Implementing an employee referral program: when, how, and why

Competition for talent in today’s business landscape is tighter than ever. Organizations need experts to fill open roles so that they can stay ahead. However, the traditional recruitment process can be quite sluggish and slow. Not to mention, ineffective at times. 

As far back as 2011, with CareerXRoads Sources of Hire Report, it was found that 65% of job openings are filled through internal movement and referrals. And the reason behind this is clear: such an employee referral is five times more likely to be hired and they’re 46% more likely to remain at an organization as opposed to 33% for organizations that only use career sites. 

With this in mind, it’s important to look at an employee referral program. What is it? When should you implement it? And what are its pros and cons? This article seeks to answer these questions so that you can hire better for your organization.

What is an employee referral program?

When it comes to what is an employee referral program, the answer is quite straightforward: this is a hiring program implemented by organizations, which are looking for new talent. 

However, instead of using career sites and traditional advertising for open roles, they rely on their internal talent to spread the word about different job roles among their network of peers. 

In this way, current employees become engaged in the process of recruiting for the organization by helping it find job candidates.

How to implement an employee referral program

If you would like to try implementing an employee referral program at your organization, there are several important steps you need to take before the ball gets rolling. Prior preparation and the definition of parameters are crucial for the program’s success. As such, it’s important to consider these steps to help you build the program and implement it:

Step 1: Get management’s buy-in 

This is important because they’ll need to help you outline your budget and also encourage the employees under their oversight to participate. Getting their buy-in will also help you define roles, set hiring goals, and allocate the necessary resources. 

Step 2: Ensure the referral process is easy

In this step, you’ll want to build your referral program. Here, you’ll want to set out the parameters for the hiring process. You need to create rules that existing employees need to follow, including processes that make it easy for them to refer a peer. Examples of making this process easy are using an online employee referral platform, using simple online forms, placing a physical resume mailbox in your HR department, notifying employees when there’s a new job opening, etc.

Step 3: Set your goals and metrics

Goals may include getting more qualified candidates for open positions, reducing the time to hire, or reducing employee turnover. 

Step 4: Offer employees a range of incentives

Irrespective of whether your incentives are financial, non-financial, or a combination of both, you need to ensure that you produce the right carrots for your existing network of employees so that they’re engaged and interested enough to participate. Examples of non-financial rewards include additional paid vacation days, electronics, gift certificates, charity donations, etc. 

Step 5: Communicate the program to employees transparently

You need to publicize your referral program within your organization whilst ensuring that you emphasize what the rewards are. Clear instructions on how to participate which are also easy to understand are also important. 

Step 6: Recognize employees

It’s also crucial that once you’ve made a successful hire through this process, referring employees are recognized, acknowledged, and rewarded. You can do so by writing to them to personally thank them, posting about the referral on social media, acknowledging their contribution through an internal communication channel, etc. 

Step 7: Track the program’s success

You have already worked out what your goals and metrics for the employee referral program are. And after a successful hire, you need to track the program’s success. You can do so by gathering information about the total number of referrals that you received, the number of these who were actually hired, whether this method was more productive than traditional recruitment methods, the duration of the employee’s stay with your organization, and feedback from management and employees about their perceptions of the program.

What are the benefits of an employee referral program?

Employee referral programs come with a number of advantages. Among these, you can enjoy benefits that include:

  • Faster time to hire
  • Higher quality of hires
  • Reach candidates that are considered “passive”
  • Boost employee retention rates
  • Higher conversion rates/Better job matching
  • It yields better returns on your investment and can be more budget-friendly
  • Employees hired through internal referral programs tend to stay within the organization longer
  • It’s a great way of ensuring a stronger “cultural fit” for current and prospective employees
  • You’ll find it much easier to hire for hard-to-find roles
  • Employee engagement will get a bigger boost and so will your company culture
  • Your employer brand will stand to gain from the exercise

What are the cons of an employee referral program?

Of course, nothing in life is perfect and employee referral programs shouldn’t be considered the perfect solution in the hiring process either. Below are some of the disadvantages of such programs that should be kept in mind as well:

  • Referrals can end up being biased and candidates may not be as strong as presented to the HR department
  • Other more suitable candidates may be overlooked during the recruitment process
  • Interpersonal relationships may be damaged or severed due to competition or personal relationships that can’t “translate” well in the workplace.
  • It can lead to “bad hires” because the process is considered pre-vetted and quality standards may slip by the wayside.

When is the best time to implement it?

For those organizations that are looking for a quick and quality hire, implementing and using an employee referral program is one of the best ways to do this. That’s not to say that it’s a process that will always yield quality hires though. It’s always worth weighing up the pros and cons of such programs to ensure that you get the most out of them. As for when the best time to implement it is, it will depend on your organizational needs. It’s great for both small and large businesses and it’s also great for non-traditional roles or those that are not easy to hire for.

In conclusion

If your organization is in need of new talent, you may think that an employee referral program is your best bet. However, if you’re looking for a database of highly qualified and experienced talent pools, browsing through our experts hub is your best bet. Here, you’ll not only find business development experts but also software developers and a whole lot more. And if you have any questions, feel free to reach out to us and we’ll give you all the help we possibly can.

Published: November 21, 2023

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StorsenDigital is a leading company that specializes in sourcing the best outsourcing talents in Europe. With the rise of remote work and digital transformation, skilled professionals are in high demand, and StorsenDigital is at the forefront of managing the supply and demand of these talents.
StorsenDigital is a leading company that specializes in sourcing the best outsourcing talents in Europe. With the rise of remote work and digital transformation, skilled professionals are in high demand, and StorsenDigital is at the forefront of managing the supply and demand of these talents.