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Wanzek Construction, a clean energy construction firm with headquarters in North Dakota, had a hard time finding skilled workers to fill job vacancies. The company used career sites, but finding qualified staff still proved a challenge. Although they thought an employee referral program may help, putting one into practice wasn’t easy, for several reasons.
“For one thing, Wanzek’s frontline workers spend most of their time in the field, away from leadership. Wanzek also has a diverse and multilingual workforce—a tremendous asset, but it made establishing a proper referral program difficult,” explains Cris Grossmann, CEO and Co-Founder of Beekeeper.
Grossmann notes that ultimately, Wanzek decided to use a third-party platform to implement their employee referral system.
“This platform had seamless translation capabilities and was easily accessible via mobile phone app. Unsurprisingly, [Wanzek] found themselves with over 500 referrals in less than three months. And unlike candidates brought in through other means, the vast majority of these referrals were—at a minimum—properly qualified for the actual job at hand,” Grossman says.
Wanzek’s example shows how an organized employee referral program can be a source of growth and development for your company. It can also simplify the hiring process. And it can offer potentially lucrative rewards to current employees.
“Employee Referral programs are strategic incentive-based programs organizations have in place to motivate employees to attract and target candidates who are family, friends, acquaintances or former colleagues,” states Jennifer Preston, HR and Recruiting Consultant at FlexHR. A current employee introducing someone can save the company time, effort and costs.
We’ll take a look at how you present an employee referral program to your staff in an incentivizing way, how a referral program can benefit your business and pitfalls to be aware of and impactful ways you can promote it to both present staff and potential new hires.
The Benefits of an Employee Referral Program and What to Watch Out For
Creating an effective employee referral program takes time and effort. Employees need:
- A detailed description of the program
- Who is eligible to participate in the program
- What reward they will receive for a referral
- If there are any requirements for the potential employee that they refer
- If the new recruit needs to be with the company a certain length of time before the bonus
For a program to be successful, the company must supply an open, transparent, clear breakdown of what it entails.
There are a myriad of benefits to having a well-structured employee referral program. It can save the company money, for starters.
“According to Glassdoor, recruiting costs most companies $4,000 per hire. And for frontline businesses, that number is often much higher—between $3,000 and $13,000 for hospitality workers and upwards of $57,000 for manager retail roles. Employee referral programs—by effectively taking recruitment in-house and tapping into the power of your employee network—can reduce these costs dramatically,” notes Grossman.
There’s also a savings of time. Research says that it takes an average of 55 days to find a new hire on career sites and 39 days using job boards. With employee referral programs, that time is cut down to only 29 days.
And then there’s the confidence that a referral from a known employee can bring. Strong workers will likely recommend strong job candidates. After all, current employees want to preserve their reputation and want to be seen as having smart decision-making skills. That desire, in the long run, can benefit you.
“When I was Director of HR and Recruiting for a start-up, we did a significant percentage of our hiring through employee referrals. It was highly successful and made for an incredible place to work. Every existing employee knew the type of candidate that would be successful—the core values, the mission and vision, the expectations above and beyond the specific role description—every person needed to have a ‘roll up the sleeves’ mentality to be successful,” says Preston.
What to Watch
Of course, like anything, there are potholes you should be mindful of when using an employee referral program.
“Like any good program, all it takes is ‘one bad egg’ to make things go awry. Perhaps it is a weaker performer within an organization who refers anyone and everyone they have met without having vetted or truly knowing anything about the candidate,” Preston advises.
Businesses must remember that job candidates often report their hiring experience and thoughts on the process back to their referring employee. If your company is slow to respond, fails to give constructive feedback or ghosts the applicant, it may sour your employee’s view of the company.
Working from the outset to build a strong program, complete with checks and balances, is what will help it to work effectively. Even once the program is up and running, you still have to make sure employees and recruits are aware of it and the benefits it can bring.
How to Promote Your Employee Referral Program
The first step in promoting your program is to present it effectively so that your employees understand it. Educate your employees on the details of the program, why it’s important for company growth and how they can benefit. Get them to buy into the idea of the program as an investment in themselves and the future of the company.
Next, keep the idea of the referral program before your staff. Some experts say hearing a message at least three times makes it stick. Others say it needs to be repeated at least seven times. Either way, ensure your program information is visible in multiple places for easy access and awareness. The employee handbook, a communication board and company newsletters are the perfect places to remind them.
Other ways to promote the program include:
- Discussing it at a company-wide town hall meeting
- Encouraging management and supervisors to discuss the program at smaller departmental meetings
- Adding information about the referral program in job listings
- Promoting the referral program on the company’s website
- Make the referral program an easy and simple process for employees to do
To promote your referral program to potential new hires, present the program as one of your company benefits. If the incentive is truly appealing, it can be the ideal way to motivate top-tier talent.
“A referral program is fundamentally a gesture of trust and should be presented as such. Effectively, you’re telling employees: we know you know our business better than anyone, and we trust you to find us people that would thrive here,” states Grossman.
“Presenting it this way is important because, if you don’t emphasize the trust element, you risk making employees think you’re simply outsourcing your work to them, despite the financial incentives on their end. You want your referral process to feel like a team effort,” Grossman concludes.