The Corporate Recruiters Blog

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Manage your referral program.
·   The submission of “names” only (i.e. no resumes) for top candidates should be accepted and encouraged (top performers will often opt-out of a bureaucratic process).
·   Accountability and budget allocations.
It’s amazing how many organizations delegate the referral program to a junior person or intern. If you want to reenergize your program, rotate someone into the job with a background in marketing. Managing the referral program should be someone’s full-time job, and the percentage of the recruiting budget that is allocated to it should correspond with the percentage of total hires it produces. The fact that referrals seem “easy” is no reason to under-appreciate and under-fund them. Getting “top performer” referrals requires great talent, time, and money.
·    Make the rules simple.
Complex submission rules will dissuade employees from participating. Try to create guidelines that are easily understood. However, make sure you address problematic areas, such as how to deal with a situation in which two people claim to have referred the same candidate who ultimately was hired.
·    Avoid employee program manager turnover.
Because of weak metrics, most employee referral programs are under-appreciated by recruiting, HR, and senior management. As a result, turnover rates among ERP program managers are quite high. Because the learning curve is steep, the replacement manager almost always “damages” even the strongest referral program. In order to avoid this problem, the position needs to be given as much recognition and pay as necessary to encourage the program manager to stay in it for at least three years. If the person running the program views this position as one small step on their way to becoming an HR generalist, you have made a bad hiring decision.
·   Add mechanisms for resolving disputes over who “gets credit” for duplicate referrals. There should be an appeal process for individuals who feel they were unjustly denied a referral bonus.
·    Maintain clear records.
By time-dating each resume that has the properly filled out referral card, for example, you can avoid potential problems. Keep data that list the referral, the date, the name of the candidate, all pertinent candidate data, a copy of the resume/application, and a copy of the referral form. Also, when the status of the referral changes, update it accordingly.
·    Don’t allow referral spamming.
Designing a process that allows individuals to inundate the referral system with high-volume, low-quality resumes will cause the program to suffer or even fail. If you allow it, some employees will bring you stacks of resumes that they got from a recruiter friend or from the Internet. Although it’s tempting to accept them, never accept large volumes of resumes or referrals. The reason for this is that the person giving a large volume of referrals cannot know them all, and one of the key design features for program success is that employees only refer people they know on a professional level. Unless it’s an unusual circumstance, limit referrals to no more than three a month for many individuals.
·    Historical data.
Add a feature where an employee’s “next referral” is weighted based on the success of previous referrals.
·    Gather metrics for continuous improvement.
Surveys reveal that well over 75 percent of referral programs do not use metrics to monitor the performance and health of their programs. An even greater percentage of organizations do not evaluate the on-the-job performance of new hires by source. Without this crucial metric, you cannot calculate the added value of referrals. Other metrics need to be kept on voluntary turnover, offer acceptance rates, and termination rates. Employee participation rate by reporting group can be a particularly telling metric. Some metrics you may consider proposing include:
-    “On-the-job” performance of referral hires (measure and compare the ERP’s performance ratings to other sources of candidates)
-    Program ROI
-    Retention (turnover rate) of referral hires
-    Percentage of all hires who come from referrals (variant: percentage of key jobs filled by referrals)
-    Manager/referee/referrer satisfaction with the referral program
-    Percentage of diversity referrals/hires (especially in management and key jobs)
-    Process time by step (delay from referral point to interview date, which results in fewer top performer hires)
-    Employee participation rate in the referral program
-    Cost per hire (as compared to other sources)
·    Distribute ranked referral metrics to managers.
It’s not enough to gather metrics about referral programs. If you really want to drive performance, distribute ranked referral results by individual manager. The report should go to each manager every month so that they can see by name where they rank against others on producing quality hires. There is no tool that will get managers attention faster than distributing ranked metrics. Distribute a “best to worst” list of company-wide departmental referral performance in order to embarrasses dawdlers.

