by Kathy Buscher
One of the most effective ways to source talent for your organization is through an employee referral program. Beyond delivering economy (i.e., the lowest cost-per-hire), referred individuals come vetted by current employees who are uniquely qualified to identify candidates who fit the company’s mission and culture.
Most employers see the advantage of an employee referral program. In fact, the Society for Human Resource Management (SHRM) estimates that one out of two employers offer a formal employee referral bonus program. Of those that do, SHRM states that 25 percent of all hires result from employee referrals.
The Human Capital Institute (HCI) indicates that 74 percent of employers offer referral incentives. Some 92 percent offer a cash bonus, with $1,000 being the median amount. Their research finds that $500 bonus awards are the most common.
Is an Employee Referral Program Right for Your Company?
An employee referral program is a win-win-win. The employer, the referring employee and the new hire all benefit.
Recruiter.com estimates employee referral programs can save companies $3,000 or more per hire. In busy Human Resource Departments, a referral translates to one less hire the team must identify and recruit. Also, as mentioned above, many companies find that referrals are a better fit.
Beyond the potential monetary bonus, such programs allow every employee, regardless of level within the company, to submit a referral. The employee feels a sense of community not to mention deriving satisfaction from being able to contribute to the company’s success. Plus, an often overlooked benefit is that they get to pick their coworkers.
The new hire arrives at work knowing more about the company than the typical new employee, easing anxiety. Plus, the individual has an automatic friend, which facilitates integration and can be a motivational force leading to on-the-job success.
Important Considerations When Establishing a Referral Program
Companies considering implementing a referral program should keep these factors in mind:
Ways to Ensure Program Success
What If an Employee Referral Isn’t a Fit?
My approach is to always conduct a phone screening of the referral even if I feel the candidate’s qualifications do not match the position requirements. In this way, employees feel that their referral was given every chance.
If the referral is too far afield, I’ll be honest and tell the candidate “You only have 75 percent of what we need.” If possible, I’ll provide leads for jobs at other companies that I know about through my network.
Other recruiters, after reviewing the resume, will opt not to conduct any interview and simply notify the employee there won’t be an interview.
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A referral program is an excellent way to build a sense of community and teamwork within a company. It also is an economical way to hire skilled and reliable workers who come with the best recommendation of all: that of a current employee.
Kathy Buscher, SPHR, SHRM-SCP, is Director of Human Resources at Electrosoft Services, Inc.