WHY EMPLOYEE REFERRAL PROGRAMS
SHOULD BE YOUR #1 HIRING SOURCE
Making the business case 2014
© Dr John Sullivan
1 Read more at www.drjohnsullivan.com
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Why the increased emphasis on referrals?
Referrals will continue to become even more prominent because of:More data proving their business impactMore firms are shifting to a data driven approach
which makes their ERP’s much more effectiveThe growth of social media and the Internet
make it easy for your employees to find top talentThe visibility of prospects work on the InternetNew technologies are availableNew vendors appear every day
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The business and recruiting impacts of referrals
Part I
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The 1ST step is building a compelling business case
Here is a list of the business impacts from referrals
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Business impact #1 – High quality hires
ERP’s produce the highest quality of hire Hires from referrals perform better on the job
than hires from any other source
Let’s look at 2 charts revealing source quality >
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Referrals are the #1 source for new hire quality
Source effectiveness
1. Employee referrals
2. Large job boards
3. Niche job boards
4. Temp to perm
5. Recruiters
6. Trade media
7. Staffing services
8. College recruiting
9. Career fairs
10. Co-op education
11. Mass media
12. Military
Source: staffing.org 2011
Source effectiveness (out of 5)
1. Employee referrals 3.44
2. Social networking sites 2.98
3. Corporate career pages 2.75
4. Internal job boards 2.52
Source: Aberdeen Group 2013
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Business impact #2 – High productivity
ERP’s produce improved new hire productivity Referred hires from average workers produce
25% more output /profit… than non-referred employees
Referrals from top performing employees produce 135% more output / profit
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Business impact #3 – A high ROI
Calculating the $ value and ROI of each ERP hireStart with your average revenue per employeeMultiplying that dollar amount by the % of
higher output produced by referral hires (25% up to
135%)…reveals each ERP hire’s $ impact on revenueAt a struggling firm like Sears using the minimum
increase in output of 25%, ($138,200 rpe X 25% improvement) this means that each ERP new hire is worth nearly $35,000
At a productive firm like Facebook, using the maximum 135% increase in output, each ERP hire could be worth up to $1.6 million
Compared to a probable cost per hire of less than $10,000
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Business impact #4 – High retention
ERP’s hires have a better retention rate
Referred workers have a higher retention rate and are up to 30% less likely to quit their jobs
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Let’s shift to recruiting impacts
The superior recruiting impacts from referrals
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Recruiting impact #1 – A high volume of hires
The highest volume of hires - of all sources of corporate recruits, employee referrals are #1 in volume at between 24.5% and 44% of all hires
An even higher volume occurs at top firms – at firms with excellent referral programs… 50% of all hires come from referrals (Twitter, Facebook and E&Y) and the top firms have reached nearly 80%
Up to 8 referrals per opening – by assigning prospects to the right employees… you can get up to an average of eight referrals per position
Let’s look at a chart revealing source volume >
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Referrals are the #1 source for new hire volume
Source popularity Volume
1. Referrals 24.5%
2. Career site 23.8%
3. Job boards 18.1%
4. Recruiter direct source 6.8%
5. College 5.5%
6. Rehires 3.3%
7. 3rd party 3.1%
8. Social media 2.9%
9. Print 2.3%
10. Temp to hire 1.5%
11. Career fairs 1.2%
12. Walk-ins 0.3%
Source: CareerXroads 2013
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Recruiting impact #1 – Hiring volume at top firms
The best firms average 46%
Source:yesgraph
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Recruiting impact #2 – High quality applicants
Higher quality applicants A survey of 73 major employers… 88% said
that… “referrals are the # 1 best source for above average applicants”
HR executives rated referral candidates #1, earning a 8.6 on scale of 10
Referrals also have the highest interview to hire ratio (17% of referrals are interviewed)
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Recruiting impact #3 – A better hire ratio
A much better hire ratio
Although only 7% of applicants come from
referrals, they produce 40% of all hires
Between 14% to 25% of referrals are hired…
Versus 1% from among all sources combined
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Recruiting impact #4 – Time to fill
Faster hiring speed / time to fill A referral program can have the fastest “time to
fill” of all sources (29 compared to 45 days)
“Blue light alert” referrals are the fastest of all referrals
Source:yesgraph
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Recruiting impact #5 – Low-cost
Lower-cost hire A well-managed referral program that doesn’t
focus on the reward as a motivator produces hires at a lower cost than the average cost per hire at a firm
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Not all referrals are equal
Top-performing employees submit the highest quality referrals Referrals from top performing employees
provide significantly higher quality referrals than the average worker (ttp://faculty.haas.berkeley.edu/bo_cowgill/papers/Referrals.pdf)
The worst referrals come from “people that you don’t know that approach you” Relative strangers that ask you to “please
make me a referral” produce the worst quality… because you don’t know their work or skills
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What are the key elements that
are present in top-performing
referral programs?
