of these activities. They may do many things to help broaden your reach among people they know.
  4. Focus employees on top performers and key skill-sets. Your employees already know who the top performers are at your competitors and what might make them look for another opportunity. But today they don’t have a resume or a way to tell you about how great they are, and these top performers won’t apply for a job you have open today. You’re already sitting on a gold mine, and tomorrow’s employee referral program will more easily exploit this by regularly asking them to name names. Your research efforts might yield other target hires that your best employees can help you pre-qualify, pre-sell, and motivate — but you’ll have to make sure that the right people in the company know who the gold candidates are and where to spend their energy.
  5. Create a culture of rapid follow-up. A common thread that runs through passive recruiting and employee referrals is the need for proactive and rapid follow-up. Employees quickly shut down if you don’t follow up with their submittals. Wait on a passive candidate and the trail quickly goes cold. We’ll never be able to guarantee that every referral will get an interview (like several companies did in the late 1990s). But employers will get better at knowing who their best referrers are, and that immediate follow-up is needed for top candidates or those recommended by their best referrers.

Times have changed, and in the future, organizations will need to think much differently about how they manage and execute their referral programs to stay a step ahead of the competition. A lot of these changes are already in motion. I have seen many companies in the planning or implementation stages on the strategies above. It’s time to start thinking about the future of your own referral program.

Dave Lefkow is currently the CEO of talentspark (, a consulting firm that helps companies use technology to gain a competitive advantage for talent, and a regular contributor to ERE on human capital, technology, and branding related subjects. He is also an international speaker on human capital trends and best practices, having spoken in countries as close as Canada and as far away as Malaysia and Australia. His consulting work has spanned a wide variety of industries and recruiting challenges with companies like Starbucks, Boeing, HP, Microsoft, Expedia, Washington Mutual, Nike and Swedish Medical Center.