Making Employee Referrals Pay – A Great Way to Build Your Workforce

Many enduring businesses have been built on the backs of referrals.  One customer talks to another and lauds the product they bought or the service they experienced. Word of mouth is a reference to the passing of information from person to person. Originally the term referred specifically to oral communication (literally words from the mouth), but now includes any type of human communication, such as face to face, telephone, email, and text messaging.  There is even a Word of Mouth Marketing Association (WOMMA) … go figure!

For years, the best professional services companies have known that the best technique for recruiting top talent into their organizations was through employee referrals.  They found that current employees referring prospective employees was a terrific way to build their workforce.

As the services industry has boomed, so has the need for solid employee referral programs.  Programs that not only attract the best and brightest candidates, but also have a hand in mentoring the new hires and making sure they are a cultural fit.  Programs that build workforce capacity and enterprise value.  Programs that retain employees long after the luster of the newcomers orientation has faded into the background.

Here are five things to consider when rolling out your employee referral program.

1.    Make sure your workplace brand is one worth promoting.
Asking current employees to ‘sell’ the benefits of your company only works if it is something worth selling.  Don’t even consider an employee referral program until you have an attractive workplace culture.
2.    Determine what defines a great employee.
Look beyond the technical requirements of the job openings and list the attributes you find attractive in a candidate.  Make sure your employees look to attract staff with both the hard and soft skills to be successful in your company.
3.    Develop an employee referral program that is win-win.
Determine your total costs for making a hire (labor, advertising, recruiting fees) and compensate employees based on this number.  If you are 25% higher than your competition, who cares, the objective is to develop a program that works for you.
4.    Link the employee and the candidate past the first day of employment.
Jeanne Roberts, President of KSSI, pays out her recruiting bonuses over a 10 month period.  This encourages the referrer to stay in touch with the new employee.  These mentoring or ‘stay in touch’ programs can go a long way in increasing retention.
5.    Level the information playing field.
Develop a recruiting packet that employees can use and refer to.  You are not trying to turn all your employees into card carrying members of SHRM, but you do want them to be armed with consistent information on the company.

Turn your company into a referral machine.  Start the process early.  Some companies actually had out referral programs at orientation and use the variable compensation of referral bonuses as a recruiting incentive.

One final note.  Monitor the costs of the program. Establish targets and develop goals for reducing hiring costs.  Successful employee referral programs lower total cost of hiring significantly and when combined with mentoring and outreach hooks, contribute to long term retention. Establish targets and develop goals for reducing hiring costs.

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