The Complete Guide to Employee Referrals EVERYTHING YOU NEED TO FUEL YOUR EMPLOYEE REFERRAL PROGRAMS

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1 The Complete Guide to Employee Referrals EVERYTHING YOU NEED TO FUEL YOUR EMPLOYEE REFERRAL PROGRAMS

2 TABLE OF CONTENTS 03 INTRODUCTION 06 PART I: Why Companies Need Employee Referrals? 10 PART II: How to Engage Employees 21 PART III: Optimizing Your Employee Referral Programs 25 PART IV: Fueling ERPs with Social Media 29 CONTACT CAREERIFY

3 Introduction Just a few things before getting started

4 WHY SHOULD I CARE ABOUT EMPLOYEE REFERRALS? C-SUITE 93% of CEOs say that they recognise the need to change their strategy for attracting and retaining talent. - PWC 17 th Annual Global CEO Survey TALENT ACQUISITION U.S. businesses spend more than $110B on talent acquisition, on avg. more than $3,000 per hire. - Predictions for 2014, Bersin by Deloitte HUMAN RESOURCES Retention and engagement is the second most urgent issue among global HR leaders and organizations. - Human Capital Trends 2014, Deloitte EMPLOYEES 1 in 5 workers plan to change jobs over the next year. The top reason employees want to stay at their current workplace they liked the people they work with. - Career Builder Employee Survey 4

5 CHECKLIST: PITFALLS TO AVOID IN EMPLOYEE REFERRAL PROGRAMS q Taking too long to respond to referrals or not responding at all q Launching program without strategy or plan to analyze results every 6 12 months q Underfunding the program and creating all referral rewards equal q Too much administrative and manual work for program managers q Low employee engagement and not refreshing the program regularly q Waiting too long to reward referrals with probation periods longer than 90+ days q No limit on number of referrals sent out for each employee (AKA spam) q Excluding executives, senior managers and HR folks from your programs q Not having employee recognition throughout your referral programs 5

6 PART I: Why Companies Need Employee Referrals? Employee referral programs are the most powerful corporate recruiting tool, bar none. - Dr. John Sullivan, Internationally known HR thought-leader 1 1. Dr. John Sullivan, ERE.net Employee Referral Program Killers

7 EMPOYEE REFERRALS Proven Results #1 Source in hiring volume #1 Source for new hire quality Highest retention rate of all hires Strongest application-to-hire ratio Rated top source for diversity impact Best on-the-job performance of all hires Staffing.org Creating an Employee Referral Program: Guideline for Getting Started, Bersin by Deloitte, December Dr. John Sullivan and Associates research The Shortest Path to Better Hires, Oracle 2013

8 KEY BENEFITS Attract Top Talent No matter what industry you re in, you will find superior talent associating and surrounding themselves with other great talent who likely have closely aligned values. This is why it s critical to tap into your top performers network to find other great talent. This same process is exactly how top companies such as Google continue to grow incredible people attract other incredible people. Increase Employee Retention Referral hires have proven to have greater job satisfaction since employees get to come to work with their friends which also happens to be the #1 reason employees don t leave their job (CareerBuilder, 2014). Not to mention, referral hires stay at companies much longer than any other type of hire. A recent study also indicated that workers are up to 30% less likely to quit after making referrals (The Facts about Referrals, 2013). The retention benefits of employee referrals continue to prove effective. Shape Company Culture The world s top companies thrive by hiring the best possible talent who all have a similar vision, values and passion. It s incredibly powerful when your employees have a role in defining your company culture. Referral programs are designed to attract talent who not only have the right skills, but would also be a perfect fit for the organization. Reduce Recruiting Costs Referrals continue to be the best source for longterm hires when compared to any other. According to Dr. John Sullivan s research, employee referrals cost $2,306 on average while the average cost per hire in the US is around $3,500 (Bersin by Deloitte 2011). Recruitment agencies will charge between 15% to 30% of a new hire s annual salary, far more than any referral bonus. Taking all of this into consideration, it s clear that referral hires are the most cost effective, especially when they usually have the highest retention rate and job performance. 8

