Great Analysis of the Impact of Networking and Employee Referral Programs

The combination of effective networking, the hidden job market, and  employee referral programs produce the most powerful way to land your dream job.

Employee Referral Programs

Most companies offer some type of employee referral program (ERP) as a means of sourcing high quality candidates. Existing employees tend to refer people who are like them, having similar values and characteristics.  Since a referral reflects directly on the referring employee, care is taken to recommend only the best candidates.  

Employers have long regarded employee referrals as a preferred way to staff openings because of these compelling reasons:

• The cost of recruitment is lower with a referral, since there is no advertising, collection and screening of applications, or payment of agency fees. Instead, the referring employee is often given a referral bonus based on the referral being hired and successfully completing a certain period of employment.  Referral bonuses typically range from $200 to $900. 
• Referrals complete the hiring process much faster. Research from Jobviteindicates referrals complete the hiring process in an average of 29 days, versus 39 days for applicants from a job board and 55 days for applicants through the employer’s own careers page on the employer website.
• Referrals onboard faster than non-referral hires. Why? Because they already have a personal connection to the employer in the person who referred them, and this person typically plays a role in helping the people they refer to acclimate faster to the employer.
• Both referrals and the employees who refer them stay with the employer longer than non-referred hires. Because of their inside connection, the same Jobvite study showed that 47% of referrals complete 3 years of employment, compared to only 14% of candidates hired through job boards and 39% hired though the employer’s website.  In First Break All the Rules (page 28), author Marcus Buckingham points out that having a best friend at work is a powerful employee retention factor.

So it is no wonder that referrals account for about 40% of an employer’s hires but only 7% of the total applications for employment.  

Job search expert Hannah Morgan reveals three more important facts about employee referrals in her US News & World Report article, 7 Things You Should Know About Employee Referrals:

1. When an employee refers someone, that person is hired about two-thirds of the time.
2. The higher on the corporate ladder the referrer is, the higher the chances of that person’s referral being hired. Referrals from director and above were hired 91% of the time, compared to 53% of the referrals from entry-level staff.
3. The size of the organization matters, with 14% of the employee base being referral hires in firms with 1-99 employee, 24% in firms of 100-999 employees, and 27% in firms with more than 1,000 employees.

Becoming a Referral is Your Best Chance of Landing the Job

One look at the data tells you that you will significantly increase your chances of hire if you are referred to an employer, versus applying via a job board (Monster, Indeed, et al) or via an employer’s career website:

Becoming a referred candidate takes more time to set up than do the other three methods.  Yet it is a perfect passive job search strategy as you seek to expand your career opportunities.