Employee Referral Programs – why they matter

Its safe to say that every company/business has its own ERP (Employee Referral Program), whether formal or informal, that they promote to varying degrees at various times.  Larger companies with hundreds of open positions, in some cases, have a full-time employee dedicated to running and optimizing their ERP (Twitter recently posted a job description for this role).  Smaller companies that hire a few people a year often rely on their employees to refer candidates for those positions, with hiring managers reminding their staff at every team meeting to think about “who they know” for an open position.

Beyond the obvious reasons why Employee Referral Programs make sense, the goal of this post is to dive into the core value propositions of a strong ERP, and motivate Recruiting/HR Leaders to focus their energies on improving their ERP to the best of their ability (with or without ERP automation software.)

Here are the most important benefits of a well-oiled ERP:

1.  Cost

Recruiting can be an expensive proposition.  Between the budgets spent on staff, job board postings, resume databases, applicant tracking systems, and third-party agency fees, getting your CFO to approve additional spending for your cost center can be a real challenge.  What better way to free up cash for your budget then by reducing the expenses associated with your day-to-day recruiting operations?  A productive ERP system can do this for you.  Here’s how:

A simple math analysis will make it clear that referred candidates are significantly less expensive then acquired candidates (by acquired we mean, you spent money to find them).  Even after you’ve paid your employee’s referral fee for a successful placement (generally between $1-$3k from our research), you’ve spent quite a bit less then you would have spent to find that candidate through other means.  We built an ROI calculator to help illustrate this concept in more detail.

No doubt you will save money in the long run if more of your jobs are filled with candidates that were referred by your employees vs candidates you discovered externally.

2.  Culture

You’ve often heard the phrase “culture of recruiting”, or the idea that a good company culture fosters ongoing candidate referrals because people that love working at your company want to share that same experience with others.  A well-defined and operated ERP can create a measureable impact on your company culture in the following ways:

– Employees who are actively referring candidates into the organization that get hired feel a sense of acheivement that goes beyond a paycheck.  This positive energy no doubt will translate into better productivity from that employee, and chances are good they’ll stick around.

– People want to work with people they know and like.  If you encourage your employees to pro-actively seek out personal and professional contacts for your open positions, you’ve now made your employee part of the hiring process, offering them some measure of control over who they will be working with.

– Referred candidates join your company in a more organic way.  The first 3 months of any new job is akward for a new employee regardless, but the level of comfort can be increased when they join a company where they already know people personally (and know that those people thought highly enough of them to invite them into the organization).

All of this adds up to an improved culture, with better chances of employee retention in the long run.

3.  Evangelism

When your employees are promoting open positions at your company in their social circles, they’re also marketing your company.  Their LinkedIn status update that says “We’re hiring” and includes your company logo, is an impression for every eyeball that sees it.  Enough of these posts and suddenly your employees are running a campaign that might have the marketing team scrambling to capture leads!

At a high level, when employees promote anything about your company in a positive way, they’re sending a signal to their audience that they like where they work, which translates into brand equity.  It’s the kind of marketing every organization would love to have.  More importantly, if your employees are not willing to share jobs, it says something about how they feel about the company, and alerts you to more important work ahead – culture adjustments.

Cost, Culture, and Evangelism are just a few of the high-impact benefits of a successful Employee Referral Program.  While there are certainly more, hopefully these concepts are enough motivation for the reader to ask themselves, “how can we improve our ERP?” and take immediate action.

The referred candidates are out there waiting to hear from your employees – are you doing enough to get your employees to make their move?


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