Resourcing Insight Blog

01 Mar The Evolution of the Referral Programme

These are the thoughts and takeaways from the latest Resourcing Think Tank held on Thursday 11th February and hosted by Mace. This Think Tank sought to discuss approaches to the “Evolution of the Referral Programme”.

The following summary has been prepared to reflect a segment of the discussion held amongst senior Talent Acquisition professionals from leading national and international businesses. Specific company details, experiences and examples have been omitted from this summary as all discussions are held under ‘Chatham House Rules’.

Referral Schemes

Do they conjure an image of hassle and hard work? One where employees don’t really seem that bothered by it? A constant challenge to make people understand how important they are?

Should you really care?

We think so. 

And the facts speak for themselves.

Our data analytics platform (Resourcing Insights) demonstrates that on average:

  • Our customers are achieving 21% of hires through their ‘referral’ channel
  • Referrals have the best retention rate within the first 12 months (97.7%). Conversely, candidates sourced through advertising channels are significantly lower at 79.16% retention. How much is this alone costing you?
  • Candidates generated through referrals are the 2nd cheapest means of sourcing (your careers site being the cheapest)
  • Advertising your jobs (i.e. on external job boards) is 12.5 times more expensive in terms of cost per hire than referrals
  • Referrals are more likely to be promoted. One of our members shared that 23% of their candidates sourced through referrals had received a promotion in the first 12 months (vs 13% from other sources).

Referrals need to be a core part of your overall Talent Acquisition strategy.

Here are the aspects to instigating and delivering a successful referral programme.

Creating a referral centric culture

Lots of referral schemes are doomed to failure because the premise of a referral scheme isn’t grounded in a clear explanation of why they are important to your business.

Businesses that get this right do the following:

  • People = your business. Clearly setting out an expectation for EVERYBODY within your business that they have a personal responsibility to act as a flag bearer for this business is essential. This means that all employees have a responsibility (and are judged by) their ability to uncover and develop great talent. This aspect may relate to their own annual bonus (i.e. as part of wider performance objectives).
  • Don’t lead with money – lead with a values approach – related to the business goals / mission. Linking referrals directly to your organisations vision, mission and purpose raises this way above ‘just another HR initiative’ and gives meaning that people can resonate with.
  • Talk to ‘new joiners’ about referrals from the moment they start in your business. This both underlines the importance you place on talent AND is one of the best times to get referrals. Lean on that positivity / euphoria of them joining your business!
  • Get buy-in from the top down. Demonstrate the value (and measure it). One of our members had compiled an org chart of one particular business unit which demonstrated the significant number of employees originating from referrals and then how many had been promoted (lots). Relate it back to cost for Finance. Relate it to talent for the CEO. Make it relevant, but above all – sell it!
  • Understand that, as individuals, we want to help (usually!). We also like it when our opinion is sought and valued. Make sure you use it! This in itself is a more powerful tool than money alone (which runs the risk of purely becoming ‘what’s in it for me’). 
  • Build a culture where referrals are welcome. Sounds simple. But being appreciative means doing something with these referrals and giving both the candidate and the referrer a good experience. Otherwise don’t bother! 
  • Consistently deliver ‘Referral search light’ sessions where the recruitment team sits down and introduces the referral scheme, give hints and tips as to how to refer (social media etc). This tends to drive more ‘fit’ based referrals as opposed to specific vacancies (skills). Give them the tools.
  • Understand that the power of peer recommendation v’s a call from a recruiter (agency or internal team). A ‘peer’ is likely to be able to give more context, genuine honesty of what it’s like to work at that organisation, and therefore your candidates are likely to be more engaged from an early point and less likely to be ‘mis-sold’.
  • Work hard to get lots of detail / context from the referrer. It makes the job of you and your team much easier.
  • Consider non-monetary rewards. Our members cited examples of matching a referral fee if donated to charity, offering ‘experiences’ for you and / or the wider team to build team spirit, extra time off and so on. Consider what other innovative ways you can offer relevant rewards rather than pure ‘hard cash’.
  • Offer up a competitive element – quarterly or annual prizes for the ‘Champion of Referrals’ and associated kudos / increased incentive.