9 KEY BENEFITS Major Business Impact Employee referrals have been identified through many studies to have the best on job performance when compared to any other type of hire. Referral hires perform 3% to 15% better than any other hires (Oracle, 2013) which in turn translates to better business performance and a higher ROI. You can imagine the impact on business performance that employee referrals can have when achieving referral hires of 50-75% of total hires. Employee Experience If your organization is reaching 50% or more referral hires on a consistent basis, it s a great indication that your employees not only love their job but also love the environment they work in. Employee experience and on-the-job performance are closely aligned, meaning happy employees typically perform better. Referral hires can improve your employees experience by democratizing recruiting and allowing your employees to shape the company culture. Employer Branding Top organizations are highly aware of the importance that employer branding has on attracting and retaining top talent. Referral programs allow you to tap into your employees social networks which will drastically increase your brand reach among passive candidates. Not to mention the authenticity you add to your employer brand by providing employees with a voice. It s one of the best ways to get in front of passive candidates and place a positive perception of your workplace in their minds it s marketing at its best! Employee Engagement Referral programs are a great way to get employees engaged by transforming your workforce into a recruiting powerhouse. The more employees get involved with the recruiting process, the more likely they are to get involved with internal programs, resulting in a more cohesive workplace. The incentives included in referral programs add an additional element of engagement as well! 9

10 PART II: How to Engage Employees

11 ERP ENGAGEMENT PLAYBOOK Your guide to engaging employees throughout the entire referral program from onboarding through referral hires.

12 1. ACTIVATION AND ONBOARDING Before employees start making referrals, there needs to be some type of engagement tactic to activate their participation within your program. This is a very important step in the engagement journey as it s your chance to get employees excited about participating, understanding how the program works and getting them setup with the proper tools to start making those incredibly powerful referrals. It s very important that the employee experience from the first time they learn about the referral program is seamless. Employees are your participants in the program and you want to ensure it s as easy as possible to get started. Here s a few ways to engage employees to get started: Getting Started Video Providing your employees with onboarding content such as a fun video explaining how the employee referral program works is a great way to fuel their excitement! Try and be creative with this video as you can use it every time a new employee comes onboard. Be sure that your video is aligned with your company culture to make a greater impact. Onboarding Campaign It s very important to capitalize as new employees join the company and become a part of your referral programs. When new employees come onboard, they re still very excited to impress, a great time to tap into their network while they re highly engaged to see if there s any potential candidates. You can also send out occasional s providing more details on the program while employees are most engaged. 12

13 2. CAMPAIGNS Just like marketing professionals launch campaigns to drive sales, you must apply similar tactics to fuel your employee referral programs. Your campaigns will typically be sent through communications and should be personalized and authentic to fit your company culture. Keeping all communications authentic allows you to build your employer brand internally while communicating it through employee interactions. Campaigns also provide you with a great way to drive specific employee behaviors. Here s a few ways to use campaigns to improve your ERP: Regular Digests Targeted s Before launching your ERP, it s assumed that you ll have tools to help automate the usual manual processes. One of the most effective weekly digests involves sending employees an that automatically shows which contacts in their network would be a good fit for open roles. If you don t have a tool like this, you can still send weekly s keeping employees in the loop of new rewards, recognizing successful referrals or providing tips on making an effective referral. This is where you really need to put on your marketing hat. It s useful to plan a number of campaigns each month so that you stay on track and hold your team accountable. It s useful if you have some type of segmenting capabilities so that you can really target certain groups of your workforce. For example, build a segment of high performers who can help with filling hard-tofill or executive roles. Send campaigns by segmenting your workforce into different groups, such as high performers, that you can target with s. 13

