When business owners think about recruitment one of the first things that comes to mind is the sheer expense of hiring a new employee. Recruitment cycles are notoriously expensive not just because of paying fees to recruiters but also the time it takes to bring candidates onboard. Shockingly, it costs up to £11,000 for a business to replace an employee earning the UK average salary of £27,721.
No less troubling is the fact that there is no guarantee that this new hire will stick around. New employees might find that they aren’t a good fit for your company culture and leave, just after you’ve finished forking out to invest in their training. Employees don’t like to stick around too long either, as the average amount of time workers stay in one job is 4.2 years.
While extortionate recruitment cycles appear to be a cost of business, this couldn’t be further from the truth. Many companies are using employee referral programs to get hires that fit better within their organisation and reduce recruitment costs. Recruiting referred candidates is beneficial for a number of reasons, not least because they are hired 55% faster than those appointed through career sites.
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In addition, referred candidates have higher job satisfaction, with over 46% staying in the role for one year, 45% for two years and 47% for over three years (almost 10% more than career sites and job boards in every category). The strong numbers behind employee referrals have lead to many organisations to start implementing their own referral programs in an attempt to reduce spending and increase employee engagement.
But what is an employee referral program exactly? An employee referral program is a program where employees recommend potential hires from their personal network. Current employees will put forth people they think would be a good fit for the organisation in return for a reward if a successful hire is made. Referrals are incentivised to help ensure widespread engagement.
Rewards come in a variety of shapes and sizes, from the financial to vacations and points. Each of these encourages staff to partake with varying degrees of success. Salesforce, in particular, has paid over $5.5 million worth of referral payouts after making new hires.
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Employee referral programs help organisations to develop a company culture that is catered more closely to employees. Employee referrals give current staff an opportunity to have their say on who they should work with. Similarly, employee referral programs signal to clients and prospective employees that current employees are actively involved in talent recruitment and can contribute to hiring decisions.
It is worth mentioning that these programs also stand the tests of the social media era.
Technology platforms like Talentry allow staff to share positions to their social media contacts and refer potential candidates. In a matter of seconds, an employee can put forward their recommendation and contribute to the culture of their company.
Even though you can use software platforms to run employee referral programs they still need to be managed effectively. Employee recommendations need to be responded to promptly if they are to deliver the best results. Failing to respond to recommendations sends the message that you don’t value the contribution of an employee, which is the opposite of what you want to get across.
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The success of employee referral programs rests on the shoulders of current members of staff. Current employees will screen potential candidates before putting them forward. Nobody is better equipped to tell if a candidate can work within a company than a potential coworker. The unique preselection process offered by employee referral programs cannot be achieved when screening random candidates from job boards.
Ultimately, employee referral programs come in all different shapes and sizes. What may fit one organisation may seem out of place in another. Some companies see fit to offer financial incentives to employees where others prefer to incentivise referrals with holidays and point-based systems. The key is to implement referral programs that tie closely with the company culture.