Employee Engagement

10 Tips For Building An Employee Referral Program

By
Amanda Cross

If your organization is like most, finding great talent has been more challenging than ever. There isn't necessarily a shortage of great talent, but it may be harder to spot if you're not great at sharing your employer value proposition or EVP. Instead of wading through endless job boards and trying to get noticed, many companies are taking more proactive approaches to hiring: starting an employee referral program.

If this concept is new to you, let's dispel the mystery. Today, we'll cover:

  • What an employee referral program is.
  • Why companies set up these programs in the first place.
  • How to make an employee referral program work for your business.

Table of Contents

What Is An Employee Referral Program?

Let's start with something simple: What is an employee referral program?

An employee referral program allows employers to connect with new talent by utilizing personal 1:1 network connections. Typically these programs use the extensive network of current employees, but you can extend this to customers, business leaders, and other acquaintances.

Employee referral programs speed up your time to hire and help streamline the process of finding great talent.

A group of coworkers at a desk in front of computer screens.

5 Employee Referral Program Benefits

Employee referral programs have a myriad of benefits for companies. While shifting how you recruit can create a new learning curve, you'd be surprised how impactful these programs can be. Here are just some of the benefits your company could see by adding a referral program as a recruitment method:

1. Having A Friend At Work Improves Employee Engagement

Gallup, a leading resource on employee engagement, has worked with numerous companies and employees to determine what builds engagement at work.

Gallup's Q12 survey is a quick twelve-question survey that dives into various aspects of a company's culture. For example, question #10 is, "I have a best friend at work." Work requires connection, and having someone to talk to can improve employee tenure.

Since employees are likely to refer friends (or, at the very least, people they like), this will improve workplace engagement.

2. When Employees Refer Others, It Proves They Value Your Organization

When was the last time you referred something you disliked? Even if you think others would love that item, you're far less likely to refer an item to others because you didn't personally like it.

Employees don't want to cosign cultures and companies they don't like. It's hard to be enthusiastic about something when you're one foot out the door.

Launching your employee referral program can help you spot flaws in your current organization. Are people jumping at the chance to tell their friends about open roles, or is it challenging to get referrals for open positions?

3. Companies Fill Critical Roles Faster

Putting up a job and hoping for the right candidate can be time-consuming. Writing a great job description, finding the perfect place to list your open role, fighting for a great position on the board, and then wading through all of the applications is stressful, and you still need to interview someone.

Referrals should be much easier to interview and hire. Since you typically have an employee vetting the person and putting their reputation on the line, the quality of referrals is typically high. In an ideal world, companies should be able to interview referred candidates and decide if they are a match quickly. 

4. The Cost To Hire Employees Goes Down With A Great Referral Program

You can reduce recruitment spend in other channels if you consistently utilize referrals.

Instead of spending money on job board ads that might not work, you can spend a smaller amount to incentivize employee referrals.

You'll also likely spend far less time reviewing applications and interviewing candidates for open roles, which saves hours of administrative work.

If your candidates are quality, they should likely stay longer too, which means you'll spend less time rehiring for the same roles.

5. The Quality Of Your Hires Increases With A Well Managed Referral Program

Last but not least, the quality of your hires should increase with a well-managed referral program. Employees are putting their reputations on the line with colleagues and their company. Most employees want to impress and bring the best teammates into the fold. So, what does it mean to manage your program well? Keep reading because we will discuss ten strategies for running your company's employee referral program.

Two workers interviewing a candidate.

10 Strategies For Running A Successful Employee Referral Program

So, you're excited about starting an employee referral program, but how do you get one off the ground? Your future self will thank you for starting this program. Let's dive into the steps you need to take:

1. Make Sure Everyone Is On Board With Your New Program

While referrals have been around for a while, it can be easy to fall into the "more is better" wheel of recruiting via job boards. Some managers, recruiters, and employers will find value in digital recruiting strategies like posting on Indeed. There's nothing wrong with this (as it can lead to a more diverse candidate pool.)

When introducing an employee referral program, you've got to get everyone on board. Don't introduce this program as a complete replacement to your current system: this is a supplement to improve the hiring process.

You'll want to set expectations about how referrals will be treated during the hiring process. Are hiring managers required to spend a certain amount of time reading referral applications? Do they automatically get a first interview? Ultimately, it's vital to establish what a referral means to your organization and how it compares to a job board applicant.

