Management Tips··8 min read

How To Run An Effective Employee Referral Program

Employee Referral Program

Do you have a new position available within your company? Do you need to find some talent fast? How about an employee referral program? Employee referrals can be a great way to fill open positions without doing the legwork yourself quickly. In this article, we'll tell you why.

But first, let's go over what an employee referral program is and how it works.

What Is An Employee Referral Program?

An employee referral program is a promotional tactic where current employees are given incentives (such as monetary bonuses) for referring candidates to open job postings within their company's human resources department. Well-thought-out programs can save you substantial amounts of time and money when filling open positions.

However, poorly designed referral programs can do more damage than good. This is because they can quickly turn qualified applicants away from your company if the program's incentives aren't well thought out or appealing enough.

Costs And Benefits Of An Employee Referral Program

The main benefit of an employee referral program is the amount of time it can save you. According to a survey by Bersin & Associates, this method is 38% faster than other methods.

And if the referred candidate accepts the job offer?

You'll likely see lower turnover rates due to fewer unqualified applicants applying for the position. The costs of an effective referral program are easily outweighed by the benefits, particularly in a competitive talent market.

Creating The Best Employee Referral Program

So what does it take to run an effective employee referral program? What should you include in your employee referral program template?

We'll tell you:

Keep It Personal

Employee referral program ideas can work exceptionally well if they're personalized. When a candidate is referred, the employee who made the referral should receive some credit or reward.

Think about giving them a special mention in the job description, as it will provide an extra incentive for current employees to refer their co-workers for the position.

Make It Rewarding

While it may be tempting to announce that you'll disburse some cash bonus for every successful referral, this option is usually not the best choice. Bonuses can quickly become an extra financial burden for your company and won't necessarily result in higher-quality employees.

A better option is to offer a simple reward system that gives employees something they'll want. Rewards can be anything from extra vacation days to a paid lunch with the company CEO to something as simple as a free T-shirt or baseball cap with your logo on it.

Be Transparent With Your Employees

Transparency can prevent your employees from feeling misled or taken advantage of. Make sure that they understand how the referral program works and answer any questions you're asked about before the new hire is made. Start by giving them employee referral program examples.

It's important to avoid using words in your employee referral template with negative connotations. For example, you'll want to use words like "referred" rather than "solicited." This is because certain words can come across as overly pushy or aggressive.

Watch Out For Conflicts Of Interest

Your employees must never view the referral program as an opportunity to advance their careers.

If they think that referring a candidate might put them in the running for another position, they'll be more likely to focus on who will benefit their careers the most rather than on who might help your company.

Track Your Referrals For Maximum Effectiveness

Tools and programs are abundantly available that can help your company track referrals made through your employee referral program and the success of each candidate. For instance, you could create a unique referral code for employees to use when referring their co-workers.

Once a referral is made, this code would allow you to track both the referred individual and the person who referred them. This way, you'll know who's responsible for each successful hire.

You could also use your applicant tracking system to track which employees referred the most referrals. This way, you can reward those with the most significant impact on recruiting quality applicants, rewarding them for their efforts and increasing employee engagement by giving your current workforce an additional incentive to recruit.

By tracking your referrals, you can also gain a better understanding of which jobs are the most popular among current employees. This will allow you to create a more effective job posting to attract even more applicants.

Avoid Overdoing It And Don't Make Every Job Available For Referral

While it's a good idea to allow employees to refer their co-workers for most jobs, there's no need for every single open position within your company to be eligible.

This can quickly become overwhelming and time-consuming for your employees, resulting in fewer referrals overall. It's best to limit the number of available positions so that you can gain a better understanding of which jobs are actually in most need of new hires.

Don't Forget About Your Candidates!

Candidates referred by their friends or colleagues will already have a working relationship with whomever they're brought on to replace.

They'll also understand the company culture and be able to hit the ground running much more quickly than a candidate who isn't familiar with the company, its employees, or even the city they'll be working in.

Make Employees Who Referred Candidates Feel Appreciated

When new hires are brought on through your employee referral program, you must let all involved know just how much you appreciate their help.

A simple reward, like a welcome pack or a gift, can go a long way towards thanking your employees for their efforts.

Limit Rewards To Only The Most Productive Referrals

In most cases, an employee referral bonus program rewarding employees who refer candidates who are hired is common practice, but it shouldn't be the only reward available for workers.

If every single person is rewarded every time a new hire is brought on board through an employee referral, then it really can't be considered a reward at all. Ensure you have an employee referral program policy in place.

Avoid Assigning Blame If A Referral Doesn't Work Out

You must avoid blaming employees who refer candidates to your company if those candidates end up failing to meet the requirements of the position or your company's culture.

Not only is it unfair to the person who referred them, but it can also be bad for morale among employees who might feel that their recommendations are constantly being questioned.

Let Employees Know That Their Recommenders Will Be Taken Seriously

Suppose your current employees aren't comfortable referring other people because they fear that their recommendations won't be taken seriously. In that case, you need to improve the way your employees refer candidates.

Please give them a better idea of how new hires are brought on board and the critical decision-makers, so they know that their recommendations will impact.

If you give your current workforce more influence in the hiring process, they'll be more likely to refer others they know.

Make Sure Everyone Is Educated On Your Employee Referral Program

Ensure that everyone who works for your company is aware of the specifics regarding your employee referral program, including who can be referred, how referrals are submitted, and what happens after a new hire has been brought on board through an employee referral.

Make sure that every level of your company understands how their role contributes to the program and who they can refer.

This will improve overall productivity within your operation and increase participation in your referral process.

Set Expectations For Employees And Candidates From The Get-Go

Above all, make sure that both current employees and candidates are aware of your expectations for them when it comes to employee referrals.

From your end, make sure that their skills and experience meet the open position's requirements, that they understand the company culture, and that they're okay with working close to friends or family members who also work for your company.

Maintain An Open Door Policy For Employees Who Want To Make A Referral

This may seem obvious, but you must allow employees to make referrals even if they don't have a referral quota. Not every employee will be comfortable referring their friends or family members for employment, and there's no reason to punish those who aren't.

Maintain an open-door policy by letting employees know that they can make referrals at any time.

Don't Underestimate How Easy It Is To Make A Referral

It might be easy for you to overlook the power of your current workforce when it comes to making great hires, but you mustn't underestimate your crew.

Encourage your employees to refer their friends and family members who might fit, even if they're not related to anyone currently working for your company.

Keep The Process As Simple As Possible

When running an effective employee referral program, keep the process as simple as possible.

Don't allow employees to submit incomplete referrals or encourage them to contact candidates directly without going through the proper channels because this will increase your workload and decrease the efficiency of your company's referral process.

Just allow them to submit their referrals in-house to focus on what they do best instead of taking over tasks that aren't part of their job description.

Don't Forget To Set An Example

Please don't underestimate the power of social proof when it comes to impacting employee participation in your employee referral program.

Encourage people to make referrals by publishing photos on social media of current employees enjoying their jobs, hosting events that showcase the company culture, or even offering incentives for referring new hires who end up excelling in their positions.

Make Sure Your Employee Referral Program Is A Win For Everyone Involved

Above all, make sure that your company's employee referral program is a win for everyone involved.

From employees and candidates to potential hires and employers, make sure that it's as beneficial as possible for each party so you can reap the benefits of improved productivity and higher workforce morale.

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