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How to build an effective employee referral program

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Even in the best of times, keeping your recruiting operation running smoothly can be a challenge. You know that maintaining a pipeline of passive job seekers is a best practice, but with all the other duties crowding your schedule, you may not have the time. 

It’s even more stressful in competitive hiring markets, when the task of filling crucial roles in a timely fashion may become a time-consuming and frustrating exercise. External recruiters can help fill in the gaps, but relying on them too heavily will get expensive fast.

Building a strong employee referral program is a great way to minimize this struggle. By incentivizing your existing employees to tap into their professional networks, you can gain access to a pool of qualified candidates. This reduces the cost and workload of recruiting, and increases the likelihood of hiring people who will be a positive addition to the company’s culture. 

If your workplace doesn’t currently have an employee referral program, here are some pointers to help you get started:

Get everyone on the same page

Before you can start paying your employees to tap into their professional networks, you may need to get buy-in from more senior people in the organization. Luckily, there’s a strong business case to be made for incentivizing existing employees to help with recruiting. Companies with strong employee referral programs generally have a shorter time-to-hire, a lower cost per hire, higher quality of employees, reduced turnover rates, and stronger employee engagement. All of this translates into better productivity and less money spent on recruiting. 

Set strategic goals

Any time you’re funding a new initiative, it’s a good idea to set specific, measurable benchmarks that will help you determine whether your efforts are valuable. Determine which metrics you’re looking to improve. Are you looking to reduce time-to-hire for strategic roles? Increase employee engagement and satisfaction? Improve employee retention rates? Reduce hiring costs? Be specific and set measurable goals to track. 

Determine what the incentive structure will look like

Many of the specifics for your referral program will depend on industry standards and what your competitors are doing. The best candidates for your job likely know people in various companies who would also be happy to hire them, so it’s important that their friends in your company feel motivated to bring them on board. 

Determine the amount of money you’ll pay out to referring employees, and the timeline for these payments. Will they be paid after the new hire has been in their role for a set amount of time? Is there a set price for all successful referrals, or are certain roles more valuable? Iron out these details and put them in writing so that you can ensure your employees know what to expect. 

Decide how you’ll roll out the program to employees

Once you know all the details, it’s time to build excitement for your new (or improved) employee referral program. This will involve marketing the program to your workforce and selling them on the benefits they’ll see if they successfully refer their qualified friends and acquaintances for open positions. In addition to the financial incentives, a referral program gives your employees the opportunity to shape the culture of their workplace by suggesting people who would bring expertise and a positive attitude to the company. 

Build a system for tracking referrals

Overcomplicating the referral process is a quick way to put a damper on your new program. Ideally, it should be simple and user-friendly for employees to make referrals and collect their bonuses, and it should be easy for the HR and recruiting teams to manage as well. Find a simple unified system that works best for your team. This might mean including the referring employee’s name in the candidate’s file in your applicant tracking system, or you may find it easier to put together a simple spreadsheet. Whatever will be the easiest for you and your team to maintain is the best choice. 

Set a plan for ongoing improvements

Once your program is up and running, it’s important to take time to evaluate how effective the program is at regular intervals. Within a few months of rollout, take a look at whether the referral program you’ve designed is accomplishing the goals you laid out, or whether you need to make tweaks to make it more effective. You’ll also want to look at the quality of the employees that are hired as a result of this program; if they’re demonstrably better fits, it may be easier to get company leadership on board for additional investment in employee referrals. 

Empower your employees

Turning your existing employees into recruiters on your behalf can streamline and improve outcomes for your company’s entire recruiting operation. Employee referral programs don’t just result in better hiring decisions by increasing the likelihood of finding candidates who fit your company’s culture; they’re also likely to improve your existing employees’ engagement with their roles. By allowing the individuals in your workforce to take a central role in shaping the organization (and earn a little bonus cash for their efforts), your company’s leaders can make them feel empowered and valued.

When it’s executed properly, an employee referral program can address a lot of HR concerns simultaneously, making your recruiting process faster, cheaper, and more effective while strengthening relationships with your existing workforce. 

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