2. Ensure You Have The Systems You Need To Recognize Referrals

Most referral programs have incentives attached. If you want employees to feel inclined to send you names, you have to make it worth their time. There are many ways that you can keep up with referrals, depending on how much time you have to manage your program. You can lean on the help of candidates/employees or manage referral payouts yourself.

Here are a few options for setting up the systems you need:

  • Add a question to the job application about referrals.
  • Create a survey to manage your referrals and which employee referred that person.
  • Have employees follow up with proof when someone they've referred joins the organization.
  • Create trackable links employees can use to share jobs with potential candidates.

3. Get Serious About Headcount Planning

If you want your employee referral program to be successful, you need a consistent recruitment effort. Are you posting new opportunities last minute, or are you carefully planning next year's roles already? Headcount planning is the practice of understanding your business needs and the staff you need to get there. Headcount is typically planned on an annual basis, but there is an increasing number of companies moving to quarterly planning too.

So, how can headcount planning help your referral program? With a proper headcount plan, you can start recruiting for roles before needing new candidates. Workers will understand what you need months in advance, giving them time to find the right person to refer.

Headcount planning is an arduous process. It requires input from every department, the finance team, and company executives. You also need a solid company vision and goals to excel with a headcount plan.

You don't need all of this to start your referral program, but you'll likely run into some speed bumps without it. While this step can feel daunting, take some time to consider what a headcount plan could do for your organization as a whole.

A group of coworkers talking and working at a desk.

4. Set SMART Goals For Your Employee Referral Program

If you want to invest money into an employee referral program, you'll likely want to set some goals around the program's success. When we set SMART goals, we devote time to building out goals that are:

  • Specific
  • Measurable
  • Attainable
  • Relevant
  • Time-Bound

Here are some potential SMART goals you can set for your employee referral program:

  1. Drive X potential applicants via the referral program by December 2023.
  2. Interview X referred candidates by October 2023.
  3. Present offers to X referred candidates by November 2024.
  4. Have an X% employee participation rate in our employee referral program by April 2024.
  5. Create an automated system to share the referral program with new employees during their first three months.

5. Ask For Specific Recommendations (Instead Of General Ones)

Have you ever been asked for a recommendation but couldn't provide the right one? More than likely, you were asked for general advice. Questions like, "What is your favorite book?" often lead to poor recommendations because everyone loves different kinds of books.

When you ask for general recommendations, there are a few things that go wrong:

  • You are inundated with too many requests that don't meet your needs.
  • Employees shut down because they aren't sure how to best answer your request for a recommendation.

So, what's the antidote to general referrals? Ask for something specific:

  • We want to hire three new small business sales representatives. Do you have any recommendations?
  • The marketing team is looking for a content marketing manager. Do you know if anyone is looking for a new role?
  • We need a software engineer proficient in Python. If anyone comes to mind, please forward their information.

By asking for a specific department, role, and even skills, you'll get better quality referrals (even if the number of referrals is smaller.)

6. But Don't Make The Process Of Providing Referrals Overwhelming

Once someone has an employee referral in mind, what do they need to send that person to the right place? If employees have to jump through hoops to send in a name, your referrals will likely go down.

Instead of asking employees to fill out a long form with information they probably don't have, don't be afraid to do some of the work yourself. You can ask employees to fill out a few fields like:

  • Candidate name
  • The position they'd be a great fit for
  • LinkedIn/website link

You could also ask for the name of the person making the recommendation, although that may be optional, depending on your process. For example, some people use Google Forms to run their recommendation process, which can automatically collect respondent email addresses.

A woman looking at a phone and filling out some paperwork

7. Make Your Employee Referral Program Visible

Do employees know that your program exists? If you survey your employees, you might be surprised how few people remember the program, especially if your recruitment efforts need to be more consistent.

Program visibility starts during the recruitment process and continues throughout the employee lifecycle.

  • Recruitment: Ensure potential candidates who are referred have a good experience. If these people join your organization, they'll feel comfortable recruiting others. 
  • Onboarding: Mention your program during the onboarding process. This can be a part of your employee handbook, or you can mention it during any onboarding seminars that HR hosts.
  • Retention: Throughout an employee's tenure, ensure the referral program is top of mind by mentioning it during internal newsletters and meetings. You can also host occasional competitions to improve engagement.
  • Offboarding: There are many reasons an employee leaves your organization. If you treat your team right, they can be a great source of employee referrals even after they leave your business. If an employee leaves on good terms, ask about the possibility of referrals in the future.

8. Try Launching Your Program Occasionally

Who doesn't love a good launch? Customers rush to see new products and stores on their first day. The proper launch builds excitement and drives engagement.

