Employee Referral Schemes: The 5 Reasons Yours Underperforms

By Tony Restell

For as long as I’ve been involved in recruitment, employee referral hires have always been the holy grail of recruiting. Countless studies have shown that employee referrals typically work out best for the employer in the long run (in terms of tenure of the employee being longest), succeed in bringing recruits on board faster than other channels; and the icing on the cake – at a lower cost per hire than many alternative recruiting channels.

These studies have always chimed with what I hear directly from employers. The problem I’ve always heard employers bumping up against though is that they just can’t ramp up the volume of hires being made through the employee referral route and so remain reliant on other channels for the majority of their hires.

Employee Referral Hires Get a Social Boost?

It seems that this shortcoming may now finally be being overcome. In its latest source of hire report, CareerXRoads reveal that referral hires are now US employers’ most important source of external hires, ahead of both the corporate career site and trusty job boards. External recruiters incidentally are way down the list – though in some countries like the UK you could reasonably expect their weighting to be far higher than in the US:

• Referrals 24.5%
• Career Site 23.4%
• Jobboards 18.1%
• Direct Sourcing 6.8%
• …
• 3rd Party Recruiters 3.1%

It seems the combination of technology advances and social networking have made it possible for smart employers to extract a far greater volume of hires from their employee referral programs.

Employee Referrals - 5 Key Ingredients

If you’re not getting a quarter of all your external hires via the employee referral route, maybe it’s time to assess whether your program ticks the following 5 boxes in terms of factors that seem crucial for success:

1. Automation – for an employee referral program to be a success, it’s crucial for your recruiting team to be able to enrol employees onto the program quickly and effectively. Automated follow-up is also key to ensure that employees are fully engaged with the program and learn what steps they need to take on an ongoing basis.

It’s important that recruiters are able to import all the company’s job openings without any double-work. Otherwise you have the employees engaged but only a trickle of jobs coming through. It’s critical that your program makes it as easy as possible for employees to share the most relevant openings with their networks and to be made aware of people in their network who could be a great fit.

With insufficient automation, referral programs will often be characterised by a flurry of activity at the outset that then dwindles quickly thereafter. By contrast, a program that’s been cleverly automated will require only moments of an employees time each week – and will similarly generate very little workload for the recruiting team.


2. Intelligent Candidate Matching – this is a factor that has often caused employee referral programs to die, for two distinct reasons. If employees are left to look at job openings and consider who in their network might be a good fit, they will often lack the time to give this their full consideration – or will simply overlook people in their network who could have been a great fit. But sharing jobs without any candidate matching can also cause employees to disengage. If inappropriate jobs start appearing in their social networking feeds, this is unlikely to produce hires and could reflect badly on the employee.

What’s key therefore is to have some form of intelligent candidate matching. If jobs are to be shared on social networks, your employee referral program needs to select which openings are most relevant for each employee to share. Ideally this will be done so effectively that the employee will be happy to have such jobs automatically shared with their networks. Alongside this, a personal approach to potential matches is likely to increase the response rate amongst shortlist-calibre candidates. So ideally your program should also present to employees the members of their network who look like the strongest fit for open positions, so most of the work of sharing openings with appropriate individuals has been done.


3. Introducing Competition and Gamification – one drawback of employee referral initiatives has historically been that there’s a long feedback loop between the time when an employee initiates a candidate referral and that candidate actually joining the business. Plus there are many candidate referrals that never end up being hired and where a reward is therefore not forthcoming.

This is where some form of competition or staff leaderboard can be a great motivator. By publicly recognising the efforts of those employees who have been most actively participating in the scheme, employers can make staff feel motivated to continue their involvement in the referral program on a weekly or fortnightly basis. If your program doesn’t make it easy for you to regularly acknowledge and thank staff in this way, that may be one significant contributor to a lack of engagement in the program.


4. Leveraging Employees’ Extended Networks – until very recently, most employee referral programs rewarded existing staff for referring in a successful hire. Incentivising the wider network of your employees’ contacts to share your openings has been the missing ingredient.  Yet doing this expands the reach of your recruitment marketing exponentially!


5. Mobile-Enabled – we live in an era where it’s well-documented that candidates are increasingly likely to progress their job search on a mobile device. Yet recruiting has struggled to keep pace, with a large proportion of careers pages and application processes yet to be optimised for mobile. It therefore goes without saying that an employee referral program that doesn’t work on mobile devices is going to produce weaker results than one that works seamlessly on mobiles.

Get to the point where you have an employee referral program that does all these things and you’ll have made a giant leap forwards. Getting employees on board and motivated to participate should become easy. The bottleneck of having enough jobs – and the right jobs – to share is eradicated. The reach – indeed the targeted reach – of your referral scheme is dramatically increased. No wonder this channel has become so important for the employers who have embraced it in this way.

Image credit: Recite