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Referral Programs > Retention > Talent Acquisition > Talent Management

Top 10 Reasons to Build a Robust Employee Referral Program

With multiple reports lately discussing how employers are having difficulty filling open positions – despite the high unemployment rate – now is the perfect time to invest in an employee referral program (ERP) – whether that entails creating one from scratch or enhancing your current one.

Referrals make up 26.7 percent of all external hires, making referrals the number one resource for them, according to the 2010 CareerXRoads Sources of Hire study.

Not only are well-structured ERPs one of the best ways to generate new hires, but they’ve also been shown to increase retention, lower costs, boost morale, and essentially make your job easier. Take a look…

The Top 10 Reasons to Build Your Employee Referral Program:

  1. More bang out of your budget – A robust employee referral program can help lower your cost per hire.  The 2006 DirectEmployers Recruiting Trends Survey showed that employee referrals produced the highest ROI of any other sourcing method. According to Staffing.org, companies spend an average of 16 cents for staffing for every dollar of compensation recruited, but a study of Lincoln Financial Group, whose employee referral program accounts for 55 percent of all external hires, revealed that the company boasts a much lower staffing cost ratio of 10.9 cents per dollar.
  2. The possibility of actually getting through that “to do” list.  ERPs can cut down significantly on the time you spend sourcing and screening candidates, as they essentially outsource this job to your employees, whose own discretion helps ensure you don’t spend time sorting through irrelevant applicants (see #3).  And by holding on to the resumes that don’t turn into immediate hires, you won’t always have to start from scratch when new positions open up (see #4).
  3. A better quality of candidates – Who better to recommend candidates who fit the culture of your company than the very people who live it every day? Because your employees already know what it takes to be successful at your company (and because no one in his right mind would refer a candidate who could reflect badly on him), employee referrals eliminate the need to weed out unqualified applicants.
  4. Make that a steady supply of quality candidates – While not every employee referral will lead to a hire, a well-designed employee referral program will help you build a generous pool of qualified resumes from which to pull as more positions open up.
  5. Less turnover – Employers with robust ERPs tend to have a lower rate of turnover. One reason for this? Hires produced through ERPs tend to stay with the organization longer because they enter the organization with already established social connections and a better understanding of the culture. ERP hires are also 3.5 times less likely to be terminated than hires produced through other sources.
  6. Your employees will have a new appreciation for their job - and yours – ERPs provide employees with a sense of ownership in – and deeper respect for – the hiring process. Employees value meaningful work and a sense of connection to their company even more than they do high salaries, according to the 2009 10th annual Deloitte Best Company to Work For survey. Giving them a chance to participate in the hiring process is a way to foster that sense of connection and the feeling that they are making a positive contribution to the company. 
  7. A better-looking employment brand – ERPs turn your employees into brand advocates. If they’re telling friends about job openings at your organization, they are essentially sending the message, “This is a great place to work.” Not every referral will turn into a hire, but it does contribute to the notion that your organization is an employer of choice.
  8. A boost in competitive intelligence — A more indirect – but equally beneficial – result of implementing an employee referral program is that it gives your employees an excuse to proactively seek out and network with other professionals, who can be a resource for gaining knowledge, sharing best practices and, of course, generating more referrals.
  9. You’ll stop resenting the time your employees spend on Facebook.  With the widespread use of social networking sites to connect with other industry professionals, your employees today have an even wider range of connections by which to source qualified, trusted candidates for you.
  10. Your new employees will pay it forward – According to the American Journal of Sociology, referred workers tend to outperform their non-referral counterparts and are more likely to refer future employees.
Mary Lorenz

About Mary Lorenz

Mary is a copywriter for CareerBuilder, specializing in B2B marketing and corporate recruiting best practices and social media. In addition to creating copy for corporate advertising and marketing campaigns, she researches and writes about employee attraction, engagement and retention. Whenever possible, she makes references to pop culture. Sometimes, those references are even relevant. A New Orleans native, Mary now lives in Chicago, right down the street from the best sushi place in the city. It's awesome.
1 comments
blondell
blondell

@ In order to get more americans  back to work you have to fulfill the needs of the customers that is supporting the economy the more money that they earned the more money will nine out ten  they will spend.  Giving a pay raise at the right time also helps to get that vacation plan paid up and ready to go!!

Helping that un-employed worker get a decent paying job,also helps ,there's people will skills and

they aren't given the oppuntunity to display their skills by being in the wrong job,for many years.

Is there anyone listening to the silent crying worker's??

For instance there's no union for retail worker's they have no one to fight for their rights at all.

They are treated un-fairly in some & most cases.

 

                                                                                      T&T

phil
phil

Great points here.

Where does the "ERP hires are also 3.5 times less likely to be terminated than hires produced through other sources." stats come from? Do you have a source?

Trackbacks

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  2. [...] The Top 10 Reasons to Build Your Employee Referral Program: [...]

  3. [...] The Internet rules when it comes to searching for jobs: A remarkable 86 percent of job seekers search for jobs online, with job boards leading the way as the main go-to source for job listings, followed closely by company career sites. Networking, staffing agencies and recruiters rounded out the top five. Interestingly enough, however, when it came to finding a job, job boards came second to networking, a finding that is consistent with other surveys that indicate that employee referrals are among the most effective recruitment resources. [...]

  4. [...] The Internet rules when it comes to searching for jobs: A remarkable 86 percent of job seekers search for jobs online, with job boards leading the way as the main go-to source for job listings, followed closely by company career sites. Networking, staffing agencies and recruiters rounded out the top five. Interestingly enough, however, when it came to finding a job, job boards came second to networking, a finding that is consistent with other surveys that indicate that employee referrals are among the most effective recruitment resources. [...]

  5. [...] The Internet rules when it comes to searching for jobs: A remarkable 86 percent of job seekers search for jobs online, with job boards leading the way as the main go-to source for job listings, followed closely by company career sites. Networking, staffing agencies and recruiters rounded out the top five. Interestingly enough, however, when it came to finding a job, job boards came second to networking, a finding that is consistent with other surveys that indicate that employee referrals are among the most effective recruitment resources. [...]

  6. [...] Focus on culture: The vast majority of job seekers (roughly 70 percent, according to the Inavero survey) say they would accept a lower salary to work for a company with a strong employment brand. Just as it influences a candidate’s decisions to accept an offer, culture should also play just as much of a role in an employer’s decision to hire. Author and business strategist Amber Naslund advises employers to “hire for culture, train for skills,” which means, hire people who truly believe in the mission of the organization and are passionate about its success. You can’t train for attitude, but you can train for skills. And what’s more valuable to the organization in the long run? (The added benefit is that these employees will likely end up being strong brand advocates.) [...]

  7. [...] have a better understanding of the company culture than other hires. Referrals are also 3.5 times less likely to be terminated than other hires. Want more? Download our guide for more on building a [...]

  8. [...] See this article from Mary Lorenz at CareerBuilder, for a list of the top 10 reasons referrals are valuable to employers.  It just goes to show how important referrals are to not only applicants, but employers as well!  [...]

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