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Want More Employee Referrals? Larger Referral Bonuses Might Not Be the Answer

Written By
Jeremy Vickerman
Content Producer

The benefits of employee referrals are universally lauded and are considered the number one source of high-quality candidates. Faster time to hire, reduced cost per hire of up to $3,000, candidates that come from within a trusted network and, most importantly, the validation that you have engaged employees that are willing to act as an advocate for your organization. On top of this, employee retention is typically greater for referrals compared to non-referrals.

No wonder organizations are doing what they can to get more of them. In an effort to promote referrals, the majority of organizations offer related bonuses that can be anywhere between $1,000 and $5,000 for successful placements. Some, in the place of money, offer other incentives such as extra vacation days, day trips and expensive gifts. There are also those who offer gestures for all referrals, regardless of whether they get hired, in the form of low-value vouchers or free coffees.

It makes a lot of sense to offer incentives for something you want to promote, but – believe it or not – referral numbers are not affected by the size of the reward. All these incentives are nice to offer and, in terms of the cost-to-value ratio, they are often cheaper than the expense of finding an equivalent candidate through a TA team or agency. However, they will not be the reason referrals come in thick and fast, as there is much more than meets the eye when it comes to employees selling your business to their network.

Employee Engagement, Before and After

According to Payscale, employees that had been referred were happier and enjoyed more fruitful relationships at work. This is supported by the fact that an average of 46 percent of referred candidates stayed for over a year compared to 33 percent from other career sites. Referred employees are more likely to be engaged but equally it will primarily be the engaged employees that refer candidates in the first place. In this respect, referrals are a self-fulfilling cycle.

As mentioned before, there is more to consider than just upping the referral bonus. Engagement and opportunities for internal mobility play an integral role in stimulating referrals. The impression an employee has about their company carries significant weight when they speak with their network, with 83 percent of people trusting recommendations from friends and family over any other form of endorsement. As such, relationships, growth opportunities and reputation lie at the heart of referrals, so it is often more of a personal decision than companies estimate.

Subsequently, employees aren’t just going to refer anyone in hopes of receiving an incentive, as there is too much at stake. Once a referral has been submitted, the idea of a bonus diminishes and a focus on relationships and reputation takes precedence.

Regardless of whether an employee receives an incentive, if they feel their recommendation is not appreciated it’s likely to have an impact on whether they do it again or encourage their fellow employees to follow suit. Therefore, the way in which a company communicates throughout the referral process is vital if they want them to continue to act as their brand evangelist.

The Impact of Technology on Employee Referrals

Process and technology can heal or hinder an employee referral strategy. Let’s say that you have a workforce full of brand advocates with talent-rich networks, excited about putting some of their key contacts forward for your hard-to-fill roles. How frustrating would it be if your TA teams never saw these referrals? Well, this unfortunately is the case for many organizations that don’t have a system in place to keep track of these recommended candidates.

Without a process or appropriate technology in place, the desire to refer candidates can quickly fade away as a poor candidate experience leaves a bitter taste in the mouths of your workforce. Imagine if an employee has put a candidate forward previously, but their efforts vanished into thin air because they never heard anything more from HR. Or the embarrassment they might feel after recommending an acquaintance who then gets ignored by the recruitment team or has to tolerate a tedious hiring process. Even employees with high levels of engagement can have little to no confidence in referral schemes and the subsequent recruitment process. People simply don’t want to put their friends through something they don’t understand or believe in.

To ensure that it is a success, it is important to ensure your processes work in harmony with technology that molds to your company culture and internal procedures.

At the heart of your referral strategy there should be a dedicated, branded referral site where employees can access a list of available roles, as well as see the steps and status of any ongoing referrals in real-time. Ideally, it will allow referrals to be submitted to general talent pools and communities all year round, which will keep a steady stream of potential candidates coming in regardless of the number of opportunities that are available. A referral site can also present an opportunity for gamification, with the inclusion of a scoring system that tracks their referral activity and keeps them informed and engaged.

This should be backed up with regular communication that focuses on ensuring transparency of process. Opt for a technology that enables you to create and customize workflows with the desired level of visibility and transparency. Preferably it will also take care of providing status updates to referrers, as well as those that have been referred, at key points throughout the process.

A social sharing tool, such as Avature DNA, allows you to interact with the employee community, providing a platform for you to promote your referral scheme. By sharing instructional videos, fact sheets and previous success stories, you can help educate the workforce on the referral process as well as inspire them to keep up their efforts. Showcasing these successes through DNA creates a buzz, encourages peer-to-peer recognition and consolidates your gamification efforts. The right technology will also allow you to share jobs on external social media platforms and via email directly through your employee referral site, allowing for efficient and consistent referral campaigns.

Finally, keep track of the performance of your program by making the most of real-time reporting that provides teams with key data and analysis such as response rate, participation and ROI. This enables them to assess and adapt their strategies and tactics with the help of the figures in front of them.

Reaping ROI from Referrals

Investing in the correct technology to optimize your process is worth it in the long run with referrals delivering such significant ROI. This can help build a program everyone believes in and makes it easier for your employees to help you. So worry less about the referral bonus and focus more on engaging them in the process by making sure you are rewarding them, not just with incentives, but with transparency and timely communication.

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