How to Build an Effective Employee Referral Program

By Supriya Verma - Published on September 21, 2021
Article gives the tip on creating employee referral program

Employee referral programs empowered businesses to create a win-win situation for both themselves and their current workforce. The companies earn strategic advantages in cost reductions, lesser investment in time and resources, and increased staff morale besides higher inflow of superior-quality new employees and higher employee retention. Statistics reveal that 1 out of every five referrals gets hired(1). Employee referrals have the highest application-to-hire conversion rate having only 7% application but constitutes 40% of all hires (2).

According to Employee Referral Statistics, Employee referrals were ranked first among all sourcing options by 82 percent of employees. The amount saved in productivity and sourcing costs per hired employee referral is $7,500. Only 25% of employees recruited through job boards stay for more than two years, while 45 percent of employees obtained through employee referrals remain for more than four years.

Hence to spearhead the prevailing competition of talent acquisition, the implication and inclusion of an effective employee referral program play a significant role. This recruiting approach in which businesses entice current employees to refer qualified candidates for open positions in their organizations does not demand any substantial infrastructure. This program can be executed within the existing ecosystem with minimal time, money, and resource investment.

Following are the measures to build an effective employee referral program that generates phenomenal results.

  1. Involve management in the process

    It is crucial to include management when creating and developing an internal Employee Referral Program for the organization.  The rest of the execution will be a breeze if the management is convinced with the plan and proposal. The recruiters must explain the process to persuade authorities to support the project. This would result in approval on the budget provision required to surface the program effectively. The recruiter must convince them of the benefits and importance of the comprehensive program.

    Furthermore, employees will be encouraged to participate fully in the program because of the management’s endorsement.

  2. Explain job requirements

    Knowing the actual recruitment requirements simplifies the process, ensures a positive conclusion, assists recruiters in finding a suitable applicant, and helps the firm achieve short- and long-term objectives. The hiring requirement definition determines the level of urgency to fill the gap and helps attract suitable applicants while reducing the time and money spent on identifying, attracting, engaging, recruiting, and retaining talent. It’s crucial to evaluate the hiring requirement and estimate resources allocation before presenting it for deliberation to the management.

  3. Set goals for the program

    Determine a communication schedule and all the most efficient ways to contact or respond to prospects; poor response times will cost money and execution time. However, it appears that the main reason referral schemes fail is because recommendations or inquiries are not responded to quickly or at all. Therefore, the recruiter should set a time limit for the program’s execution.

    • Establish a process to report any feedback or responses within 72 hours.
    • Give referrals priority (move them to the front of the queue for processing and evaluation)
    • Set distinct timeframes for interviewing these referrals. Define an interview time and date and provide online tests.
    • If the referral program is mapped with the timelines, it would seldom lose its trajectory and ascertain goal realization.
  4. Broadcast the program and provide instructions on multiple platforms

    Before initiating a referral program, the recruiter should let everybody know about the requirement in the company. Make the incentive structure public and emphasize the best in industry rewards. The recruiter must ensure that everyone understands how to make referrals by including clear instructions. Provide directives in the form of an AV(audio/video), a downloadable PDF, or a webpage on your company’s website. To keep the information easily accessible, it’s also a good idea to put it in areas where employees congregate, such as canteens and restrooms.

  5. Keep employees updated

    When it comes to deploying the employee referral program, talent alignment and hiring awareness plans can help the recruiter find exceptional people more quickly. By focusing on the right alignment, companies may mobilize corporate communication and update employees on the value of great referrals.

    Employees are less inclined to suggest their brilliant peers since the organization does not emphasize the importance of the employee referral program. According to studies, 60% of employees would be eager (3)to join a referral program. Because their company does not actively promote the program, just 23% participate. Moreover, if your program is highly responsive, the company will receive referrals from diverse employees.

  6. Deploy a multi-channel yet easy referral process

    Maintain a proactive approach and set the stage to effortlessly integrate the referral process into the system so that the referrer is not overburdened with referencing. Establish a clear referral policy with precise requirements and a monetary reward so that employees do not feel forced to make a referral. Referral criteria and tips should be straightforward to understand and apply.

