Every organisation needs employees to help with its day-to-day running. These employees, from the cleaners to the top boss (manager etc.) are the heart of such organisations; without them, daily activity would grind to a halt.
Before a person can become an employee of any organisation, he/she must go through a process of screening, which includes an interview with a recruiter, manager etc. After completing this process the person is then employed. Before the personal interview the candidate needs to research the open vacancy, and there are many ways of getting information about the new position. They could find the job through a job board, LinkedIn, a newspaper advertisement, word of mouth or by referral.
This article will focus on employee referrals, why companies should use them and how to encourage them. And if you don’t have a referral program in place I recommend that you create one.
People influence people. Nothing influences people more than a recommendation from a trusted friend. A trusted referral influences people more than the best broadcast message. A trusted referral is the Holy Grail of advertising.
What is an Employee Referral Program?
An employee referral program is simply a recruitment method where current employees of an organisation are encouraged to look for fit individuals for a particular position in the organisation. The person they want to recruit must be known to them, either a friend or family member. This program comes with a financial reward to the employee who is recruiting. This, in essence, acts as an incentive for employees to deliver. Candidates who gain employment with any organisation have more information than others who are not employed through this method. There is a reward attached to employee referral programs, as mentioned above, and this reward is often known as a referral bonus, which is often payable to the person who refers the new employee after the probation period. Some companies pay this bonus after six or nine months or even longer, but the longer people have to wait, the less people could be motivated to recommend somebody, so don’t delay payment of the bonus.
Why Use an Employee Referral Program?
The typical recruitment process takes a whole lot of time. Some processes have up to 10 stages, from various examinations, tests, and trials to the eventual employment. This time automatically goes hand-in-hand with expenses; the more time you spend, the more an organisation spends on associated expenses such as refreshment for recruits, agents etc. This is where an employee referral program comes in: an organisation can skip up to three steps in the recruitment process. The person being referred is known by the employee, so all that needs to happen is a trial period or a very few stages after the referral has been made.
Imagine a situation where you want to employ, so you make use of agents, combined with other means of publicity like media advertisements, fliers etc.. Before you realise it, a lot of money has been spent. Money is spent using this traditional method in two ways: dissemination of information and agent services. So, instead of using these methods, why not use an employee referral program? The only cost to worry about here is the referral bonus. This cost-effectiveness is one of the reasons you should use this method. Your recruitment expenditure will greatly reduce because your employees source candidates themselves, also there is a reduction in time expended in the recruitment process.
In the process of recruiting, the candidate gets better information about the company by virtue of being acquainted with the referee. There is a certain relaxed mood when people who know each other discuss an issue, especially when it comes to enquiring about a job opening, and employee referral programs aim to exploit this mood of familiarity. The insider information a referred person acquires is quite different to the information someone relying on the internet will find. This exchange of information, coupled with internet information, will lay a strong foundation for this recruit when he or she is finally hired.
In essence a referral program turns employees into recruiters. They go out, secure the candidates, and your HR team applies the finishing touches. Furthermore, it was discovered through a study conducted by Jobvite, a recruitment and application tracking system that people hired by referral stayed longer on a job than others. The study discovered that 46 percent of those referred stayed over a year compared to 33 percent of those hired through job boards. One reason for this could be the influence of the referee on the referred.
How Do You Encourage Employees to Engage in This Program?
Firstly, the referral bonus should be clearly articulated. Employees taking part must know what they get for every candidate referred, and how the system of referral bonus works. This means that companies must have a set framework to make this work. There must be a plan, and an execution method in order for the employee referral program to work. Create referral rules that are as simple as possible, don’t create any unnecessary obstacles for your team if they want to refer somebody. Always ask new hires too during the induction process, let them know during the first day what your referral program looks like.
Also, state clearly that the future actions of referred employees will not affect referees in any way. Some referred candidates don’t perform up to expectation and when this happens, the referee must be assured that he or she will not suffer any consequences. It is only logical for people to abstain from an exercise that may affect them negatively if it backfires. So assure your staff that they are not the ones who make the final decision, the HR department will still interview their referrals and hire if deemed fit.
“People made referrals because they liked working at the company, not because they were hunting bonuses”
– From the book “Work Rules!”
written by Laszlo Bock
How Companies Can Set up an Employee Referral Program
Companies should start by informing their employees about the program, then there should be a clear bonus or incentive plan. This should be followed by a process to document progress and ensure effective communication. As described earlier, communication and planning are the keys to the success of this program.
It is good to have some incentive plan in place, but even doubling or trebling the referral bonus will not bring you more resumes. Only constant reminders, good strategy and discussions with your team will bring you more referrals. People like to work with people whom they know and trust, so encourage employees to refer new people for the team.
In conclusion, the employee referral program saves resources, time and money, and according to research has a positive effect on the turnover of an organisation.
Don’t forget that every employee is a brand ambassador and potential “recruiter” whom you can use. So support your people not only with referral bonuses, but also put in place a brand ambassadors program.
The equation for referrals is simple:
Happy employees = More referrals.