Step 5. Pay Referrals rewards.
·    Do not delay reward/bonus payment.
Withholding payment of the bonus for 90 to 180 days post-hire is silly. Do sales people have to give back their sales bonuses if the customer stops buying after 90 days? Do you delay payments to staffing agencies or executive search firms? Well, of course not. So why should you treat your employees more harshly than you do your vendors? Rewards work only if they are immediate and there is no “risk” of not getting them. Nothing discourages participation more than delaying the reward based on something beyond the employee’s control. Paying half of the fee upfront is not an acceptable alternative. In addition, it’s not the employee’s responsibility to hire a candidate, only to refer them. Hiring managers do the final assessment and they determine whether the person is the right fit. If the person does quit prematurely, it’s the manager you should blame, not the employee making the referral, because they have no control over how the individual is treated.
·    Provide different rewards for different jobs.
All HR programs should reward performance, and referrals are no different. Referrals for hard-to-fill jobs and mission-critical jobs should get a bigger bonus than easy-to-fill jobs. In addition, there should be a supplemental bonus if someone turns out to be a top performer after they are hired. If you fail to include reward differentials, your key jobs will be filled more slowly or not at all. In fact, the best programs allow referrals only for jobs that are high impact or are hard to fill.
·    Use big-dollar bonuses only for top jobs.
Paying too much money can actually kill a program, as large bonuses incent employees to spend more time looking for referrals than doing their jobs. This angers their managers and eventually it will cause these managers to resist the program. Research shows that anything over $1,500 will generally have little impact on referral volume of quality candidates.
·    Don’t pay a miniscule reward.
Do not embarrass yourself by paying a ridiculously small bonus. Yes, you can pay nothing or just have drawings for prizes and still have an effective program, but don’t pay $50 or $100 for something that if you had to hire an external consultant to do would cost thousands of dollars. If you’re paying significantly lower than the market standard, you will get push back from your employees who compare what your firm pays to what is paid by close competitors.
·    Reinvigorate the rewards.
Although some well-designed referral programs produce great results without any monetary rewards, most research shows that offering a monetary reward increases both the number and quality of referrals. This does not mean that you should offer a lot of money ($1,500 is the recommended maximum), but it does mean that you should vary the rewards and change them periodically to keep people excited. Many firms successfully use drawings for trips, luncheons with the CEO, a reserved parking spot or other non-cash items. The key here is to vary them and to see what works and what doesn’t. When something does work, it generally needs to be changed less often — about every six months or so.

Step 3. Promote outside your company.
·    Reinvigorate “event” referrals.
Getting referrals from employees who attend events is the most underused approach to referrals. Every year, literally hundreds or thousands of your employees attend seminars, association meetings, and other professional events and come home with nothing but a hangover. Referral programs must work with managers and corporate travel to identify which individuals are attending professional meetings and to encourage them to “bring back” the names of the very best people they encounter at these events.
·    Email referrals.
The program allows referrers to email open job descriptions to their friends.
·    Use employees to help you convert passives to actives.
Just like Cisco proved, employees can be great salespeople. Someone will (or already has) come up with a scalable version of the Cisco Friends campaign — one that won’t overwhelm employees with inquiries, while allowing them to focus up to a half-hour of their time a week building relationships with great potential hires.
·    Focus employees on top performers and key skill-sets.
Your employees already know who the top performers are at your competitors and what might make them look for another opportunity. But today they don’t have a resume or a way to tell you about how great they are, and these top performers won’t apply for a job you have open today. You’re already sitting on a gold mine, and tomorrow’s employee referral program will more easily exploit this by regularly asking them to name names. Your research efforts might yield other target hires that your best employees can help you pre-qualify, pre-sell, and motivate — but you’ll have to make sure that the right people in the company know who the gold candidates are and where to spend their energy.
·    Leverage employee relationships and affiliations to get ahead of hiring demand.
Relying on employees to refer jobs to friends or submit their friends for jobs is at most 10 percent of the battle. What about the people your employees know who could be great for future openings? Realizing that passive talent is incredibly valuable but does not always lead to immediate hires, employees will not only help you engage and build relationships with passive talent, they’ll also be rewarded for these activities, not just the longer-term outcomes of these activities. They may do many things to help broaden your reach among people they know.
·    Use proactive referral tools.
Even new or reenergized referral programs produce less-than-optimal results when they rely on advertising and word of mouth alone to produce referrals. Instead of the standard “wait for referrals” approach, recruiters need to proactively seek out top performers in targeted jobs and ask them directly for names. It turns out that top performers are often too focused like lasers (and they seldom need the extra money) to find time to make referrals. What is needed is a program to directly approach them face-to-face during breaks in management meetings and after their return from a trip to an event and then to ask them specifically for the names of the people that really impressed them.
·    Referral cards.
If you don’t currently have them, there are few better ways to reinvigorate the referral program than referral cards. Referral cards are attention-getting cards (Southwest Airlines used mock boarding passes) that you give to employees to hand to people they meet in their everyday business and personal life who have a special skill. They say something very complimentary (like, “Your customer service skills are amazing!”) and suggest that they might fit well with your organization. These cards work the best when you’re looking for customer facing skills because we see those people every day when we purchase things, eat lunch, travel, or return things.
·    Non-employee referrals.
The program should include a method to incorporate referrals from non-employees (vendors, consultants, ex-employees, and even spouses and customers).
·    Extend employee referral programs to passive job seekers.
Your target hires in 2015 will be even more likely to be employed than they are today. In the future, employees will be encouraged to drive leads and prospects vs. resumes and applicants, and recruiting processes will be better prepared to support this. They will also be your best networkers, opening up their rolodexes or actively building relationships that will lead you to great talent. Extended or multi-level referral programs that reward indirect referrals (for instance, a friend of a friend of a hire) will become very common.
·    Get feedback.
Ask successful referrers which approaches or sources they have found effective in identifying their candidates. That information is used to educate other employees at “lunch events” or departmental meetings.

