How to Find Top-Quality Staff: Employee Referral Programs

Employers looking to find and hire talented employees might be surprised to find out the best place to start looking: their current employees. Employee referral schemes can be the most cost-effective source of high-quality candidates, giving employers the best value for their dollar with top-quality candidates.

Referral programs help to attract the best by encouraging existing employees to find and ‘refer’ suitable candidates to the business. When comparing the cost of a referral scheme to a recruitment agency fee, it’s easy to see why employee referrals are considered one of the most cost-effective methods of recruitment.

Many of the world’s top firms get 50% or more of their employees from referrals. For example, fast-growing Australian software firm Atlassian has hired over 58% of its staff from employee referrals since 2009, with only one hire from a recruitment agency.

Employee referral schemes are often underused and underappreciated, but effective referral programs can easily be the best (and most cost-effective) source of quality candidates. Here is our simple 6-step process to create an effective referral scheme, or to redesign your existing program:

6-Step Process to Create an Effective Employee Referral Program

1.    Prioritise Your Positions

Not all jobs are equal to your business. For your referral program to generate the best return, prioritise high-impact and harder-to-fill roles for inclusion. There is no need to include every position, particularly for roles that can easily be filled through your usual recruitment methods.

2.    Strategically Set Rewards

Make the most of your investment in referral rewards by setting them strategically. It’s tough to set the bonus at the right level, as it’s important that bonuses are not too big or too small. Research what similar businesses pay for their referral bonuses and use your usual cost-per-hire to work out what is an acceptable reward that will motivate staff without costing your business too much.

Consider adding a results-driven twist to your rewards scheme by offering an extra ‘performance’ bonus if a referral becomes a top performer. This will help to further motivate employees to find and refer the very best people.

3.    Educate Employees

The key to a successful referral scheme is communication: be sure to educate staff on both what you’re looking for and how they can find and provide better referrals. It’s often a good idea to provide a simple ‘toolkit’ to staff with information and tips on the referral program, such as how to convince contacts to apply and an explanation of the rewards available.

4.    Promote Your Referral Scheme

Ensure that the referral scheme doesn’t fade into the background, by using regular promotions or marketing tactics to remind staff of its importance. Draw attention to the scheme with special offers when your business really needs to hire. Special offers can include competitions or higher bonuses for a brief period of time (a few months, to ensure your staff have time to select great candidates). When used strategically on hard-to-fill or ‘hot’ jobs, promotions will help you to find great staff, fast.

5.    Communication is Critical

Once you’ve started to get referrals coming in, the next step is to communicate and manage your candidates effectively. Be prompt with feedback to both referrers and referrals, or risk a reduction in quality referrals. Keep the referring employee informed about their referral’s progress and don’t be afraid to give honest feedback if a referral isn’t quite right.

6.    Make Referrers Feel Special

As with any positive behaviour, timely recognition is a fantastic method of encouraging employees to continue to refer top candidates. Be sure to make each person feel that their contribution is valued, even if the referral was not hired. In addition to any bonus schemes, consider using handwritten notes and small gifts for successful or almost-successful referrals. Most importantly, don’t forget to say thank you for the employee’s time and effort.

To ensure your employee referral scheme is a success, look out for part two of this article soon: Top Reasons Employee Referral Programs Fail.

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