Are Employee Referrals the Best Way to Hire Top Talent?
According to Bullhorn, existing candidate referrals ranked as the single best source for high-quality talent in 2018. It makes sense, your current employees are on the front-line of your business every day. They understand your company culture, values, and industry, and therefore exactly the type of person who would fit in well in your organization – in terms of both skill-set and cultural fit.
But are employee referrals as simple a solution as they seem?
The positives: why referrals work
Employee referrals are undoubtedly a good way to reach out to passive candidates i.e. a candidate who is not actively seeking out a new job. From a screening perspective, it can also often save time. The reality is that if you have hired good employees at your company, there is a decent chance that people in their peer groups will be of a similar caliber. But don’t forget to show a certain level of wariness and still carry out your due diligence on their CV, references, and profile.
Employee referrals can also save significant amounts on hiring, with the average cost of hiring an employee being up to £12,000 – when factoring in things like training expenses, and employee relocation costs. With employee referrals, you cut out some of these costs – mainly those associated with advertising on job boards, agency fees – by far the biggest cost when hiring externally, and in most instances, you can also save some time, as it can often be faster to hire through referrals
The flip side: it’s not all sunshine and roses
The key here is to never make assumptions. Someone may have been excellent in their role in another company, but there are no guarantees that they will replicate this success based on past performance. If you know someone personally or they have been recommended to you – it can be easy to labor under this misbelief – so it’s important to not make assumptions and undertake the same screening process as any other candidate. The old adage of never working with your friends can also sometimes ring true, so this is something to also be aware of.
It’s also crucial not to put all your eggs in one basket. Although employee referrals are a great way to access top talent, you should spread the net as wide as possible to find quality talent. This should include a wide variety of channels including job boards, LinkedIn and of course your company website. At Perkbox, for example, our hires are currently split roughly between (1) reactive hires, i.e candidates responding to job adverts and applying directly, (2) proactive hires i.e my headhunting candidates, and (3) staff referrals.
Avoid the pitfalls: how to implement a top-notch employee referral scheme
First thing’s first, introduce the scheme by telling employees there is an opportunity to make money, while also bring onboard like-minded people to the company. Explain the parameters of the referral scheme. For example, how to access the referral form and what they will receive if they successfully refer a candidate – be that cash or another reward. You may find that to prevent employees from abusing this system and ensure the quality of candidates is high – it’s a good idea to split the fee or reward and provide half of it at the time of the successful hire, and the remainder after they pass probation.
Secondly, make sure employees are aware there is a referral scheme in place. Internal communication platforms like Slack can be used to create a ‘Recruitment Channel’ where new roles are posted when they arise, and to ask employees to advertise them privately on their LinkedIn and social media channels.
And finally, make sure the reward you’re offering is one that will appeal to employees and encourage them to reach out to their own networks to try and attract talent. The simple fact is that incentives work wonders as a form of encouragement. Potential rewards could include bonuses, vouchers or even meals and drinks incentives – the options are plenty.
A lovely example is, Accenture which allows employees to donate a part of their referral bonus to a charity of their choice and they match that amount.
Along with offering monetary rewards, make sure to consider publicly recognising effective referrers letting them know you appreciate their effort.
Like with anything you implement in your organization, authenticity is key. Speak to your employees before implementing a referral scheme and discuss how they would like vacancies to be communicated as well as the rewards that would appeal to them the most.
Combine this with an awareness of the pros and cons discussed above and you’re well set up for success!
About the author: Damir Latte, is Head of Talent Acquisition at Perkbox.