14 3. GAMIFICATION The term gamification is still not fully understood in a business context, however it s a part of our everyday lives, whether you know it or not. Gamification is a process of using game thinking and mechanics to engage users. Don t worry if this doesn t make sense just yet, we re going to breakdown this topic a bit more so you can really understand what it means, important features and ways to apply it to your employee referral program. Can you remember when the term social media hit the business world? Even marketers were confused as to how they can apply tradiional business tacics to these innovaive plajorms that everyone seemed to be using MySpace, Facebook, TwiPer. It was a crazy Ime but we ve all come to realize that social media has changed the way we do business every single day. Like social media, GamificaIon is a very broad topic that includes many elements. Where does it come from? All video games use similar elements such as rules, challenges, rewards and levels. There may be a mix of these elements used to engage the user and drive specific behaviors. Video games typically follow the same principles in one way or another. All of these features provide the user with recogniion and feedback which keeps them engaged and waning to come back. Games like World of WarcraZ use many of these elements in a variety of ways so that the user is always logging back in to coninue receiving new achievements. This game also adds a new dimension being online so that users can compete against one another. 14

15 3. GAMIFICATION CONT The psychology behind gamification Exclusivity Exclusivity is a powerful element in creating engagement and can be used in combination with gamification to drive specific behaviors. This element motivates us by creating a sense of belonging and a desire to be a part of an elite group. Exclusivity make us feel special and appreciated which is a basic human need that everyone desires. Incorporate exclusivity with gamification to really fuel engagement. Intrinsic vs. Extrinsic Motivators can be broken down into these two basic elements. Extrinsic motivation is the process of encouraging behaviors or engaging in order to earn a reward or avoid punishment. In gamification, this could be providing a user with a badge for completing a certain set of tasks. Intrinsic motivation is a deeper motivator that exists within each individual, typically driven by their personal interest. Helping a friend find a new job opportunity because it makes you happy to see them succeed would be a great intrinsic motivator. 15

16 3. GAMIFICATION CONT Real-World Examples Fitbit gamifies health Careerify gamifies referrals Fitbit is simply a device that can track your physical activity each day such as steps taken or distance travelled. Fitbit encourages users to hit new goals each day by rewarding badges based on their performance. Users can also compare their performance to friends which adds an additional element of competition to gamification, further encouraging users to take action. Fitbt is a great example leveraging both extrinsic (badges) and intrinsic (wellbeing) rewards to drive behaviors. Careerify s Talent Acquisition platform uses gamification in many different ways to encourage specific user behaviors. For example, employees are rewarded for connecting their social media accounts to Careerify s platform which enables users to make employee referrals much easier. Additionally, employees can be rewarded more points for connecting LinkedIn as it may be one of the top sources for employee referrals. This is where gamification not only drives specific actions but also educates users along the way. 16

17 3. GAMIFICATION CONT Now that you have a better understanding of gamification, it s clear how effective it can be when applied to your employee referral programs. It s still possible to leverage gamification without the use of software, however using employee referral software that includes gamification makes it much easier and automated. Again, one critical element in the effectiveness of gamification is real-time feedback which is nearly impossible without some type of software. Let s take a look at a few great ways to incorporate gamification into your ERPs to drive employee engagement: Mini-Challenges Using smaller challenges to drive specific user behaviors allows you to build a gamification strategy that aligns with your talent acquisition strategy. Increase brand awareness by encouraging employees to share across social or focus on quality hires by raising the rewards for hard-to-fill roles. Be sure to take your time on building an effective strategy, it goes a long way and drives incredible engagement. Company Leaderboard Allowing employees to track their performance is critical in maintaining engagement. It s very important that their achievements (feedback) are recognized in real-time so they know exactly what to do next, just like traditional games provide achievements to keep us looped-in. Company wide leaderboards allow everyone to get engaged with the program and compete against on another, a core element of gamification. 17

