How to Build an Employee Referral Program

September 28th, 2017 | Posted by:

In last week’s blog, we spoke about how an employee referral program can increase a company’s ability to hire quality employees who fit well with the job and the organization.  This week, we want to share the components necessary to building an employee referral program:

  1. Clearly understood expectations and standards – Knowing the behaviours, values, qualities and beliefs you want your employees to have is important because they become part of your hiring criteria along with the experience, skills and knowledge requirements.  Once you know, your employees need to know that too.  This component can be challenging for owners, because soul searching is required regarding what’s important. I have one owner who is a stickler for punctuality.  Another who likes working with people who don’t need hand holding and constant praise.  And another still who wants to mentor and loves what she describes as “human sponges”.  Taking the time to define what you want (and what you don’t want) and then ensuring those requirements are clear to your employees will help employees bring those types of people forward.
  2. Communication of job postings – Most companies know the jobs they need to fill and even do an okay job of spreading the word externally. But good employee referral programs need internal marketing too! For offline staff, send out a newsletter or have a public job posting board.  Intranets, email, and chat forums work well when all staff are online.
  3. A solid method of collecting and tracking referrals - As most employee referral programs provide a finder’s fee, an effective method of tracking who came in via referral, who referred them, and the candidate’s progression through the recruitment process is key to ensuring no one falls through the cracks.
  4. An effective hiring process- An effective referral program needs an effective recruitment process which progresses all candidates through the steps in a fair and timely fashion. That’s because employees don’t want to go to the trouble of wooing their friends only to have them get misplaced or sit in a file for months.  When I led HR, I liked giving referred candidates special treatment such as fast-tracking, guaranteed interviews, reduced reference requirements, and personal calls through each step of the process (although I never varied on the hiring criteria).  My rationale was that employees need to know their referrals will be treated well to ensure they will continue to refer.
  5. Communication with referring employees -Employees want to know how their referral did, and whether they will be rewarded for their referral.  As such, the follow up to the employee regarding whether their candidate was hired or not must occur. If the candidate isn’t hired, I recommend providing feedback regarding why to help calibrate for future referrals (at the same time, ensure you don’t breach the privacy of the unsuccessful candidate).  I also encourage keeping employee referrals on file should a more suitable position open up.  And of course, if the employee referral is successful, the communication with the referring employee will say thanks and identify what to expect regarding timing and method of payout.
  6. Payouts – Delivering the promised money in accordance with the promised schedule is fundamental to the credibility of a referral program.  Whether you choose to do a lump sum upon hire (less statutory deductions of course), or a step program (e.g., by paying for referral, hire, and accomplishment of a milestone such as probationary period completion or first year anniversary), credibility hinges on the follow through.
  7. Marketing - There’s no point in having the program that people don’t know about and that takes marketing. Not only should you market the heck out of the new employee referral program when you launch it, but communicating program stats quarterly or annually are good ways to keep the program top of mind for employees and to encourage continued referrals.  E.g., you can advertise the program with ads saying “Want to make more money?”, announce each time an employee is hired through the referral program, and share stats such as such as # of referrals, % of referrals hired, total monies paid out, etc. Also, don’t forget a formal thank you to the employees doing the referring.

These are the 7 key components to a successful employee referral program.  To get started, figure out how you will do each of these, document your approach in a procedure and assign an owner (your trusty HR resource perhaps?) responsible for ensuring it all happens and keeping you in the loop.  Then, launch with fanfare, celebrate referrals and hires, and most importantly, make sure it pays.

And please let us know how it goes … or if you want some help.