Employee Referrals: Tips to Build a Successful Referral Program

By Chris Murdock

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Imagine you’re going to work. You walk through the front door of your office building and you’re immediately surrounded by co-workers you cherish. They’re your friends, colleagues, college classmates and maybe even some relatives, but they all have one thing in common: they were all referred to your company by you. They work hard, they’re driven and they’ve all been at the firm for several years. Even though it sounds like a fantasy, that’s the basic concept behind referrals and why they make the best hires. I mean, who wouldn’t want to work surrounded by the people they know and love? Here’s why referrals are important to your business and how you can create a successful referral program in your organization:

The value of referrals

Trust the people you know, right? That’s how referrals work. They’re a recommendation employees give when their company is looking to hire. The best way to explain any logic is with facts, so here are 4 statistics that best describe why referred candidates make the most effective hires:

  1. 1 in 10 referral candidates are hired compared to 1 in 100 general applicants.
  2. Employee referrals produce the highest ROI of any sourcing method.
  3. 46% of referred hires stay for at least one year after they’re hired, as compared to 33% of people hired through career sites and 22% hired through job boards. Two years later, 45% of referred hires were still there.
  4. 67% of employers and recruiters said the recruiting process was shorter and 51% said it was less expensive to recruit via referrals.

But how do you acquire the best referrals? By building a referral program that reflects the nature of these candidates.

Keep employees and candidates in the loop

First, the most important part of a successful referral program is communicating expectations to referrers and referrals. Communicating everything from updates to dismissals is vital to the survival of a great referral program because if you’re not communicating expectations, it can create disengagement with current employees and also cost you valuable, potential hires.

Expectations and guidelines must be set for the program to succeed and catering them to your business model will help make your program thrive. Some questions that referrers need answers to include:

  • How quickly will the company respond to my referral?
  • Is there a referral bonus?
  • Are there qualifications for a referral bonus? Do I meet those qualifications?
  • How do I get my referral bonus?

While questions the referrals need answers to include:

  • How quickly will the company respond to my application?
  • Do I meet the qualifications of the position?
  • Will I get an interview? A second interview?
  • How long will the interview process take?
  • When will I know if I got the job or not? Will I hear back if I don’t get it?

It Really Does Make a Difference

Make sure everything is communicated in a timely manner to help build important, longer-lasting relationships with employees and candidates. Your people and your candidates want answers, so give them what they want! It never hurts to be transparent with your workforce (or your potential workforce).

But referrals only make up about 15% of hires, so does it really matter? Here’s why it should: referrals are 5x more effective than all other sources of hiring. Even though it’s the smallest group of candidates in the market, the conversion from referral to hire is much higher than candidates sourced from job boards or other ordinary recruiting practices. In other words, referred candidates have the most potential to make great, long-lasting employees, and communicating expectations and guidelines to them and their referrers will improve the hiring process within your organization for these types of candidates.

About Chris Murdock:

Chris Murdock is the Co-Founder and Senior Partner of IQTalent Partners. Chris has over 12 years of executive recruiting experience and leads search execution and client relationships along with supporting searches across the firm. Prior to Founding IQTalent Partners, Chris was a sourcer with Yahoo!’s internal Executive Recruiting team in the corporate offices in Sunnyvale, California. Previous to Yahoo!, Chris was an Associate in the Menlo Park, California office of with Heidrick & Struggles, where he recruited for software, hardware, professional services, and semiconductor clients. Before Heidrick & Struggles, Chris worked in the Retail Practice of TMP Worldwide in Atlanta, Georgia. While with TMP Worldwide, he worked on CEO, General Merchandise Manager, and various VP and Buyer level searches. Chris earned a bachelor’s degree from Vanderbilt University.

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