18 4. CONTESTS & CHARITY DRIVES Another large component of successful employee referral programs include contests (extrinsic reward) and charity drives (intrinsic reward). These motivators are great at engaging employees over a longer period of time as the reward is usually larger and takes more time to achieve. Typical contests and charity drives may run for at least a month in order to get the highest ROI. It s important that your rewards for each of these incentives strongly align with your company culture. Here s some tips on how to leverage contests and charity drives: Contests Contests give you the opportunity to get creative with your referral rewards. One key element in making any contest successful, is understanding your employees and knowing what type of rewards get them excited. Again, aligning your contest rewards with your company culture is critical. This is where you can reward employees a certain number of points, for example, based on referrals, applications and/or hires. The employee with the highest number of points will be rewarded at the end of the contest. Charity Drives Charity drives are a great way to involve senior and executive staff as they are more likely to be interested in intrinsic rewards which are related to their deeper values. If your organization has a charity partner, this is a great way to drive donations to them or perhaps each employee has their own charity of choice. Using a tool that automatically keeps track of referrals and donation amounts makes this process much easier to manage, although it can still be effective without a tool. 18

19 5. REWARD STRUCTURES One reason many employee referral programs fail is a result of applying the same reward amount for every type of employee action. For example, why would you reward employees the same cash reward for an entry-level job referral as a mid-level manager it just doesn t make sense. The same rules apply towards every employee action. The more you align rewards with your organization s talent acquisition strategy, the better your results will be. Here s a few ways to structure your rewards for greater ROI: Status Rewards With new ERP automation tools like Careerify, you can now reward employees throughout the entire referral process. This allows you to engage employees from the initial referral all the way through hire. It s important to properly strategize your rewarding structure so that it aligns with your overall strategy. You should reward employees through each stage of the referral process from referral, application, interview to hire. This also creates transparency so the employee knows exactly how their referrals are performing. Hire Rewards Your employee referral program should have different reward levels for each type of hire set in stone before you launch. Some organizations may want to increase rewards for technical roles and creative roles in order to find the best possible talent among a unique skillset. We commonly see companies use this strategy for the level of employee (entry vs. executive) but there are certainly many dimensions that are company specific, which will change the value associated with each type of hire. 19

20 ERP ENGAGEMENT ROADMAP High-Level View of the ERP Playbook in Action 1. Getting Started Send employees a welcome with a high level overview of your ERP highlighting incentives, recognizing past participants etc. 2. Onboarding Video Display an onboarding video that clearly outlines your ERP with basic training to get employees started and exciting about participating. 3. Launch Contest It s important to have a primary incentive to encourage engagement throughout your ERP which recognizes participation throughout the referral process, not just the final hire. This could be an experiential reward such as a day at the spa to the employee who has accumulated the most referrals that became applications. 1 2 Repeat the process 3 4. Recognize Performance (ongoing) As your ERP goes on, you should be recognizing your top performers (upon their approval) to everyone involved in the program through some type of communication to emphasis the importance of your program. 7. Reward for Hires Upon a successful hire you will be rewarding the employee with some type of reward. You should also be sending out a recognition that highlights their achievement including the reward. 6. Evaluate & Optimize You should have performance reviews throughout your ERPs to ensure you identify and resolve any bottlenecks in your programs. Keep track of your metrics so you can continuously optimize based on historical data. 5. Send Out Campaign Re-engage your employees occasionally with targeted campaigns that focus on one specific behavior such as increasing referrals for hot jobs by sending an to all of your top referrers

21 PART III: Optimizing Your Employee Referral Programs

22 OPTIMIZE FOR PERFORMANCE There s a countless number of metrics that can be tracked when using effective employee referral software as every employee action should be tracked. The more your programs become data driven, the more you can leverage automation to improve the employee experience. There s a few simple metrics that you should start tracking right away to optimize your programs. REFERRALS-TO-APPLICATIONS-TO-INTERVIEW-TO-HIRE RATIO This is one of the best metrics to get a high level perspective on how your employee referral programs performance is really doing. If you re investing in ERP software, these metrics are really a basic must-have. Knowing the number of referrals, applications, interviews and hires are possible when your software is integrated into your existing recruiting systems. Be sure to check that this is possible before investing into any new solutions. Additionally, you can break down this metric to look at where the performance issues are at each stage in the employee referral process. For example, if your employees are making lots of referrals but only a small fraction are becoming applications, perhaps your employer branding or job descriptions are deterring applicants. PINPOINT PROGRAM ISSUES 22