A program launch can help employees remember that the program exists even if you have a continually available program.

The most obvious way to relaunch your employee referral program is by having a friendly competition to see who can refer the most candidates in a specific time frame. You want this to coincide with a time when you have a lot of open roles to fill, of course. The winner can receive bragging rights, an award for their hard work, or even a gift card.

Competitions are short-term solutions to engagement issues. If you want to keep employee enthusiasm high, you need to keep the contest time frame short: one month or less.

9. Provide Recruitment Material To Make The Process Simple

Once your current employees are ready to make an introduction, what do they say? Any qualified candidate will likely have a question or two about your company, culture, and what it's like to work there. While employees may have their own experiences to draw from, recruitment materials can help streamline the referral process.

So, what kind of material should your organization prepare? Here are a few examples to get you started:

  • A career page to showcase open roles.
  • Written and video-based spotlights of current team members.
  • A one-pager about the benefits of working with your organization and what you stand for.
  • Social media templates employees can share on sites like LinkedIn.
  • Images of the team workers can share with their friends and acquaintances.
A woman sitting at a desk working while a camera records her.

10. Ask For Consistent Feedback On Your New Program

When you launch any workplace program, gathering feedback is a crucial step. You'll want to gather three types of feedback: employee, hiring manager/recruiter, and referral feedback.

Employee Feedback

As your employee referral program builds momentum, it's essential to take a step back and ensure that the program is visible, easy to use, and helpful for workers.

To gather feedback, you can send out a quick survey or have direct chats with anyone who has participated in the program. Pay special attention to anyone who has only participated once to ensure there are no unknown roadblocks.

If you have any program holdouts, you can also gather feedback to see why they aren't participating.

Hiring Manager And Recruiter Feedback

You also want to gather feedback from hiring managers and recruiters. These people use all these new leads, and you want to make sure it's making their job easier.

  • How do they feel about the quality of the referrals they are receiving?
  • Is this making hiring easier or harder?
  • Are there employees who give better referrals? What about employees giving terrible ones?
  • How can you make the process streamlined for the person connecting with referrals?

Referral Feedback

Last, you can also gather feedback from employees and candidates referred to your company. While this type of feedback might not be the first on your list, it's crucial. These candidates should have a positive outlook on your organization because they know someone who works there.

Do employees need to set better expectations? Are these candidates and employees receiving a lackluster response from hiring managers? All of this could negatively impact your employer brand, so you want to resolve these issues promptly.

Before reaching out to anyone on your referral list, ensure you know exactly where they stand in the hiring process. Most people are willing to chat for 10 minutes about their experience. Don't take up too much time (especially if they aren't working for your organization.)

Acting On Feedback

Once you have gathered details from all these different people, you should clearly understand how to move forward. Act on your feedback and follow up with how you've adjusted your processes.

After you make a few changes, let those new practices settle. Then, after a few months, you can ask for more feedback and adjust until your program is exactly where you want it to be.

How To Recognize Employees Who Refer Candidates

One crucial aspect of employee referral programs is how you recognize team members who take the time to provide referrals for the organization. There are many ways to show your appreciation, depending on how much money you have to spend.

When considering how much you want to spend on your employee referral program, consider how much you'll save on recruiting expenses. With a well-resourced referral program, you may not even list open roles on career sites. The money you would have spent boosting job listings and hours spent looking through resumes adds up. Most companies can afford greater recognition efforts because they divert recruiting costs to their internal program.

Let's cover some of the many ways you recognize employees who refer great candidates:

Recognize Employees Who've Helped You Grow Your Team

First, let's start with a free or low-cost way to recognize employees. You'd be surprised how much your team members would appreciate a thank you for their hard work referring top candidates. Your organization can celebrate current employees by doing something like:

  • Social media shoutouts
  • Sending top referrers a special message using your company's recognition software
  • Featuring team members in the internal company newsletter
Create a culture people won't want to leave with Nectar.

Donate To A Charity Your Employee Loves For Every Referral

If giving money directly to employees makes your company uncomfortable, one strategy you can use is making a charitable donation for every referral an employee makes.

For example, you might donate $50-$100 for every successful referral. For some company cultures, doing good makes all the difference. Depending on how many hires you make based on referrals, this can lead to a lot of great work.

Provide A Bonus Based On Employees Joining The Company

Next, you can use the typical approach of providing a referral bonus based on when new hires join your organization. Often employees have to stay with a company for a certain period (typically three months) before an employee can collect this bonus.

