Why your Employee Referral Program Makes You Crazy....And How To Get Your Sanity Back.

Well run employee Referrals can make up more than 40% of hires in companies.  It’s widely touted as the richest candidate source by recruiters and in fact, is often the first recruiting method for most startups, before a recruiting function is implemented.  Even with those truths, recruiters still struggle with the irritating side effects of their referrals programs.  

Side Effect #1: Referrals take up a lot of time
Reality: “Referral” is probably poorly defined

The problem probably isn’t that you don’t have time.  It’s likely that you haven’t clearly defined what a referral is, so you’re inundated with candidates who aren’t well known to the referrer.  Inevitably, someone on the team combed through their network, dumped it into your ATS, and you’ve woken up to 500 new candidates to review overnight.  You can’t find the signal through the noise, so the good referrals go undetected for longer than necessary.

4 steps to solve for this.

1.  Put clear parameters around what a referral is and create a “referral test.”  

1. Do you know this person?  
2. Have you worked with them before?  
3. Do you know they would be a valuable addition to the team?   

If the answer to those questions isn’t “yes,” then it’s not a referral - it’s a lead, and should be rewarded differently.  If lack of time is a problem, don’t incentivize people to send you 100 leads.  Incentivize them to send you 5 good referrals.  (more on incentives later)

2.  Prioritize all referrals - get to them first.  Use your ATS to sort by source and before you review ANY other candidates, review the referrals.  Better yet, have email notifications set up for all referrals and utilize a Recruiting Coordinator to round robin the referrals across the recruiting team.

3.  Don’t talk to every referral - yes, I said it.  I know this is a big hot button in recruiting and this opinion isn’t widely shared.  But, if you know you team, your managers, and your roles, there’s nothing wrong with going back to the referring employee with a clear reason WHY you aren’t going to talk to their referral.  It’s likely that they can change your mind, but if you give them fair feedback, they might agree with you and save you the thirty minutes you’d have spent on an exploratory call.  

4.  Create a separate process and incentivization for the “leads.”  You don’t want to discourage them altogether, and this could be a great opportunity for a Recruiting Coordinator to take on some inbound sourcing responsibilities.

Side Effect #2: Your referrers hound you for updates
Reality: The process may be poorly managed

If they’re following up, it’s probably because the program is poorly managed.  Many referrers feel that their employee referrals get lost in the shuffle.  I’m not talking about the referrer who gives you 100 leads, but the one who gives you 5 referrals and has no idea what happened to them.  

You need clear KPIs associated with your referral program and should be able to answer the following questions easily.  

• How will the referring employee know you’ve actioned their referral?   (our metric - someone will respond to the referrer within 24-48 hours)
• How soon will you reach out to the referral? (our metric - within 48 hours)
• How will the referring employee know what’s happening throughout the process? (our metric - every time there’s process movement, we @mention the referrer in our applicant tracking system for visibility)
• Do you expect the referrer to help close? (our metric - yes, every time)
• How long do you anticipate the process taking? (our metric - ~2 weeks, which is the average length of time it takes to process any applicant for our higher volume roles)

This goes back to managing your time.  Set clear communication timelines so people know what to expect.  Document them and refer people back to them regularly.  

Side effect # 3: It relies entirely on cash bonuses which motivate the wrong behavior 
Reality: Cash is important, but there are other options.

Cash is a powerful motivator - offer someone $10,000 and it’s a definite call to action.  Every referral program I’ve worked with has had a cash component but there are other components that can be leveraged in addition to, or in lieu of, cash.  

Public acknowledgement: In our last quarterly fireside chat with our interviewing teams, we talked about the state of the union in Recruiting and where we’ve applied their feedback to make changes.  More importantly, we give Employee Referral recognition to 1 person for each of the following things:

• Highest Volume of Referrals
• Most Hires from Referrals
• Best Referrer - which goes to the referrer who had the best ratio of referrals to hires.  (It incentivizes quality.)

Consider equity:  this is controversial and not every company can do this, but consider incentivizing referrals with equity.  For example, for senior, well-connected new hires, you might commit to an additional equity grant after 6 months, if they can refer 6 hires in that time frame…..in fact, this arrangement may also help you to get an offer accepted when a candidate is waffling.    

Think of something "random:" Think of the thing that’s unique to your office.  Is parking a challenge?  How about a month of parking, or a subscription to a valet through a program like Zirx or Luxe?  Is work space becoming a challenge in your growing startup?  Maybe the incentive is your own desk space for a quarter, or a stand up desk.  Or, maybe it’s something like a monthly dinner with your founder(s), or a special piece of swag that’s hard to earn.  There are so many unique options here to consider.

Overall, a referral program is necessary for any well run recruiting function and can be a very smart way to recruit.  I’d encourage any recruiting team to spend time focusing on making their referral program work well to get the most out of it and make it unique for your organization.   

If you’d like to chat, I can be reached at [email protected]