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​Hire Better Employees with a Referral Program

Employees who come through referral programs are more productive, profitable for the company, and they stay longer.

Scenario 1: You run a lawn care business and spring has sprung. That means it’s time to hire a few more people to join the crew that stayed over the winter to work on snow removal. You put up a great posting and get dozens of resumes.

You pick a handful of resumes, run through a thorough but quick 15 minute interview, and hire a few field workers plus a team lead. A month or two into the busy season three of those hires decide lawn care isn’t for them, and you’re left short two crew members and a team lead. The worst.

Scenario 2: You run a lawn care business and spring has sprung. That means it’s time to hire a few more people to join the crew that stayed over the winter to work on snow removal. You put up a great posting and get dozens of resumes. You also let your current employees know this posting is eligible for the employee referral program and they pass the opportunity on to a few of their contacts.

You pick a few resumes, including a few referred by your employees, run through a thorough but quick 15 minute interview, and hire a few field workers, one of which was referred, plus a team lead, also referred. A month or two into the busy season one of those hires, not a referral, decide lawn care isn’t for them, and you’re left short a crew member. Not the worst.

What's a referral program

A referral program involves you offering an incentive to employees when they recommend a candidate from their network (a friend, a past colleague, etc) for a job. What the incentive is and when they receive it varies, and we’ll cover all of those details.

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Your employees are your company's ambassadors, so if they're willing to share a position with their contacts and you are willing to recognize and reward them for that effort it's a win-win-win.

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Why start a referral program

Referred employees are at the top of the list for new hire quality, outdoing job boards and recruiters, according to research by recruiting software providers, Greenhouse.

They are more engaged, more productive, and they stay with companies longer. This combination spells more profit for you in the longterm.

Imagine narrowing down a list of candidates to include people referred by employees you already trust, versus blindly combing through dozens of random applications or spending money on a recruiter.

Your employees are your company’s ambassadors, so if they’re willing to share a position with their contacts and you are willing to recognize and reward them for that effort it’s a win-win-win. That’s the benefit of a referral program.

Convinced? Here are the steps to implement one.

1. Involve your employees from the start

Putting together an employee referral program takes time, and you don’t want to rush and end up wasting time on a program no one uses.

So before you start putting together the program, talk to your employees and find out if they’re receptive to a referral program. Book a few employees for a meeting, or send out a brief email or survey asking for comments.

A few questions you might ask:

  • Are you familiar with employee referral programs?
  • If so, do you feel like they’re effective? Why or why not?
  • Would you participate in an employee referral program if we implemented one?

You’ll get a good idea of their past experience with referral programs and might identify some dos and don’ts to keep in mind as you build your own. You’ll most likely also get some incentive ideas…

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What is a good employee worth to you? Remember, a successful referral means that you're making a hire with little to no research, and the numbers show that this hire will stick around longer than someone you hire after seeing their random resume.

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2. Pick a prize that works for both parties

What is a good employee worth to you? Remember, a successful referral means that you’re making a hire with little to no research, and the numbers show that this hire will stick around longer than someone you hire after seeing their random resume.

The prize doesn’t have to be a cash incentive, though that’s common. You can give away smartphones, restaurant gift certificates, or sporting event tickets. The key is to offer something that makes sense for your employees.

The wrong prize won’t motivate your employees to go out of their way to refer anyone. The right prize could send some great candidates your way.

When it comes to choosing an incentive, make sure balance what you can afford with what will motivate your employees. If you can predict how often you’ll be hiring and offering a referral program opportunity, you’ll have a good understanding of what you can afford to spend to find a good fit.

3. Determine the conditions of the prize

Not every referral will end up in a hire, but when one does, when do your employees see their incentive?

Some companies wait until a new hire passes three months to reward a referrer, or, if they are dealing with a cash prize, they might decide to give out a small portion up front with the rest to come after the new hire reaches a certain time employed.

Greenhouse’s research suggests that some type of immediate reward regardless of a successful hire will encourage employees to participate in a referral program. That might mean handing out a $5 gift card to Starbucks when they submit a referral or their referral is chosen for an interview.

Give this system some thought. You might find that splitting a prize with the larger amount to come after a new hire reaches 1, 2, or 3 months works best for your business. If you regularly hire large groups of seasonal field workers for example, there might be some risk to paying people up front for successful referrals who may find the work is not for them.

It’s important to be really clear with your employees about the program rules, especially who is eligible to participate. For example, you may determine that the program is only open to employees in good standing, meaning that poor performers are exempt.

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Employees often feel cut out of the process, so let them know when you receive their contact's resume, if you've scheduled an interview, or if you've decided on another candidate.

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4. Get employees to participate

Once you have a good referral program in place you’ll have to put a little effort in to make sure people use it.

A few tips to encourage participation:

  • Remind employees about the program regularly: Even if the prize is great people might forget about the program, or a new hire might not hear about it.
  • Recognize employees taking part: This can be as simple as a shout out at your next meeting or a small thank you gift card to a nearby coffee shop when a referral comes in.
  • Keep employees in the loop: Employees often feel cut out of the process, so let them know when you receive their contact’s resume, if you’ve scheduled an interview, or if you’ve decided on another candidate.

Make your program work for you

A referral program is literally meant to work for you, cutting down on time and money spent recruiting, so tailor it to your needs.

You can limit referrals to specific roles, or offer different prizes for different roles. Just ensure that you’re communicating these details to your employees effectively so that they know when they have the green light to recommend someone great. Maybe this means an email when a new posting goes up or designating a section of your central bulletin board to postings/referral opportunities.

Have you tried a referral program? If you have any successes, insights, dos and don’ts to share with the group please share in the comments below!

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