September 1, 2022

Maximizing The Effectiveness of Your Employee Referral Program

by Mike O'Neill

If you’re an HR professional designing or maintaining an employee referral program, you’re probably looking to optimize it for maximum effectiveness. You’ve probably discovered that the better the initiative works, the more valuable your candidate pool becomes.

And you’ve also discovered that it’s not a one-size-fits-all type of program. Successful referral programs involve a tailored set of questions and incentives that motivate employees to provide their strongest recommendations for positions.

If you’re struggling with your current program, you’re missing out on enjoying the following benefits of a successful referral initiative:

Are you enjoying:

  • Lower overall recruiting costs
  • Reduction in time to hire external candidates
  • Better targeting and sourcing of passive hires
  • Deepened pipelines to potential applicants?

When it’s uniquely fitted to your company, referral programs flourish. Many times, these programs fizzle out because they’re treated as a project to roll out and left alone as a permanent fixture in the company’s recruitment process. The company has forgotten that it changes over time and that they have to be adaptable to improve the process.

And while the referral initiative should be permanent, its components shouldn't. It’s okay to not get it right at the beginning. Most things require reevaluation in order to improve. That’s where I come in. 

As a longtime corporate HR professional, I’ve successfully designed, implemented, and refined employee referral programs in fast-growing manufacturer settings. The most important things I’ve learned to do are:

  1. Give employees what they need to make referrals
  2. Provide clear guidelines and expectations
  3. Acknowledge the effectiveness of good incentives
  4. Require a degree of accountability to stress the importance of the program and have a positive impact on employee culture
  5. Be very specific on measurement data
  6. Provide feedback on the outcome

The rest of this article is a detailed list of the ways you can optimize your referral program to boost performance and increase your pool of qualified candidates. I’ll also show you what not to do when implementing this initiative and the steps to take for a complete makeover of your program.

How to Run an Exceptional Employee Referral Program

If you’re dealing with a failing referral program, you’re probably experiencing one or more of the following issues:

  • Unmotivating incentives
  • Complicated referral process
  • Lack of communication among participants
  • Lack of growth

When the process is too difficult and the incentives aren’t impressive, your referral program will fail and your candidate pool will be abysmal. Poor communication discourages employees from participating and causes you to miss out on valuable candidates.

If you’re dealing with the issues above, you’ve come to the right place! You’ve discovered that you need to adapt your program to the changing needs of your company. You’re motivated to improve it. I will help you.

I’ve compiled a list of steps you should take in order to optimize your employee referral program and create a better pool of qualified candidates. 

Assess your current program

If you take any piece of the advice listed in this blog, take this one: Track your referral program’s performance consistently. It’s impossible to improve without knowing its current effectiveness. Track the initiative's performance by treating it like a marketing campaign and your internal employees like customers. Keep the program fresh in their minds by reminding them of it often and rewarding them appropriately for their participation. 

Determine your program’s KPIs and track your return on investment by compiling an ongoing collection of data. Some HR departments use software programs like Boon or Teamable while others keep analytics in an Excel document.

You should be tracking:

  • The number of people hired through the referral program
  • The number of qualified candidates obtained
  • The rate of employee participation
  • Retention of referred hires compared to other sources
  • Performance of referred hires compared to other sources

As for the process of the program, consider if your questions are optimized for finding the best candidates. Make the process as easy and streamlined as possible by sticking to the basics. Too many rules and processes will make an employee skip the initiative. The processes of referring a candidate, defining the nature of and timeline of receiving incentives, and how to resolve complications should all be easy for employees to understand.

You should also make a habit of evaluating your program’s bigger picture. As a whole, is the program complementing the culture and values of your company? Is it unique to your company? Ask yourself these questions when you review your program to make sure it’s still bringing in the right people for your openings..

Once you have a clear picture of your program’s performance, you can decide what to cut and what to optimize.