Many Nectar users utilize our challenges feature to host an employee referral program. At Nectar, we use this strategy. Nectar employees who refer candidates who get hired can redeem a challenge for 1,000 points (equal to $100.) From there, employees can redeem their bonus for various rewards, including a Visa gift card or items from our Amazon integration.

Whether you use a system like Nectar or a more manual process, providing a bonus is a great way to incentivize more candidate referrals.

Improve Tenure By Offering A Second Bonus Based On Workplace Anniversaries

Do you want to take referral bonuses to the next level? Try offering a bonus based on employee retention rates.

Hiring is only one step of the equation. You should also try to improve retention.

Many employee referral programs are paid based on an employee working for three months. However, you can take this a step further by offering a second bonus when employees reach their first work anniversary. Adding another bonus based on getting to an employee milestone will incentivize workers to find better candidates to send hiring managers and recruiters.

Your additional bonus will work similarly to the initial one. This strategy ensures more successful hires. A simple process like this can make a big difference if you're struggling with turnover issues.

Consider A Small Prize (Even If You Don't Pick A Candidate)

Once you have a steady stream of referrals, you might decide to democratize the bonus process. After all, you'll likely have way more recommendations than job postings.

By offering a small prize to workers even if you don't pick their recommendations, you ensure that a flow of referrals keeps coming in.

The easiest way to offer these prizes is to bundle referrals into chunks of five or ten. For example, you might give a piece of company-branded swag for every ten candidates referred.

A trophy sitting on top of a yellow background with stars and gold glitter around it.

How To Maximize Future Referrals

Last, it's important to discuss how to maximize referrals. As your program exists, you might notice dips in how many potential team members are sent your way. If you're looking to build a consistent recruiting initiative, you'll eventually need to put in some work to boost your numbers. Here are a few ideas to get you through these dips.

Send Out Employee Engagement Surveys

You might notice a dip in referrals if your company culture dips or employees hate their workplace. No one wants to recommend a place they don't enjoy working at. So, addressing any workplace issues looming in your organization is necessary.

Send out a quick, anonymous survey to gather information from your team. What's working, and what do you need to improve to get a higher rating from your team? Try some of our strategies to enhance engagement survey completion rates if people are ignoring your survey request.

Follow Up On Any Referral You Receive

Next, you want to focus on the follow-up. If employees send you candidates, but you never acknowledge them, you'll get fewer referrals over time. The follow-up is a critical step to getting more referrals over time.

Set aside time every week to go over all the recommendations you've received. Then, send a quick message to the employees who sent them in and let them know the next steps. For example, you could say:

"Hi [Name],

We appreciate your referral for our recent customer success role. Our hiring manager, _____, is excited to reach out to your connection. They'll be scheduling a time to chat and see if a mutual fit exists. I will keep you in the loop as _____ progresses in our hiring pipeline.

Thank you!"

A short message like this can make all the difference. Once you find your exact message, this email can also be largely copied and pasted without much tweaking.

Celebrate Referrals Who Join Your Organization

Next, you want to celebrate the referrals that do join your organization. As you introduce your new employee, let the team know who referred them. You can also set up a fun onboarding activity between employees and the people they referred. Small actions like this can make new hires feel welcome and current employees ready to refer more candidates.

Continue To Streamline The Referral Process

Iteration is pivotal, as you can infer by reading today's article. Keep streamlining the process if your employee referral program differs from where you want it to be.

You can make minor tweaks to things like the:

  • Bonus you offer
  • Referral application
  • Recruitment materials
  • Employee training around recommendations
  • Language you use to request recommendations

Before you know it, you'll save money on recruiting and finding candidates you love.

A group of coworkers chatting and looking at a presentation.

Conclusion: Building The Perfect Employee Referral Program

Are you ready to beat your hiring goals while reducing your spending this year? Building an employee referral program can help you do just that. Today we went over:

  • What a referral program is
  • The benefits of having a program in place
  • Tips to help you manage your program
  • How to recognize employees who refer candidates
  • Steps to take if you want to maximize your program

Whether you are a beginner or you've been running a program for a while, we hope you found something helpful in this post.

If you're ready to take your referral program and employee retention to the next level, why not request a demo of Nectar? Our recognition tool can help you build a stellar peer-to-peer recognition habit, while our challenges feature can be the perfect home for your employee referral program. We've got the tools you need to build a culture people won't want to leave, so check out what we have to offer.

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