Things that (have the potential) to trip you up 

  • You must have a clear process and set of ‘rules of the game’. What does the referrer need to do? What do you need to do? What constitutes a referral (see below)?
  • Ensure you have the resources (or fight for the resources) to support successful execution. Otherwise it will be wasted effort. Referrals are important!
  • Be clear about what type of referrals you want. Is it focused on live vacancies (i.e. perhaps more based on skills) v’s just general introductions (perhaps more based on attitudes and behaviours)?
  • General introductions are well worth catching for the purposes of talent pipeline but can create a lot of ‘noise’ and work for the team. If it’s targeted it does help keep momentum.
  • Be clear about what ‘good’ looks like. Clearly a hard one if you aren’t sure yourself! Without a big diversion into the topic of assessment, it is an important flag if hiring a diverse workforce is important to your organisation. You do need to give clear context on ‘good’. Typically this would be based on values, motivation and behaviours as opposed to pure skills. 
  • Mentioned above, but make sure you work hard to overcome the apathy / frustration that may appear if referrals don’t make it through the hiring process. Pick up the phone and communicate to the referrer and explain why their recommendation wasn’t quite right and that you are extremely appreciative and welcome further introductions. Common courtesy has the ability to ‘make or break’…..
  • Keep it fresh. Talk about it regularly. Ensure its part of reviews. Make it ‘front of mind’ in as many ways as you possibly can. Get creative. Publicise it. Shout about it! It’s inevitable that they will lose some of their ‘gloss’ and ‘sexiness’ over time if you are lazy and do nothing about it. It’s your responsibility!
  • Get a referred candidate onto your ATS ASAP to avoid any awkward situations with agencies also submitting the same candidate. Be clear on ownership and that it only constitutes a referral once it’s logged in the ATS successfully (but make it easy to do).
  • Who can actually refer candidates? In our members experiences it is common for HR or recruitment teams to be exempt from the referral scheme (the view is that this is their job). In addition contractors can be excluded (although perhaps more contentious). Again set clear ground rules.
  • Doing a short term ‘enhanced bonus’ for referrals (in times of need) does more harm than good (increases expectations medium term!)

What is a referral?

Shouldn’t we have talked about this at the start of this blog? Isn’t that what all good books / articles do when giving an expert view on a topic…..?

In this instance, probably not. We felt passionately that the why comes before the what.

For completeness, the Oxford Dictionary defines the term ‘referral’ as: “An act of referring someone or something for consultation, review or further action”.

In our view, the honest answer to this question is that there is no easy answer. It really depends on why (that word again) you are actually doing this (hence considering that first). Is it volume recruitment based? Or is it very specific hires you are looking to drive?

Here’s some things to consider:

  • Firstly it is important to clearly outline what is a referral and your associated expectations to avoid the inevitable ‘grey areas’ that can occur.
  • Some companies ask for everything (name, number, address, CV, intro etc). Be aware that asking for too much information precludes people from applying (‘too much hassle’). 
  • Others are very open to just a pure name / number or the candidate listing the person who recommended them on their ATS.
  • Consider taking a dual approach along the following lines:

    • A ‘Bounty’ approach – the referrer has undertaken some influencing to the candidate to apply (spoken to them, found out some basic info, shared the link).
    • ‘Mini-bounty’ – the referrer thinks a person might be a fit but not had any real influence over that person being interested in that company. The reward here is less than the full bounty.

Whatever your answer to this question may be.

Make it clear. Very clear!

Global payments

Quite a few of our members wanted to explore how you reward referrals on an international basis. In short how do you balance the level of referral amounts in different countries with hugely varying tax structures / implications, costs of living, different cultures and different levels of salaries?

A tricky one!

Our members discussed two key aspects to this:

  • The first (and most important) was to link back around to the purpose behind a referral scheme and to ensure referral schemes globally led with this first and foremost (not purely money). Ensure the perception on the value of referrals is very clear.
  • From here a few of our members talked about designing a country-by-country reward table – i.e. the referral is the same % of basic salary. With this clearly communicated it didn’t matter what country you referred to – you got your local award. Being upfront about this helped avoid feelings of unfairness.

Referral technology

Finally we briefly touched upon what technology should be instigated to support a strong referral programme. The general consensus was that:

  • The social media aspect shouldn’t be overlooked. Especially for graduate hires – hiring a marketing focused person is a good ROI and, 
  • There are some products on the market that (alongside your ATS) can add value such as Hollaroo which facilitates keeping a talent pool engaged (especially for referrals) or alumni.
  • Don’t forget it’s all about people!

In conclusion, running a successful referral scheme is slightly more complicated than producing some ‘natty’ posters and crossing your fingers. It takes time and money to plan and execute to be most effective.

But if you work through a scheme in a logical manner, taking into account all of the above, the results massively outweigh the upfront time investment.

Happy referring!

To find out more about the Think Tank The Evolution of the Referral Programme:

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1 Comment
  • What are the benefits of employer branding? | Xpo-Online Blog
    Posted at 13:11h, 08 December Reply

    […] to refer your organisation to other professionals. Candidates generated through referrals are the 2nd cheapest means of sourcing, and according to LinkedIn’s Global Recruiting Trends (2016), they are beginning to emerge as […]

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