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Management Skills

How to Fix the Problems with Your Employee Referral Program


Jan 28, 2016

employee referral programYou don’t want to hire just anyone. And based on a recent survey from LinkedIn, talent acquisition managers are more focused than ever on quality of hire.

There are many ways to hire quality employees: better job descriptions, sourcing in new places and one of the most frequently used tools—employee referral programs.

In fact, 26 percent of the LinkedIn survey respondents stated that employee referrals are an essential and long-lasting recruiting trend.

So, let’s examine why employee referrals are so important, problems that many employers face with them and some tips to help turn yours into a well-oiled machine.

Why Employee Referral Programs Are So Popular

In short, employers use referral programs because they work. Not only do they work, but when implemented correctly, they work extremely well—a fact that multiple surveys support.

“Employee referral programs are important because referred employees tend to integrate into the organization faster, have a longer tenure and perform better,” —Mark Fuell, director of talent acquisition for Ernst & Young’s U.S.

  • 82 percent of employers rate employee referrals above all other sources for generating the best return on investment (CareerBuilder).
  • 88 percent of employers rated employee referrals above all other sources for generated quality of new hires (CareerBuilder).
  • On average it takes 29 days to hire a referred candidate, compared to 39 days to hire a candidate through a job posting or 55 days to hire a candidate through a career site (Jobvite).
  • Referral hires have greater job satisfaction and stay longer at companies – 46% stay over 1 year, 45% over 2 years and 47% over 3 years (Jobvite).
  • Referrals bring in more diverse hires, and one out of every five referrals gets hired (Zao).

 Of course, the program has to be executed correctly for you to reap the benefits. 

3 Problems Employers Face

Unfortunately, many employee referral programs are plagued with problems, which causes them to be ineffective. And in some cases, programs actually cost employers.

Poor Communication

One of the worst parts about the job hunt is never hearing back from a potential employer. We’ve all been there. We thought the interview went great, we sent a timely and thoughtful thank you letter, and then…crickets.

When this happens to an employee referral, it puts the employee who referred them in the awkward position of having to explain to their friend why they weren’t hired. And why would they want to risk that?

Poor communication between HR, the employee and the referral is a major reason why employees won’t want to participate in your program.

No One Knows About It

The Recruiting Division, an on-demand recruiting solutions company explains, “Employee referral programs need to be part of company cultures for the most exposure, participation, and results.”

And if employees don’t know there is a referral program, how can they participate?

None or Not Enough Compensation

One of the main pieces of a good program is the compensation offered to the employee. And it doesn’t have to be money.

As TLNT, a new source on the business of HR for human resource and talent management leaders and professionals, recounts, “gift cards, cash rewards, a day off, a parking spot, or even social recognition are all great rewards.”

But if a company isn’t offering any type of compensation, it’s hard to entice an employee to stick their neck out and refer someone in their network.

Tips for Improving Your Employee Referral Program

But the good news is that it’s easy to fix these problems and create a top-notch employee referral program.

Get top-level buy in. Having your executives committed to your employee referral program makes it easy to incorporate into your company culture.

Offer rewards. Tell employees what they can get from referring to your company.

Communicate, communicate, communicate. Make sure you communicate with everyone throughout the entire process, from the application until they’re hired or rejected.

Keep up engagement. Send out reminders so that your employees won’t forget about the referral program.

Make it easy. Ensure the process is simple for you, the employee and the referral so that no one gets bogged down filling out a bunch of forms.

Promote your company. Give your employees resources like videos, pictures or a great careers page to show their networks why it’s so awesome to work at your company.

The Next Steps

It’s essential to have an employee referral program in place to recruit quality candidates. Some programs have problems with awareness and communication. But after you’ve identified the solution(s), and fixed any issues, it’s easy to start raking in the referrals.

Once you start getting potential candidates from your employee referral program, the next step is the interview. For an HR refresher on interviewing, you can check out our previous blog posts: questions you never want to ask and questions you should definitely ask.

Also, to help coach your managers on their interviewing skills, learn more about our lawful hiring training.

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