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.
July 2001 News
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