Recruiters regularly rate referral hires as their top source of high-quality candidates for hard-to-source roles. This anecdotal appraisal conforms well with research that shows that referral hires are more cost effective, have the highest candidate-to-hire conversion rate and retention rate of all sources of candidates. Counterintuitively, referral hiring accounts for about 9% of recruiting budgets even though, on average, 24% of hires come from employee referrals across organizations, regardless of size and industry.
One possible reason for this is that referrals are viewed as an organic channel that can’t be scaled or standardized. The thinking goes that referrals are nice when you can get them but, like warm days in the winter or no traffic at rush hour, you can’t count on them.
In case you are wondering, this thinking is wrong. Of the companies surveyed there are 2 clusters when looking at referrals as source of hire:
- 15-25% source of hire (most companies in the world are in this range and the average is 24% across all companies.)
- 30-60% source of hire (leaders in referral hiring see significant gains across recruiting and HR metrics like employee satisfaction and role fit.)
Companies that excel at referral hiring and reap the associated rewards do so in an orchestrated and predictable way. After reviewing the top studies on referral hiring and conducting our own interviews here is a list of do’s and don'ts to consider when building your referral hiring program.
Top Performing Referral Hiring Programs DO
- Have support from the C-suite and line-of-business managers.
- Have a resource dedicated to the referral program.
- Implement referral KPIs and monitor them on a monthly and quarterly basis.
- Proactively encourage employee referrals with messaging and outreach from the C-suite and team leaders.
- Have an internal referral process that is quick and easy for employees.
- Respond quickly to referred candidates and make it easy for them to apply and get to phone interviews.
- Provide tools that allow employees to track a referrals trajectory through the recruiting process.
- Have an appropriate incentive structure for referring candidates that rewards participation in the program as well as hired referrals.
- Regularly surface “hot jobs” to employees in relevant roles.
- Recognize employees who refer candidates and who's candidates convert into hires.
Top Performers in Referral Hiring DON’T
- Use monetary incentives as the main motivator of participation in employee referral programs. (At a certain range, referral bonuses increase referrals at the cost of quality and hires from referrals.)
- Focus on increasing the quantity and not quality of employee referrals.
- Have unclear referral bonus process and structure or don’t remit employee referral bonuses in a timely and transparent manner.
- Miss the opportunity to provide education for employees on the positive impact of referrals.
- Underinvest in technology to support the tracking of referred candidates.
- Have a complicated referral program.
- Funnel referred candidates into the same hiring process as other applicants.
The above key takeaways split neatly into organizational decisions and process building. Prioritizing a referral program, with bonuses, executive messaging and education around the benefits of referral hiring is a commitment a company needs to make. Providing easy and trackable flows for referring candidates, enabling recruiters to quickly follow up with referrals and deliver incentives and positive reinforcement to employees can be done by implementing the right tools.
Whether you’re just building out your referral program or optimizing it across a large organization, ensure that you have the internal buy-in from your executives and external partners to help you bring your vision to life.
To learn more check out our post on the 8 Most Important Referral Hiring Studies.