Optimize incentives 

Cash incentives are extremely effective. Consider enhanced incentives for those who refer candidates that are underrepresented  (i.e. minority, women veteran, etc.). Other incentives could include paid time off, gifts, and a point system that allow employees to win special prizes like vacations or entries in quarterly prize drawings. Making the incentives attractive and fun keeps your employees interested in participating in the initiative.

Treat your referral program as an ongoing project. One study found that the most effective incentives are tiered, so switch up prizes every so often to keep things interesting. 

Listen to any feedback from employees and always stay open to improvement. The referral program should grow with your company, so revisit it often. Increase the value of incentives as your company grows. Make the rewards more attractive as your company becomes more successful to sweep your employees up in the journey to improvement. 

Lastly, always recognize achievements. This is crucial for improving an employee referral program. The more substantial the reward, the more attractive the program becomes. When your employee feels rewarded and appreciated for their contributions, they’ll come back for more.

Ask for feedback

Rely on your employees. They want a successful incentive program just as much as you want to reap its benefits. They’ll be key sources of information for you to make changes and optimize your initiative. 

Involving employees in the recruitment process means holding each other accountable. It is your responsibility to streamline the referral process. It’s the employees’ job to provide thorough, high-quality recommendations. Stay accountable by communicating with your employee (detailed below) and requesting their feedback.

Some questions to ask employees about your referral program are:

  • How easy was the referral process?
  • Did you feel informed about the process and its outcome?
  • Are you satisfied with the incentives?
  • How can the program run smoother?

Within these answers lies the keys to your initiative’s success. The more user-friendly it is for the employees, the more productive it will be, and ultimately the bigger & better your candidate pool will become. 

Maintain clear communication

Anytime you implement any of these changes to your referral program, let everyone know. The most common frustration employees have with these programs is that they’re uninformed about the process or any changes to  it. They don’t know the outcome of their referral, or if it was even an effective choice at all.

To be a more effective communicator, go above and beyond. Let your employees know exactly how the process works and what step they are in currently. If they’re approved for an incentive, tell them and congratulate them as soon as possible. When a candidate isn’t chosen for a position, let their referee know. If that person wasn’t a good candidate to begin with, tell them why. 

Educate them on what your ideal employee looks like and offer feedback on their referrals. Encourage them to keep referring and learning from the process. Remind them of their importance to the company’s recruitment initiative and how it’s so much more effective when candidates come from them.

Lastly, use a variety of communication methods. Your company may be filled with people of many generations, so their comfortability with technology varies. Email, text, and phone call updates are easy ways to communicate quickly and effectively with employees. Integrating the program with your work’s software system makes it easy for your referees to access information.

All of these things are essential to maintaining communication and optimizing what you already have. Include these communications in your program and watch the participation grow.

Things to Avoid When Optimizing

When you’re optimizing your referral program, avoid doing the following things to reinforce your employees’ positive relationships with the initiative and continue bringing in the best possible candidates.

  • Putting more value on one job than another - A referral to a higher-level management position shouldn’t pay out more than a lower-level referral. Every employee is valuable to the company and should be treated equally.
  • Lack of communication - This is the most important thing to avoid. Nothing makes a referral program more useless than keeping your employees in the dark. If they don’t feel informed or updated during the process, they’ll be less trusting of you and your promises of a reward and be discouraged from referring more candidates in the future.
  • Disorganized administration - Make sure the methods of data collection, employee communication, and instruction are organized. Program administrators with full inboxes, disorganized documents, and incomplete or inconsistent data tracking don’t have the greatest level of participation. It’s up to HR administrators to streamline the program.

Your Next Steps

The bottom line is that there is no one-size-fits-all method for an employee referral program. You have to customize it to get the best results. And this customization is not a one-time thing. It’s an ongoing process that requires you to track its data and optimize it when needed.

Educate yourself on effective referral programs by reading my other blogs, listening to my podcast, and setting up a one-on-one consultation with me.

After having a conversation and exchanging ideas, I’ll coach you to design, facilitate, and improve upon your company’s referral program. 

With my help, your referral program will bloom into its fullest potential, turning your employees into valuable recruiters and ushering in a new wave of exceptional employees to your team.

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