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4 Reasons Why an Employee Referral Program May be Your Best Recruiting Tool

In Hiring Strategy — by Erin Engstrom


Employee referral programs are gaining in popularity and for good reason. Referrals have been shown to reduce the time to hire by almost 50 percent compared to candidates who come from a company’s careers site. Of course, these programs should never take up all of your recruitment focus, but there are a lot of benefits to be gained by developing one that works.

Encourages Greater Employment Brand

A company’s greatest advocate is its employees. And the more they talk, the better. A 2015 study found that 75 percent of job seekers consider the employer’s brand and reputation before even applying for a position. With the existence of forums like Glassdoor, where employees, former employees and applicants are all given a podium to express opinion, it’s important that you are making an active effort to engage them.

Click here to download employee referral program policy templates you can use to kickstart your company’s program 

Employee referral programs encourage current employees to really think about the positives of working for your organization, and then spread the word to their network. Even if the employee doesn’t have a specific person in mind, the right incentive might lead to social media posts and other forms of sharing on a large scale.

Improves Quality of Hire

Chances are that when employees are referring their friends and family, they’re referring people that carry the qualities needed to be successful within the organization. This is due in part to understanding their referral’s strengths and weaknesses, but also because they know the referral’s performance could reflect back on them. It turns out, it’s effective: The software company Careerify found that referred employees are 23 percent less likely to quit than other hires.

Additionally, those who are referred are generally mentored through the hiring process, as your current employee will probably advise the referral on how to put their best foot forward. It may seem like the referral has an unfair advantages, but it’s actually to the benefit of all. For example, the new hire is aware of all the responsibilities and expectations of the organization prior to the company-mandated onboarding.

Maintains Company Culture

Yes, “culture” has become quite the buzzword in the world of work, but for good reason. A study out of Columbia University found that an organization with rich company culture has less than 14 percent turnover, while those with poor company culture exceeds 48 percent. Lower turnover isn’t all there is to gain, though: A strong corporate culture has been known to produce happier, more productive workers.

Click here to download a worksheet to define your company culture

Of course, knowing the power of a strong company culture doesn’t mean it’s easy to foster a one. A first step is to introduce the organization’s vision, mission and cultural values during the interview, and then look for candidates who align accordingly . Fortunately, when you have employees that already understand all these pieces referring their contacts, you usually end up with applicants who understand and share the values, as well.

Builds Engagement

Disengagement is expensive. Gallup estimates that disengaged employees cost the U.S. upwards of $550 billion in lost productivity each year. Worst of all, they found that 70 percent of American workers are not reaching their potential, with 52 percent not engaged and 18 percent  actively disengaged from their jobs. That’s a lot of people and money being lost.

Employee referral programs help increase attachment to the organization and make employees feel as though they have a stake in the future of the business. Employees want to grow, so having a hand in the company’s forward motion is exactly what they’re looking for. The right incentive for a referral can leave an employee feeling appreciated, which will in turn help raise motivation, another huge hurdle in engagement.

Currently, 63 percent of companies report having a documented employee referral program, and many more have an informal referral system. While organizing and implementing a referral program is a challenge, it’s one that will yield tremendous results. A growth in applications and qualified leads as well as improved culture and employee engagement is all but assured.

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