Step 2. Promote inside your company.
·    Hyper-Segmented Messaging
While an average program may draft employee referral program messages once a quarter, the message is usually generic in nature and broadcast to the entire organization. Top-performing programs, on the other hand, may generate thousands of campaigns a year, some of which may be targeted at only a small handful of employees.
Segment messaging may include:
-    Employee location
-    Job family
-    Job performance rating
-    Labor type (employee, contractor, consultant, etc.)
-    Tenure
-    Previous employer
-    Past referral success/failure
-    Diversity characteristics
-    Affinity group membership
-    Management level
-    Preferred method of communication
-    Educational background (degree, institutions attended, etc.)
While some messages are relevant to the entire employee population, the vast majority are not. The secret is to avoid “dumbing down” messages to make them relevant to everyone and instead deliver extremely relevant messages to much smaller populations. It may seem like a lot of work, but the payoff makes it well worth it.
·    Three-Pronged Message Delivery
Another key learning from Dr. Sullivan’s research is that not all employees pay attention to the same channels of communication. Some people read posters, while others ignore them. Some people read every email, while others employ filters to sort out only the most important. Some people prefer face-to-face, while others require written materials.
What the research shows is that you need to leverage at least three channels if you want your message to reach a majority of the employee population. What happens if you don’t use at least three? The research shows 72% of employees were unable to recall basic program features when prompted, compared to 43% in companies using three or more.
The key Dr. Sullivan found was the number, not necessarily the use of specific channels. While email was common among nearly all top-performing programs, there were a significant number of top-performing programs that do not leverage email at all, like construction companies.
The most common sources of communication used include:
-    Signs in public places (have you considered bathroom stall doors?)
-    Email
-    Websites
-    Intra-office mail
-    Voicemail broadcasts
-    Team/Departmental/Functional meetings
-    Mail sent to employees homes
-    Payroll notices/Stubs
Also use the following channels:
-    Company newsletter and intranet. Announce special events, such as giveaways or quarterly drawings, as well as the status of the overall program and the status of individuals referred. This should be done on a weekly basis via e-mail, the company intranet or written reports.
-    Hold referral parties. Hold quarterly “referral parties.” Eli Lilly is famous for holding “Rolodex parties,” but given technological advances, PDA or email dump parties might be more appropriate. You schedule time in key targeted departments, during a slow period, to meet in their conference room with snacks or even lunch to get employees to give up the names of key individuals that they met recently. These events work particularly well after a large percentage of the team has just returned from a large professional event or convention.
-    Referral alerts. Announce in the mailroom, through email, or even over the intercom that there is a critical need for certain position. Just like blue-light specials and amber alerts, this program can excite people and spur action in a short period time.
-    Awards and recognition. Providing awards and recognition at all-hands meetings is a simple, effective way to remind people of the importance of referrals. Awards should be given to the manager who encourages their department to produce the most referrals and mention should be made of the number of top performers in the organization who got their jobs through referrals.
-    Announce successful hires. In many companies, all employees, with the exception of the recruiting staff and often times, senior personnel, are eligible to participate in the referral program. But when higher-level employees do refer individuals, company-wide e-mails are sent out to announce and recognize their contributions. Their efforts also can be acknowledged at special meetings or luncheons.
·    Pay attention to the top-management.
-   Include senior managers and HR people. The idea behind a referral program is to get as many people as possible scanning the streets and talking up your firm. To exclude anyone, especially highly visible individuals like senior managers and HR professionals, is not advised. Excluding them makes them feel like they are second-class citizens, and they will not refer at the same rate if they are excluded specifically from the program and the reward. If you’re worried about these individuals referring people who are qualified just to get the money, then these individuals should be fired on the spot. The best programs allow hiring managers or anyone with a perceived conflict to “opt out” of the bonus or donate it to charity.
-    Make the business case to line managers. Even if you’ve got the budget for the referral program, you will need to reenergize hiring managers if you want to reenergize your program. Rather than bombarding them with memos and promotional materials, get their attention by reminding them of the dollar impact that referrals can have on their departments. Start by showing them the superior performance and retention rates of referees. Then go one step further and quantify that performance in dollar terms — something they clearly understand. If their department is low in referrals, show them the exact dollar costs as a result of having low departmental referral rates.
-   Manager talk. Have key managers give talks at scheduled management meetings characterizing the importance of referrals. Have them share a few success stories, pointers, and program updates. This will generally energize employees who frequently think that only HR cares about referrals. You can get the CEO to announce that she is a big supporter of referrals and has even made referrals herself.
-   Incorporate into the motivation system. The utilization of employee referrals is part of the manager’s bonus criteria.
·    Educate and train employees.
-    Reinforce the employee’s role in building the team. Great referral programs are not about money; they’re about empowering employees to play an active role in building an all-star team for them to work with. Exceptional employees understand that working with the very best people helps them learn, reduces the time required to clean up other people’s sloppy work, and ultimately leads to a better chance at success. The major action to take is to change the perception of who benefits from the referral program. All promotional materials and communications must be redesigned to emphasize this program is “all about them.” The subliminal message is that if they don’t help by becoming 24/7 talent scouts, they might just end up working alongside a lot of pretty average people!
-    Educate your employees on how to talk to top talent. You might not realize it, but most employees actually don’t know how to meet and screen individuals for referrals. As a result, they have a bad tendency to refer their close friends or relatives. However, if you are willing to educate them, you’ll find that referral volume and quality will go up significantly. The key to employee education is to help them understand what questions they can ask, and what tools and approaches they can use to identify and to strike up a conversation with the best talent they meet. Teach them that it is okay to use community events, charity events, association meetings, list serves, and blogs to identify potential candidates for referral. You should also consider having individuals who consistently produce great referrals to give talks or mentor others.
-    New hires in key positions are asked for referrals on their first day on the job.

