How To Set Up An Employee Referral Program

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Employee referral programs are a great way to bring high quality candidates to your company. Not only do employee referrals help you find better candidates, statistics show that candidates that are referred also have better retention rates. A lot of companies have great success with referral programs, and for good reason. A referral is a great way to start a relationship. It makes your job as a recruiter that much easier. You get to know a bit about the candidate, the candidate too gets a warm introduction to the company. You are more likely to get a positive response than perhaps any other channel.

There are several other advantages of employee referral programs, including:

  • Speed of hire: a referral is usually the fastest way to hire someone qualified for a position. It's quick to get the process started compared to job boards, and depending on your process, you can skip a couple of steps too.
  • Cost: employee referral programs are usually very cost-effective. Unlike job boards, you aren't spending hundreds or thousands of dollars to put up an ad that may or may not work. Instead, you're getting a high quality recommendation from within your own company!
  • Retention: As I mentioned above, employee retention is also significantly higher from referral programs compared to other sources.

Simply put, a well-run employee referral program is a win-win for everyone. Your employees get to bring the best people they know to your company and you increase the efficiency of your hiring process.

So, how can you set up an employee referral program? These are the key parts to setting up an effective referral program:

Work out the details

It's a good idea to put together a document that outlines the details of the employee referral program, the process, the timeframes, the benefits, etc. and make sure that the team is aware of it. Make sure it answers questions like:

  • Why you are creating an employee referral program, what your goals are
  • Why your team should refer other people (i.e. what's in it for them)
  • What the process is like

… and any other technical details Also: make sure that the right stakeholders are aware of and on board with the details.

Remember that referral programs can only work when they are adopted company-wide. You aren't going to get much out of it if you roll it out and the employees aren't aware of the details.

Make it easy for your employees to refer candidates

Now that you have the details, it's time to make it easy for your team to (a) know when there's an opening across departments, and (b) send a referral. It shouldn't be a long drawn process filling up multiple forms; in fact, it could be as simple as dropping a Slack message or sending a group email.

A good job description is always helpful, in this case not only for candidates but also your own team. When your employees understand the role well, they are able to make better recommendations. So, the first thing to take care of is a good, detailed job description that lists all the qualities you want (and all that you don't).

Make it easy for referrers to track status

You also need a way for your employees to actually refer candidates, track their progress, and for you to track employee referrals all in one place. A good referral tracking system can be really helpful, but even if you don't have one, a simple spreadsheet should be sufficient for a start.

It's important to keep employees who refer other candidates in the loop. Let them know the status of their referrals, or better yet, use something that can allow them to track status on their own. Even if you don't end up hiring a referral, it's important to thank the people who are sending these referrals your way. Even better if you can send them a small gift for referring other people.

Prompt communication is key for the success of an employee referral program. You need to give feedback to both the people who are referring candidates and the candidates being referred, as quickly as possible. An unresponsive referral program is worse than a non-existent one.

Reward people for referrals

Last, but probably the most important part of a good referral program: rewards for people who refer great candidates. To start with, make sure you leave a note; even better if you can publicly appreciate the referral!

Beyond that, you should also consider offering a monetary reward to your best referrers. Hiring is hard, and if your employees are making it easier for you, a monetary compensation is often the best, most hassle-free way of appreciating their contribution. Even if you don't want to do that, there are other options. You can get them a gift card, a trip to a foreign country, or anything else that makes them happy. For these things, you can also partner with other companies. Keep in mind though that the goal is to make the people who refer candidates feel happy, so you should do what is both ideal for you and appropriate for them.

Want to get creative? Look for other companies’ referral programs to get some ideas. For example, DigitalOcean pays a $3500 referral bonus and a $1500 donation to a charity of the referrer’s choice. Google’s employee referral strategy is even more interesting and has a lot of lessons applicable to even smaller businesses.

Once you have your referral program running, it's important to review it and make improvements on a regular basis. Take a look at how many referrals you are generating and how many are getting hired. Find out what your team feels about it. An easy way would to get your team’s feedback would be to quickly survey your team. There are tools that can help with this, but your applicant tracking system can also do the job for you.

Employee referral programs may sound daunting but they aren't. In fact, a good referral program can give you a great return for the time (and money!) you invest, perhaps better than any other channel.


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