Part II
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What elements differentiate the top performing programs from the average ones?
Key differentiator elements…
ERP elements for increasing referral quality
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# 1 - Prioritize jobs to focus on quality
Focus ERP efforts on high priority jobs (40% max)
Mission critical jobs
Revenue generating jobs
Key jobs in high profit and high-growth SBU’s
Jobs with a high previous referral success rate
Hard to fill or high-volume jobs
“Sudden” key vacancies
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#2 – Motivate using a “help the team approach”
$ rewards can reduce the focus on quality & impactUse a “help the team" approach that emphasizes:It’s part of your responsibility as a team playerAn opportunity to work alongside great people
and… you won’t have to work alongside slackersYou will learn more from higher-quality new hiresYou will be recognized for “helping the team”Your team will “win” more frequentlyProviding this competitive advantage… will
improve bus. results, stock value and bonusesShow employees the correlation between better
business results… and a higher % of ERP hires
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#3 – Use proactive approaches, not spamming
Proactive means seeking out the best referrersIt is true that “Great people know great people”,
however… most employees are extremely busy… so in order to get quality referrals… you must proactively approach them
Proactively approach the teams that have the hardest openings to fill… as well as your top referring employees
Here are 2 proactive ERP tools to consider >
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“Proactive” referral tools
A) The “give me 5” approach (Google)
Proactively approach top performers and ask them To identify the top five people that they know in
their field… in these categoriesThe best performer you ever worked withThe most innovativeThe best team playerThe best managerThe best under pressure
Then ask your employee to contact these 5 individuals and try to convince them to apply
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“Proactive” tools
B) Reach out to job references for referrals
Identify top performing hires from last year
Call their references that said accurate things
Thank them
Ask them “Do you know anyone else as good?”
Ask them to be a future reference source
#4 - “Assigned referral” tools
4 Assigned referral approaches to considerA) Use a referral community - for each of its jobs,
Accolo selects a few employees based on the likelihood that they will know the right person for a job opening… they average 8 referrals for every job
B) Assign an individual with a strong connection – Zynga executives identify an important recruiting target and then select the employee that has the strongest social media relationship with them. That individual is then coached to make the referral
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Another assigned referral tool
C) Assigned boomerang referrals Utilize your corporate alumni group to… identify
top-performing alumni that work in high need areas and assign an employee to them (DaVita 16%)
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Another assigned referral tool
D) “Most wanted list” of assigned referrals
Executives identify… a list of gamechangers
and potential “magnet hires” at the beginning of
the year
Key employees are asked to seek out these highly
desirable individuals and to build a relationship
with them over social media
When they eventually agreed to consider
becoming a referral… speed hiring is required
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#5 - Require this information to ensure quality
You must require these 6 pieces of information
1. The job title or req # you are referring them for
2. How / when you have assessed their work
3. Assess and then tell us about their skills and knowledge… and how they are superior
4. Assess and then tell us about their cultural fit… so we do not dilute our culture
5. Assure us that you have sold them to the point where they will accept an interview, if asked
6. Honestly rate them with a A+, A, or B+
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#6 - Clear expectations can limit junk referrals
Set expectations before an employee refers
1.We are exclusively seeking superior individuals that will make our firm significantly better
2.Because we only want the very best… we expect no more than 3 referrals per employee a month
3.Throughout the referral process… we expect you to put the firm’s best interests first
4.Except in extraordinary cases, we do not want referrals from relatives or individuals that approached you and asked to be referred
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Referral program success factors
Look for people that That have skills that you don’t That beat you That you learn from That you admire That can do things you can’t That have answers That are future focused That see the glass as half empty
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#7 – Great referrals require education & coaching
Source: Whirlpool
#8 – A story inventory is critical
A story inventory for recruiters and employees
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An example - How to generate stories
Microsoft “Spreadthelove” internal websiteTheir “Spreadthelove” website allows Microsoft
employees to "write up" their own individual story about their career with Microsoft (their story might include pictures, testimonials and video)
Employees can then share the web link and "spread the love" with targeted friends, family and potential referrals
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Now let’s shift to actions that increase volume
Actions for increasing referral volume and participation rates
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#1 for volume – Responsiveness is essential
Responsiveness is the key to continued success The #1 volume reducing factor is a slow response Dedicated recruiters – can improve candidate
relationships and much more effectively sort and
expedite top referrals (CACI)
Develop service level timelines like: Responding to all referrals within 24 hours Offering at least phone interviews to A+ and A
candidates within 5 days (Owens Corning)
#2 for volume – Everyone is a “Talent Scout” (Tata)
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#3 for volume
Focus on attracting “passive” prospects
Here are 4 passive approaches to consider >
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A) Referral cards can attract passives
Your customer service just now was exceptional.I work for the Apple store and you’re exactly the kind of person we’d like to talk to. If you’re happy where you are, I’d never ask you to leave. But if you’re thinking about a change, give me a call.This could be the start of something great.
