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How to Craft a Robust Employee Referral Program that Works Every Time?

Employee referral brings amazing people to your workplace. Here is how you craft one that works along with benefits of employee referral program rewards.

Referral Rewards
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10 Min read
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Last Updated on
September 13, 2021

One of the riskiest points on an organization’s list of action items is the responsibility to hire the right woman for the right job. No matter how streamlined or organized the process becomes, it all boils down to how good the prospect is for the task at hand. But apart from the HR taking the interview, who’d know what your organization expects from its employees? The employees are working with you!

This is where employee referrals come into the picture. A detailed sketch, job description, or even an expectations list can’t explain what the organization wants from the prospects like an existing employee can to his friend/acquaintance. But why do most employee referral programs either fail to bring out the prospects or result in shambolic hiring sprees that escalate turnover? Let’s start with why employee referral program rewards are a need of the hour.


Why is Employee Referral Programs Needed?

What starts with “So what my company does is…” and ends with “…and this is what you’ll have to do if you are in” filters out just the right candidate—making employee referral one of the most successful modes of recruitment. A study revealed the difference between traditional hiring and employee referrals, and boy; it’s a surprise. 

Not only that but it is also backed up by research that referred candidates are of higher stature and quality than hiring from a pool of candidates that say, leave a resume on your website or line up for walk-ins. They receive and accept the offers with open arms, stay at the job for a formidable tenure, and have an excellent performance curve.

Typically, one can say that the hiring process is not a cakewalk. A candidate (who might or might not) is fit for the job looks at the opening through a job board, gets in touch, sends in the resume, receives an interview, and then it either goes one way or another. But what about the steps that get cut down with the purpose of employee referral programs.

The candidate already knows what the company is through their referrer. They know the expectations, the work culture and have a whiff of what’s going on. Not only does it save the efforts of HR, but it teaches credibility in the candidate—something a job board can’t. As if the above pointers weren’t enough to highlight why referral programs are crucial for the employer, the employees have an excellent motivation to do it too.

Employees refer their friends and well-wishers to the company because:

  • They are helping a friend find work in a position that deems suitable.
  • They are helping out the organization escape the cumbersome process of hiring from scratch.
  • They want to cop those employee referral rewards (more of that later).
  • Who doesn’t want to work with their friends?
Employee-referred candidates make up just 6.9% of total candidates but account for 40% of total hires. - Jobvite

Let’s look at a theoretical proof, followed by an enterprise platform’s example on how they made the most of the purpose of the employee referral program to get the cream crowd.

Employee Referrals bolster the Motivation Levels

McClelland’s Theory of Motivation speaks volumes about how an employee feels the need for power, achievement, and affiliation within and outside the organization to back it up with theoretical proof. Concerning the best employee referral program rewards, you, the employer, equip the employee’s arsenal with all the three intangible superpowers:

  • The feeling of power with the ability to influence the hiring decisions of the organization by recommending the right candidate(s)
  • Sense of Achievement through the employee referral platforms, which are a significant selling point for employees to refer people in the first place
  • Affiliation towards the organization as the referrer acts as the brand ambassador to your organization while talking about it to their peers.

Referrals bring jobs to the attention of people who aren’t actively looking, getting your company a fresh pair of eyes.

Talking about hitting two birds with one stone, you get a terrific new hire (if it all goes right), and the referring employee walks back home happy that s/he will see their friend at work shortly.


Advantages of Rewarding Employee Referrals

Just the motivation of keeping the concerned employee in the loop won’t motivate them enough. Hence, what is an employee referral program if it doesn’t have a rewarding structure to give the employees an extra kick? Here’s why:

1. Reduced Recruitment Costs

With the recruitment costs cut by quite a margin, the organization saves many financial resources. The right person walks up to the interview room holding the referring employee’s hand, and a part of those committed costs can be reinvested in rewarding the referrer(s).

