Posts Tagged ‘employee referral bonus’

Utilize Employee Referrals to Hire Top Talent

Thursday, March 23rd, 2017

If one of your top sources for hiring isn’t from employee referrals, then you are missing out on an incredible source of quality hires.

When your business is ready to hire a new employee, where do you typically look first? If you’re like many smaller companies, you may start by asking current employees for referrals. Hiring from the networks of your current team has always seemed like a good idea. Recent research now shows that it’s actually the most effective way to find a match for your company.

  1. Leadership IQ 2012 Global Talent Management Survey found that employee referrals were the most effective recruiting channel for front-line performers.
  2. According to recent Glassdoor research report, “Why Interview Sources Matter in Hiring,” employee referrals boost the odds of a successful job match by a statistically significant 2.6 to 6.6 percent.
  3. A recent jobvite survey found that while only 7 percent of applicants came from employee referrals, that 7% accounted for 40% of new hires.  Hires came faster through employee referrals at an average of 29 days, versus 39 days from a job board and 55 days from a career site.  Forty-seven percent of referrals stayed with the company for more than 3 years versus only 14% hired through job boards.
  4. For more hard facts touting the benefits of referrals, click here.

Although employee referrals more often result in accepted offers, most companies do not seem to be using those referrals enough. According to CAI’s latest NC Policies and Benefits Survey, 69% of local employers do not offer a bonus for employee referrals.  That number reveals that companies might have better luck sourcing and hiring the right candidates by focusing on asking for and rewarding employee referrals.

Why are employee referrals so effective in finding the right hire for an open position?

Much like turning to TripAdvisor reviews before choosing a restaurant, employee referrals provide useful context to both the job seeker and the company. Job seekers gain insights about prospective employers from the employee, and companies learn about the reputation of candidates from the recommender.

If you want to maximize the effect of employee referrals for sourcing your next great hire, consider taking the following steps:

  1. Ask for referrals. Don’t assume your current employees are focused on your hiring needs; instead, actively communicate with them about open positions and the types of candidates you seek. Regularly remind employees that they are well suited for recommending others who would fit at your company, and ask them to refer candidates in their networks.
  2. Be specific. Don’t just ask employees to send their friends and family members to you. There’s no reason to be bombarded with résumés of people who may be trusted but are not a fit for potential positions. Instead, share details about specific job requirements and the experience the new hire will have.  Even better, give employees Facebook and Linkedin links about the job they can share with their friends.
  3. Reward successful referrals. If a current employee refers a job seeker who you eventually hire, they should be rewarded. Establish a reward system and communicate it to all employees. For instance, you might reward them with a small monetary bonus, gift card or special privileges at work.  According to CAI’s latest NC Policies and Benefits Survey, the average bonus payout is $575 for non-exempt hires and $747 for exempt hires.  Now at first glance, those numbers seem reasonable and would clearly motivate some people.  At the same time, the average recruiting fee paid to an agency is 21%, or $6,300 for that $35,000 administrative person or $12,600 for that $60,000 engineer.  What would happen if you paid $2,000 for successful employee referrals ($500 up front and $500 after 6 months and $1,000 after a year, or something like that)?

It’s important to remember that people trust one another more than they trust companies. Embrace this way of thinking, and empower your own people to help you recruit with a human approach by embracing the employee referral. CAI members always have access to the latest salary and policies and benefits survey information to help them make smart hiring decisions and retain top talent. Find out how CAI can help your company.

Tom Sheehan brings 20+ years of extensive, broad-based strategic, tactical and practical HR experience to CAI’s Advice & Resolution team.  He advises HR and other business leaders on talent management, organizational effectiveness, employee engagement, M&A’s, and employee relations.