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Build a Successful Employee Referral Program

Ask The Expert

By Barbara Mitchell

Q: My organization doesn’t have an employee referral program, and I think we’re missing an important source for new hires. How can I convince our leadership that this kind of program is a good idea? And do you have any tips on how to make it effective?

A: You’re right that employee referral programs are a good source of new hires. They are extremely cost effective, and employees referred by your current staff will likely stay longer than those who come from other sources (according to a LinkedIn study), so your turnover costs go down too. These points should help you make your case to start a program at your organization.

Here are some best practices to consider as you develop your program:

Make it easy for employees to refer people, but remind them that not every relative or friend makes a good referral. Most people know this and won’t refer an unqualified person, because a poor referral reflects poorly on them—but it doesn’t hurt to make the point loud and clear.

Be sure your job descriptions are up to date so that when you post a position, it’s clear what you’re looking for.

Keep your employees updated on the status of their referral. For example, if you decide against interviewing an employee referral, let both the candidate and the employee know.

Employees referred by your current staff will likely stay longer than those who come from other sources, so your turnover costs go down.

Consider rewarding employees for referrals who get hired. Some organizations pay cash bonuses, particularly when the role was difficult to fill and the hired candidate was in high demand. Other organizations simply recognize and thank the referring employee. Another approach is to do a drawing to choose a winner from among all employees who referred someone who was hired over the past year and award a valuable prize, like a weekend trip for two to a spa or a major sporting event.

Whatever you do, monitor how it works, and change it frequently to keep the excitement going. I’ve seen referral programs succeed even if the award is a special T-shirt. It isn’t the shirt that matters—employees value the recognition that comes with the prize because the only way to get one is to refer someone who was hired! It’s all in how the program is marketed.

And don’t overlook this additional bonus for employers: Employee referral programs can be a great way to monitor staff engagement. Employees who are not satisfied in their jobs will not refer others, no matter what the reward. An employee referral program can be a low-cost way to keep an eye on how your current staff is feeling about working for you.

Barbara Mitchell is a human resources and management consultant and author of The Big Book of HR and The Essential Workplace Conflict Handbook. Do you have a question you'd like her to answer in "Ask the Expert"? Send it to [email protected]