2. Referrals take Less Time

Employee referrals save time along with money. Research from Glassdoor suggests that it takes an average of 23 days to hire a new employee in the United States, which would only increase. Employee referrals, however, reduce the period, making monetary rewards an investment that pays back in time saved.

3. Referral Rewards ensure the Quality Factor

When it comes to the quality of referred candidates, the rewards at stake are generally pretty high, i.e., a percentage of the referrer’s salary. This gives the referrer an added motivation to put the best cards forward while referring to their friends or old colleagues.

Organizations are moving over Cash-based Employee Referral Platform Bonuses

Sure, nothing’s better than cold liquid cash to slurp on, but new-age employees are more enticed by referral bonuses that offer experiences and vouchers over money. For instance, InMobi, a marketing cloud company, started giving out Royal Enfield (often referred to as the Indian Harley Davidson) and Vespa scooters to their employees for every referral they made. What was the deal? They stopped giving out cash bonuses on employee referrals and shifted it to experiences.

Another plus point to this approach is that they appear more luscious in the eyes of the referrer. A chance to win a freeway motorbike sounds music to my ears rather than a bonus amount in cash as it’s very tangible. And as always, organizations can choose between money and non-cash bonuses for employees to refer someone.


Automated Employee Referral Platforms are the Future

As the employee referral process is streamlined and follows a procedure, various recruitment and hiring platforms have integrated rewards and recognition tools to automate it. The employee referral procedures of today are splintered with referrals getting lost in mail trails and HR sieving out formidable candidates out of immense workload.

Even if the referrals make it up the recruitment pipeline, the referrer isn’t informed of their valuable contribution, which defeats the purpose of a referral reward. This problem can be solved thanks to automation.

Platforms like Xoxoday make employee referrals seamless by integrating with recruitment and hiring platforms that work by setting up rule engines. These rule engines can trigger referral rewards on specified conditions, and integration with your applicant tracking system can be automated. To top it all off, a platform like Xoxoday has countless experiences, gift vouchers, and deals for the referrers to choose from.

Not only would you not lose any referral in the pipeline, but every referrer will get their due share without fail—which would make the best employee referral program a hit.


Setting up the Perfect Employee Referral Program

The essence of what is an employee referral program lies in the clarity of communication. All HR has to do is communicate it to the employees, and they do all the hard work (till the interviews start coming in). The employee referral program has to be clear on these fronts:

  • Why does the program exist?
  • What positions are open?
  • What’s the catch? State the perks that employees get on successful referral(s).
  • Rules and T&C of the program
  • Deadline on submission of referral(s)

Once these things are communicated, the employees will start flashing their cards in no time. Do note that the employees should understand the role in question, and in case there’s a gap in prospects coming in and the opportunities that the HR wanted, it should be clarified again.


What to do after the Referrals come in?

It’s safe to say that in talent acquisition, the quality of referrals matters more than the number of applicants sent HR way. Either way, the three things that HR should do after the referral campaign is in full swing are:

1. Appreciate

For the employees that contributed, appreciation is crucial to value their input and motivate others to put their foot forward. You don’t want to leave the employees thinking that their referral went as just another unread email.

2. Communicate

Give out a detailed progress record—be it in a candid breakroom chat or by email. Most employees are eager to know their referral’s progress as they are worried if their referral was able enough to be shortlisted or not.

3. Reward and Reward well

In case of referrals that hit the bull’s eye and got indicted into the roster, the referrer should be well rewarded. Keep the referral bonus straightforward, and your employees will already have an incentive to refer top candidates to human resources. Don’t include more if’s or but’s than what’s needed.

The Crux: Refer, Recruit, Rinse & Repeat

Employee referrals are one of the most well-known and cost-effective methods of hiring. If the employee referral program is set right by keeping in mind the above, it’ll reap the perfect pool of candidates without exhausting time, money, and efforts. And yes, don’t forget to reward your referrers for bringing their friends in!

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