When recruiting efforts are on point, companies identify promising prospects, efficiently screen them, conduct meaningful interviews in a timely manner, and hire employees who are great at their job and stay at the company. My observations from companies I work with show that it is almost impossible to have all these steps in sync across all geographies and departments. Why is this? It turns out there are so many variables, stakeholders, and definitions of success that it takes a herculean effort (with lots of dedicated resources) to achieve total success. Given that’s the recruiting world companies live in, the practical task is to look for solutions that have the greatest impact and can be implemented with the resources available. And often, the greatest impact can be seen with sourcing practices. Finding the right prospects to fill the pipeline should make things more efficient/effective down the line. And finding the right sources to reach this goal becomes a critical part of a company’s recruiting strategy. While traditional recruitment methods like job boards and agencies can be important sources for hire, I want to show you why employee referral programs should provide the most hires for companies large and small.
Common sources of hire include:
- Company Website – Often the most utilized (and sometimes the least efficient) way to find hires.
- Online Job Boards (i.e. Glassdoor, Indeed, etc.) – widely used and can be effective for certain roles.
- Social Media – sites like Facebook, LinkedIn, and Instagram are popular but vary in effectiveness.
- Agencies/Headhunters – possibly the most effective and probably the most expensive of sourcing options.
- Employee Referrals – read on!
Why Employee Referrals are a Winning Strategy
There has been extensive research that consistently shows why employee referrals are more valuable than candidates from other sources:
Higher Quality Hires: Employees are invested in their company’s success and are more likely to refer candidates who they believe are a good cultural fit and possess the necessary skills and experience. According to Dr. John Sullivan Research, 88% of employers rate referrals as the best source for above-average applicants. And research from Glassdoor revealed that employee referrals are 8 times more likely to be a successful hire compared to candidates from other sources.
Employee Referrals are 8 Times More Likely to be a Successful Hire Compared to Candidates From Other Sources
Glassdoor
Faster Time-to-Hire: Referrals often move through the hiring process more quickly. Referred candidates are 55% faster to hire compared with employees sourced through career sites (HR Technologist).
Reduced Costs: Employee referral programs significantly reduce recruitment costs associated with job boards, agencies, and other traditional sourcing methods. A SHRM survey shows hiring through referrals is 51% less expensive and up to 10 days faster than other methods.
Increased Employee Engagement: By actively involving employees in the hiring process, companies can boost employee morale and engagement as well as improve retention. Referred employees show a 45% retention rate after two years, compared to 20% from job boards (SHRM). And a 2023 study by LinkedIn found that employee referrals resulted in hires who stay with the company 25% longer than hires from other sources.
Hiring Through Referrals is 51% Less Expensive and Up to 10 Days Faster than Other Methods
Society of Human Resources management
It should be clear that, if your company does not have a referral program in place, it’s time to consider implementing one. But how?
- Develop a Strong Referral Program:
- Clear Guidelines: Establish clear guidelines and eligibility criteria for the program.
- Competitive Rewards: Offer attractive rewards for successful referrals, such as cash bonuses, gift cards, paid time off, or exclusive company merchandise.
- Easy Referral Process: Make it easy for employees to submit referrals through a simple online portal or mobile app.
- Regular Communication: Keep employees informed about the program’s progress, success stories, and reward options through regular communication channels.
- Foster a “Culture of Referral”:
- Recognize and Reward Top Referrers: Publicly acknowledge and reward top referrers to encourage continued participation. Involving leaders to do this is a very powerful tool.
- Promote the Program: Regularly promote the referral program internally through company newsletters, intranet, team meetings, etc.
- Create a Sense of Community: Encourage employees to discuss open positions and potential candidates within their teams and departments.
- Optimize the Process:
- Provide Regular Feedback: Provide timely feedback to both referrers and candidates throughout the hiring process.
- Gather Data and Analyze Results: Track key metrics, such as the number of referrals received, the number of hires made through referrals, and the time-to-hire for referred candidates. Use this data to improve effectiveness and market success to leaders.
- Be comprehensive in comparing implementation methods
- Understand features and all costs involved: There are many ways to manage a program including managing with an internal team, using an outside vendor, and setting up through an applicant tracking system (if it offers this feature). While companies are often wary of paying an outside vendor, when considering the effort it takes to manage internally (timely management and feedback of referral submissions, tracking metrics, promotion of the program, payroll/payment distributions, etc.), it is often a cheaper alternative when all costs and time commitments are considered.
It should be clear that employee referral programs are a powerful tool for attracting top talent while reducing recruitment costs and improving employee engagement. By implementing a well-structured program and fostering a culture of referral, organizations can leverage their existing workforce to build a high-performing team.
For more information on this topic, read Elizabeth Walker’s article, “Why your business should introduce an employee referral program” or Indeed’s “How to Create an Effective Employee Referral Program” .
Need help building your Employee Referral Program or understanding how to recruit more effectively? Contact Eddie (estewart@ESTalentSolutions) for a free conversational diagnostic of your recruiting ecosystem. In a few short minutes, you could receive practical tips to improve the efficiency of your hiring process.
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