According to an article written by Dr. John Sullivan employee referral programs are the most powerful corporate recruiting tool, bar none.
Firms with well-designed referral programs can tune them to produce over 70% of hires (AmTrust, for example, has reached 78%). If your referral program is struggling to produce a mere 30% of your organization’s hires, it is likely you have more than one of these 15 killer elements as part of your program design. Some of them mentioned below:

Responsiveness of the program. Nothing kills a well-designed program faster than slow or no response rates to employee referrals. If the person being referred doesn’t hear something unique to their submission within 72 hours, they will become discouraged. If the employee making a referral doesn’t get a similar rapid response, they will also begin to wonder about the program. If nothing ever happens, they will simply stop referring. This happens in a majority of referral programs.

Excluding senior managers and HR people. The idea behind a referral program is to get as many people as possible scanning the streets and talking up your firm. To exclude anyone, especially highly visible individuals like senior managers and HR professionals, is not advised. Excluding them makes them feel like they are second-class citizens, and they will not refer at the same rate if they are excluded specifically from the program and the reward. If you’re worried about these individuals referring people who are qualified just to get the money, then these individuals should be fired on the spot. The best programs allow hiring managers or anyone with a perceived conflict to “opt out” of the bonus or donate it to charity.
Failing to continuously refurbish. Referral programs are essentially marketing programs and as a result, they lose their effectiveness over time. In fact, even the best designed programs begin to produce significantly lower results in as little as six months if the marketing materials and approach are not updated. So refurbish and re-energize your referral program at least once a year.
No ATS marking. If all individuals being referred are required to visit the corporate website in order to apply, there is a significant chance that the source of the resume will not be “marked” as a referral. In fact, some HR technology does not allow referrals to be “marked” so that they can be given higher priority. And without prioritization, the slow response rate will quickly degrade program participation.
Equal rewards for all jobs. All HR programs should reward performance, and referrals are no different. Referrals for hard-to-fill jobs and mission-critical jobs should get a bigger bonus than easy-to-fill jobs. In addition, there should be a supplemental bonus if someone turns out to be a top performer after they are hired. If you fail to include reward differentials, your key jobs will be filled more slowly or not at all. In fact, the best programs allow referrals only for jobs that are high impact or are hard to fill.
Paying a miniscule reward. Do not embarrass yourself by paying a ridiculously small bonus. Yes, you can pay nothing or just have drawings for prizes and still have an effective program, but don’t pay $50 or $100 for something that if you had to hire an external consultant to do would cost thousands of dollars. If you’re paying significantly lower than the market standard, you will get push back from your employees who compare what your firm pays to what is paid by close competitors.
Underestimate efforts to create effective program
Most managers in HR and recruiting view employee referral programs as simple to design and maintain. After years of research and studying over 600 companies, I have concluded that the exact opposite is true. It’s important to realize upfront that there are factors that lead to program success, but more importantly, there are factors that seem innocent on the surface, but when present, they can literally kill your program results in a very short period of time.

In another Dr. John Sullivan article you can find more details about how using Messaging Campaigns to Spur Employee Referrals.