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Focus on passives
B) Names alone can start the referralPay $100… just for a name in key jobs… even
if they are not hired (Must provide contact information, they must be someone working in the field and be interested in a new job at Children’s hospital in Dallas)
25% of the names result in a hire
www.ere.net/2011/08/03/paying-for-names-not-just-referred-hires/#more-20189
http://www.genomeweb.com/blog/interesting-referral-incentive
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Focus on passives
C) Accept profiles – at least initially, allow LinkedIn profiles in lieu of the “slow to acquire” updated resume
D) Look for great work online – encourage employees to seek out examples of excellent work on the Internet and convince those prospects to become a referral
www.ere.net/2011/08/03/paying-for-names-not-just-referred-hires/#more-20189
http://www.genomeweb.com/blog/interesting-referral-incentive
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#4 for volume – Expand program eligibility
Expand eligibility to execs, managers and HRExecutives are encouraged to refer - a “white
glove treatment” recruiter can be assigned to encourage executives to make referrals (Deloitte)
Managers and HR are made eligible – managers and those in HR are also well connected, so they should be eligible to make referrals (Accenture)
Give it to charity – you can motivate those not driven by money and minimize conflicts of interest by offering the option of donating their reward to charity (Accenture, DaVita)
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Expand eligibility
Expand eligibility to non-employees
Open up referrals to non-employees including FamilyContingent workersConsultants and vendorsCustomers Board members Corporate alumni (Internosis, Clearlink, CACI, Verinon)
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#5 for volume – Broaden ERP coverage
Broaden referral coverageAdd on-boarding referrals – proactively ask new
hires for referrals during on-boarding (Eli Lily)
Add college referrals – the college population is well connected through social networks, so add a referral sub-program for college hires and interns (Endeca, Intuit)
Add referrals for executive positions – advanced ERP’s also cover openings for executive positions
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8 additional practices for increasing volume
1. Alerts – send targeted “I need your help today alerts” to the most relevant employees with a successful referral track record (CACI International
and Quicken Loans)
2. Competitions – friendly internal contests between teams can dramatically improve results (Deloitte)
3. Hold referral events – hold physical referral events and “virtual hangouts” or “meet ups” in order to garner attention, to educate, and to get "spot" referrals (Monster.com)
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8 practices for increasing referral volume
4. Harness social networks – closely integrate referrals with your firm’s social media effort
5. Develop professional learning communities and have your employees make referrals from the best participants (Microsoft)
6. Recognize managers – set targets, make it a promotion criteria and then… track, report, recognize and reward individual managers for high referral rates within their team
7. Ninja searches – periodically approach top employees and ask them to search their phone, social media and computer databases (Facebook)
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8 practices for increasing referral volume
8. Conduct a follow up interview – after a successful referral, send a recruiter to interview the employee in order to identify best practices and to ask for additional referrals (Amazon)
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If you’re going to include rewards…
utilize high-impact but low-cost rewards
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Reward best practices
Action steps for improving rewards Realize that the average bonus amount generally
falls between $500 and $1,500…amounts above $1,500 have proven to have little impact
The best ERP’s never pay "equal" bonuses and most vary it by job, location and competitor $
"Grossing up" bonuses (so that they are in effect tax-free) really WOW’s employees
Pay off quickly and consider a “prize patrol” approach to add excitement (Quicken)
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Reward best practices
Inexpensive rewards to consider
A referral dinner/luncheon held once/ twice a
year with the CEO to celebrate referrers
A $25 gift / Starbucks card for your 1st referral
A handful of free movie tickets for the family
First choice at vacation, schedule or other
desirable work items
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4 Final strategic program elements
1. Realize that a focus on diversity referrals will
actually increase your diversity hires
2. Track referrals to identify the high and low
referring teams
3. Notify employees when they make a particularly
weak referral
4. Use referrals for internal openings
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What elements drag down the
performance of average
corporate referral programs?
Part III
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Be careful
Homer will refer people also
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The 4 most impactful referral program killers
1.Do not allow executives to win the argument that… you don’t need a formal ERP program and a marketing effort… because “it’s part of their job”
2.Do not withhold rewards until the probationary period is over (consider an added bonus if they stay)
3.Avoid “referral spam” where a high volume of the same message causes your targeted employees to eventually ignore all referral messages
4.Avoid sending employee referrals to apply on your standard corporate careers website (not tagged)
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And finally…Benchmark firms that you can learn from
AmTrust BankDeloitteErnst & YoungEdward Jones AccentureDaVitaAricentTwitterFacebookAccoloCACI InternationalAcumen Solutions
Are you convinced of the power of referral programs ?