    Some simple but successful online and offline strategies include using a push message from the company’s career page to keep employees informed about the new requirement that serves the broadcasting purpose. Besides implementing an online employee referral system, having template-based forms for gathering referral data makes it easy to capture quick responses.

    Another proven strategy to generate more referrals encourages the employees to use company resources to talk about potential recommendations. Employees can also use an easy-to-use email campaign or instant messaging group to refer qualified prospects if the recruiter creates one. Although installing a resume drop box in the HR department’s office may seem mundane, it is pretty useful.

  7. Reward with a mix of monetary and non-monetary incentives

    A referral incentive is an integral part of an employee referral program that encourages employees to refer and assist in recruiting candidates from their networks. Referral rewards can make a big difference in company hiring efforts, especially in a candidate market where brilliant people have many choices.

    Recognizing referring employees for their efforts is the most motivating and cost-effective strategy, whereas the most popular referral bonus is a monetary bonus.

    But different employees have different requirements and preferences. Hence the company offers a mixed bag of rewards that incorporate both monetary and non-monetary benefits.

    • CASH reward

    A company may give an employee the chance to receive a bonus of a certain sum or a percentage of their income if they meet specific goals set by the company.

    • TIERED Reward

    Some businesses divide the bonus and distribute it in stages throughout the recruitment process.

    • PRIZE Reward

    Instead of distributing cash, some businesses award prizes like skill upgradation

    • VACATION Reward

    Offering a holiday to employees is another excellent referral bonus idea. It could be a company-sponsored all-expenses-paid trip.

  8. Improve the Employee Experience in the job referral process

    The most vexing problem in the business is the HR-mandated application form. However, it’s a massive pain to refer the employee to enter the entire CV to fit the company. Now is when the user input their information into LinkedIn once and then distribute it fast and.

    Forms may be an excellent idea, but they sometimes seem tedious to the employee. Hence the recruiter must make provisions for direct resume upload or instant messaging techniques to enable quick response.

  9. Acknowledge Employees contribution for referring candidates

    Share their accomplishments and stories with the rest of the team and publicly thank them for all of their efforts in locating, engaging, and connecting exceptional applicants with your recruiters. Employees are motivated by workplace recognition because it gives them a sense of success and helps them feel valued for their work. Hence the employee who took time and effort to include the right candidate into the system should be appreciated.

    The appreciation should be published in the company newsletter describing how the employee aligned his duties with the referral program as his responsibility to enable uninterrupted functioning of the system.

    The employees’ profiles glorifying their excellent contribution posted on social media platforms boost their dopamine and feel more gratified.

    A blog was celebrating the employee as a superhero, and his sincerity towards the company in filling the void published on the company internal website and communication upsurge his confidence.

  10. Induce the referral Program into the company culture

    The referral program should not be patched in the company recruitment process. It must be seamlessly induced in the company’s culture instead.

    Inclusion could be achieved by organizing a corporate launch to generate excitement for the program, arrange an event, or announce at a corporate meeting about the program. It could be imbibed by giving employees the most crucial information and encourage them to engage.

  11. Maintain a Progress Report of the referral program

    A successful employee referral program generates the best employee referrals. Only by establishing measurements and tracking data can one determine whether or not a program is successful. Define the parameters and forward the data for analysis. Data is meaningless without analytics to discover the how and why behind the metrics. The program should be weighed in terms of quantity and quality.

    The indicators that assist in assessing the program’s success include the total number of referrals made and the number of people hired as a result of a referral. It could also be measured by analyzing the ratio of potion filled through referral programs to other sources and employee retention rate.

Final Thought

The pursuit of attracting and engaging great talent keeps the recruitment machinery on its toes. Although the referral program is the star performer of the recruitment process, the desired results cannot be achieved unless it is effective. An effective employee referral program is the quickest and safest approach to engage and top onboard talent.

Hence the recruiters must keep refreshing the referral program by adding contemplative practices and agile technology.

Supriya Verma | Supriya Verma is a content writer focused on developing articles and blogs for media organizations. Her work profile includes multiple roles and responsibilities that revolve around her academics, including a Master’s degree in computer management and a PG Diploma in HR Management. She has 15 years of experience in IT services and content creation.

Supriya Verma | Supriya Verma is a content writer focused on developing articles and blogs for media organizations. Her work profile includes multiple roles and re...


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