ASQ - Team and Workplace Excellence Forum

Online Edition - July 2001


Issue Highlight — Turnabout Is Fair Play
- Take a look back at one of Peter Block's best columns as he helps bridge the gap between employee and manager and offers his invaluable "Employee Manifesto."

 In This Issue...
Getting Back To Basics
Change Of Space
Banking On Quality
Is Your Quality Process "Running On Empty?"

Recommended By A Friend

Peter Block Column
Views for a Change

Brief Cases

Return to NFC Index

Recommended By A Friend
A Recent Report on the Impact of Effective Employee Referral Programs

Recruitment methods in today’s job market—including big signing bonuses, the promises of upward mobility and hefty salaries—may be missing the point. Perhaps job hunters are looking for a deeper attraction than most efforts offer. What potential employees may be looking for when evaluating a new company is whether or not they have a friend, personal contact or relationship at the company. This can be one of the most significant factors influencing a new hire, and in turn, as a new research report conducted by Remark Solutions, Norristown, Pa., suggests, the most effective sourcing method based on overall return is an employee referral program.

   Employee Referral Programs are simply structured systems that encourage and facilitate hiring a new person as recommended by a current employee. Most companies use some type of formal or informal ERP and the report, that surveyed a diverse cross section of industries, including education, healthcare, consulting, technology and others ranging in size from less than 100 employees to nearly 100,000, sites that 75 percent of respondents projected a moderate growth rate in the upcoming year.

   According to the report, referrals have always been the most valuable recruiting strategy proven to save time via improved interview-to-hire conversion rates, save money through reduced acquisition and turnover costs and produce better candidates, as referred candidates often become top performers, experience higher job satisfaction and have longer tenure. The end result: Organizations that use ERP’s find the strongest performers with the right cultural fit faster and at the lowest cost.

Find a Friend
By implementing a systematic approach, more referrals are converted into real opportunities. Cisco, for example, the Silicon Valley high-flier, implemented a slightly different approach, the “Friends” program, launched in April 1996. Their message: “If you have a friend at Cisco, give them a call, there might be a job waiting for you! If you don’t have a friend at Cisco, visit our Web site and we’ll find one for you. Your new friend will teach you about the company, introduce you to the right people and lead you through the hiring process.”

   “Friends” and other ERP’s like it are designed to put some grace into the hiring process. Most recruiting efforts are slow and impersonal—for companies as well as job seekers—and many recruitment efforts ignore the fact that most people evaluate new jobs through personal networking.

Making ERP’s Work for You
“More participation equals more hires equals higher return on your investment,” Remark reports. Developing a culture where everyone is motivated to make referrals will result in the greatest return on your company’s human capital. A systematic approach, increasing awareness of the program and encouraging participation are the keys to getting the most out of your ERP.
An effective system can help you stimulate activity by delivering both broad correspondence and personalized communications to participants while also managing the administrative functions. Every system should capture information and facilitate reporting that displays participation, transactions and successes as well as capture data to report on return on investment. The research found the greatest levels of participation in respondents that use a full automated or Web-based program.

   And the more people you involve, the more effective the program will be. Almost 40 percent of respondents said that 10 percent or less of employees participated in their referral program. Of these respondents, 75 percent of them indicated they received 10 percent of less of hires from their ERP’s. “Although many factors drive participation, having answers to the following questions is paramount in evoking maximum participation: What motivated employees to participate in the first place? Why did they choose not to participate on an ongoing basis? What would motivate them to participate again? Understand what prospective participants are thinking and expecting from the ERP and commit to addressing their issues. This commitment will facilitate employee ownership and in turn participation,” reports Remark.

The Three Keys
The report recommends encouraging involvement through education, communication and compensation. They recommend the following guidelines as developed from the leading organizations in referral processes and maximum participation.

   Educate: Ensure all program rules are thoroughly defined, easily understood and widely published. Provide all employees with a clear understanding of what the company has to offer so they can better convey it to the potential hires. Include details on salary and benefit packages and the company’s vision and mission statements.

   Communicate: Make referrals part of the company culture with senior management support and involvement. Increase awareness of the efforts by communicating to employees through posters, reminders, Web pages and brochures. Also, keeping the employees informed on a regular basis as to what is happening throughout the hiring process will increase their participation.

   Compensate: The leading companies suggest pay incentives for employees that use the program and locate new hires. Bonuses should be paid within 30 days of the referred employees date of hire to reinforce the behavior. The incentives are effective because they reward an employee for identifying a candidate that you otherwise may not have been able to recruit. Participation should also be rewarded by offering small rewards to employees that find names or leads even though they may not result in hiring. Non-cash rewards are valued and serve as ongoing reminder of the program. Contests are also great ways to motivate employees’ participation.

   Achieving maximum participation is the key to making your ERP work best—no matter how formally or informally structured the program is. Emphasizing the value of your employees’ input when hiring not only encourages your existing employees, but also attracts potential workers by demonstrating to them the importance of people in your company’s success.

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