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Best-in-class organizations are now integrating employee referral programs into their hiring process due to the numerous benefits it can offer. Employee referrals help you find better-suited candidates who are more likely to stay with your company, compared to finding employees through external means. Happy, engaged employees and low turnover will have a positive effect on your organization's bottom line.

Employee referrals are more effective than other hiring processes because your employees are more familiar with the work culture and ethic needed to succeed in your company.

Set Employee Referral Program Goals

The first step is to determine what you want to achieve with employee referrals. Start by defining your success metrics as this is an absolute necessity for every single aspect of your employee referral program (ERP).

To set your goals, assess the short and long-term goals that would be solved by such an ERP. When you identify the goals you want to achieve and predict the outcomes of the program from the offset, crafting your program will be much easier.



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5 Stages of ERPs

Before you can start structuring your program, let's briefly review the 5 Stages of Employee Referral Programs and describe what they entail.

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  1. ERP Policy
    • Develop rules and regulations that govern program use and eligibility
    • Determine referral incentive payment systems
    • Define a referral program process, structure, and workflow
  2. Referral Portal
    • Offer an easy to use portal for recruiters, employees, and candidates
    • Use social media to maximize reach and results
    • Promote your branding
  3. Market & Promote
    • Develop value messaging
    • Communicate at every opportunity. For example, emails, newsletters, break-room posters, meetings, and social media.
    • Educate employees about tool use and benefits
  4. Seamless Integration
    • Integrate with your applicant tracking system (ATS) to ensure maximum use with minimal human intervention
    • Integrate with other “sources of truth” to simplify and clarify the exchange of information
  5. Measure Performance
    • Use reporting for participant information
    • Use analytics for trends and forward planning
    • Optimize metrics to maximize results

While it may seem that this process is linear, the stages can overlap and happen simultaneously.

Employee Referral Program Policy

Establishing your employee referral program policy is one of the most critical steps of the entire process, as it sets the foundation to what your employees and coworkers expect.

Remember, the clearer you are at this stage, the less likely that there will be any confusion when the ball gets rolling.

Here are a number of things you need to consider.

Who's eligible?
Is the program open to everyone? Can managers participate? What about foreign workers, interns, or temporary workers?

How much to reward?
Many companies award a flat reward amount for all positions to keep things simple, but this doesn't take into account that some positions are more difficult to fill. Another idea would be to reward by tiers, department, titles, etc. (For example, marketing job referrals are $200 and sales job referrals are $150.)

What's the payment schedule?
When do people get paid for making referrals? Best practices say to set a waiting period to make sure the hire is a good fit and stays within the company.

How will employees receive the reward?
Do you attach the reward to their paycheck or give it to them personally? There are many possible avenues to reward your employees. Depending on what your organization decides to reward, it can be delivered through your applicant tracking system (ATS) or human resource information system (HRIS).

What are alternate rewards that can be incorporated?
While cash is usually the reward of choice, there are other options that may be a better fit for your organization. It could be a physical gift card, points for use in a rewards catalog, or even a charitable donation. Non-cash rewards, or rewards without an explicit dollar value, have been shown to be stronger motivators than cash. This may be due to the added benefit of choice

While making choices can seem difficult, studies have shown that people love having control. According to a study from the University of Chicago, a non-cash incentive created more than twice the performance improvement over an equal cash reward. Besides performance improvements, non-cash or choice-based programs can significantly increase job satisfaction as well.

Below are other things you should consider as you build your policy:

  • Can you refer past employees?
  • How do you manage two people referring the same person?
  • Can you report referrals after the hire date?
  • Does the employee have to be in good standing to make a referral?

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Referral Portal

It’s recommended that you have an online portal so your employees can freely log their referrals. After you set this up, tracking referrals is as easy as checking the online portal logs and exporting the list of employees and referrals. 

No employee referral program is complete without social media integration. With the number of social media users rising and even surpassing the audiences of newspapers, radios, and magazines combined, social capabilities will unleash the potential of your referral program.

Social Media

With integrated social capabilities, employees can share job postings with everyone on their network as well as upload profiles of their connections for job openings at the click of a button.

Social media enables your program to have an enhanced reach in virtually minutes -- something that would require an organization to invest millions of dollars to achieve in the physical world.

With few organizations tapping into the power of social recruiting, it’s pertinent to leverage your employee networks to win the war for talent.

For more on integrating your program with social media, check out our webinar here.

Market & Promote

When your employees have a better understanding of the strategic and tactical advantages of an employee referral program, they’re more likely to participate.

It’s vital to create some buzz before launching your employee referral program so that there’s excitement before AND after launch. When communicating your program to your workplace, make sure to highlight how the program is linked to business objectives of your organization so your employees know “What’s In It For Them.”

Creating a communication ‘game-plan’ is easy, and should focus on deliverables that will help create excitement.

Here are some quick tips:

  • Prior to launch, inform the audience what’s coming, why it’s coming, and start to target those you want to participate.
  • Have an executive launch the program to jump start the employee enthusiasm and prompt people to log into the portal
  • Post launch, continue to  inform your audience about the initiative, recruit participants, and keep them engaged.
  • Send a monthly email that continues to explain the rules of the referral program, how to log referrals, and shine light on any open positions within the company.

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HRIS and ATS System Integration

Before you can track what referrals can do for your company, you need to have a process to track the referrals themselves. 

Human Resource Information Systems (HRIS) and Applicant Tracking Systems (ATS) make things easier for your HR departments. They'll streamline recruitment processes and help you create the best teams for your organization. 

Finding the right system can be difficult, so it's critical to find a vendor that will support you through implementation and after installation. 

Integration should be high on your list of priorities when looking for a system.

A unified system will make it easier for employees and managers to access needed information from a single point, saving time, steps, and money down the road.

Measure Performance

5 Elements of Hiring ROI

In order to start tracking the things you want to achieve, you need to first establish a status quo. How are things currently? Are you spending a lot of time managing the employee referral program? Do you want to speed up hiring and onboarding processes? How’s the experience for your employees, candidates, and program administrators?

Here are some of the things you’ll want to consider when setting your key performance indicators:
  • Direct Hiring Costs -- Expenses incurred when conducting a hiring search
  • Days to Hire -- Time and energy put into filling an open position
  • Lost Productivity -- When time passes with job openings, loss of productivity may occur
  • Onboarding & Training -- Becoming accustomed to the processes and quirks of the new workplace
  • Retention -- Keeping track of employee longevity and loyalty

Referrals have shown to reduce days to hire by almost 40% compared to hires from a career site. With faster hiring rates, loss of productivity is lessened.

When you’re done gathering your success metrics, it’s imperative you put them into an ROI plan so that it’ll appeal to your C-Suite when discussing funding. Garnering an investment to support your program will require business justification to back the request.

For more about Hiring ROI, check out our webinar here!
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The secret of my success is that we have gone to exceptional lengths to hire the best people in the world.
Steve Jobs

Steve Jobs Apple

Hiring people is an art, not a science, and resumes can’t tell you whether someone will fit into a company’s culture.
Howard Schultz

Howard Schultz Starbucks

Employees Matter.

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