The Skinny on Employee Referral Programs

By Adam Robinson,
May 21, 2012

Are your employees spending time on Facebook, Twitter, and LinkedIn? No? Well they should be and let me tell you why! Employee referrals are the number one source in hiring volume and quality and 50% of all hires at top-performing firms come as a result of employees’ time spent on networking and social media. Not convinced? Let’s explore the pros and cons of instituting an employee referral program in your business.

We’ve all heard the phrase ‘It’s not what you know, it’s who you know,’ and today almost 50% of hires are through employee referrals. Companies have been taking advantage of the concept to cut back on hiring costs and increase quality for the last few years but many employers don’t even know where to start when giving employees the chance to become recruiters.

First things first, let’s set up your employee referral plan. Ben Eubanks of UpStartHR wrote an insightful article on Employee Referral Recruitment Pros and Cons and he says giving your employees ‘referral bonuses’ for those hired is really important and almost every company should have one. This will increase the competition and give your employees motivation to network with the most qualified connections out there!

Start getting comfortable with the idea that your employees will be spending a small portion of their days using social media to post, connect, and spark interest on your company. Look at it as a small investment into marketing your company and showing off all your happy employees! One major applicant tracking system reported that if a company has 100 employees and each employee has an average social network of 150 friends, the potential reach for an open position becomes 15,000 people!

Now what are the advantages of an employee referral program? I already told you that they are the #1 source for hiring quality and quantity but what else? Dr. John Sullivan of ere.net cited hard data and business benefits of employee referrals in his article titled 10 Compelling Numbers That Reveal the Power of Employee Referrals. Dr. Sullivan states that businesses see an increase in candidate quality, impact hires, initial productivity, diversity, and immediate results! He also guarantees a decrease in termination rates, wasted management time, and legal issues!

But don’t remove your block on social media sites yet. Like every good HR fad it does have its disadvantages. Eubanks describes the downfalls of a referral plan including the simple fact that your employees might not be connected with the best and most qualified candidates. Also he points out you may deal with employees begging you to interview their candidate or group thinking into hiring someone simply because they were a referral (Sound familiar Yahoo?)

In the end, the benefits of an employee referral program seem to outweigh the cons and with a 46% retention rate compared to 33% from career sites and 22% from job boards, it’s well worth cringing at your employees excitement over Facebooking at work.

Did you know you can post all of your jobs directly to your favorite social media site with one click? Check out this and more when you start your free trial of Hireology!  

Once you hire those all-star candidates, learn how to keep them around with our guide to retaining great employees. 

About the Author

Adam co-founded Hireology with the mission to help growing companies make better hiring decisions through data and better technology. Adam is passionate about entrepreneurship, donating time to a number of organizations that support the entrepreneurial cause. Adam completed his undergraduate study at the University of Illinois at Urbana-Champaign, and received his MBA from DePaul University in Chicago, IL.

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