23 OPTIMIZE FOR ENGAGEMENT When looking at metrics that indicate employee engagement, it s important to change your perspective and view employees as users of your system. The keys to effective engagement is providing employees with an experience that they love and making is as seamless as possible to make referrals. USERS REFERRING This is one of the most basic metrics that you can leverage to understand what percentage of employees using your ERP system are actually making referrals. If your employees aren t making referrals, it s an indication that your engagement tactics aren t effective. Try creating mini-challenges with small rewards for number of referrals sent out across different channels to get employees referring again. You can see how important it is to engage employees throughout the entire process, not just the final hire. REFERRALS BY SOURCE This is a great metric to help you get a better understanding of where your highest quality referrals are coming from. For example, if your employees are making a ton of referrals across social media but LinkedIn is the only source that s actually converting into applications, you should adjust your rewarding system to focus on LinkedIn referrals. Don t leave it to your employees to understand where referral hires are coming from, push them in the right direction with incentives. 23

24 DEEPER OPTIMIZATION METRICS It s assumed that your organization is already tracking certain metrics to help focus your efforts and drive better performance. There s a few specific metrics such as cost-per-hire and time-to-fill that are instrumental in optimizing your recruiting initiatives. These two metrics outlined below will provide you with enormous insight into your ERPs and the ability to adjust resources with the overall purpose of optimizing performance. You should constantly be allocating resources to resolve bottlenecks in your ERPs in order to get the highest ROI on your (increasingly) limited resources. Cost-per-Hire Cost-per-hire (CPH) is one of the most important benchmark metrics that talent acquisition and HR are concerned with as it shows how efficient an organization can bring on new talent. When tracked properly, usually with software, you can evaluate your hires across multiple dimensions to better understand the most cost efficient ways to hire. WHAT TO OPTIMIZE Review your data to identify your highest CPH across multiple dimensions such as source or job type. This will allow you to re-focus your campaigns and rewards on jobs that have the highest CPH. By increasing employee engagement on these expensive roles, you should see your CPH decrease over time. You can repeat this activity on any job until you ve achieved a desirable CPH. Time-to-Fill Time-to-fill is another key metric for any organization to understand how much time passes from the moment you start advertising a job until the hire is official. It s useful when you can evaluate the time-to-hire across a few different dimensions (source vs. job type), which provides your organization with better insight and the ability to plan for future hires. WHAT TO OPTIMIZE Once you ve determined which jobs take the longest timeto-fill you can create additional campaigns or re-focus your existing campaigns to increase employee engagement among these hard-to-fill roles. With the proper optimization tactics your time-to-fill will decrease across these roles, resulting in increased productivity and cost savings. Again, continuously optimize each role until you ve reached an acceptable time-to-fill. 24

25 PART IV: Fueling ERPs with Social Media New recruiting platforms (like Careerify) now connect to this new world of social recruiting applications, facilitating the transition from traditional post and pray applicant tracking systems to highly interconnected recruiting applications. 1 Josh Bersin - Principal and Founder, Bersin by Deloitte & #1 HCM Analyst Globally 1. Josh Bersin, The Top 10 Disruptions In HR Technology: Ignore Them At Your Peril

26 THE NETWORK EFFECT Tap into your employees vast social networks to drastically increase your reach among like minded, passive candidates. Your employees are your most valuable employer brand advocates! The average employee has over 400 contacts across their professional and social networks. 4,000,000 10, ,000 1, # OF EMPLOYEES 40,000 NETWORK SIZE 26

27 EMPLOYER BRANDING Social media presents an enormous opportunity to hand craft your employer branding initiatives. Here s a few ways to leverage social media to drive your employer brand. REFERRAL MESSAGES Before launching any successful employee referral program, you must align your company brand with your employer brand through effective communications. It s essential to define your employee referral messages before launching your program to ensure it s properly aligned with the types of candidates you want to attract. For example, if you re organization is known as an exciting brand, your referral messages should reflect that. The same applies to any of your employee referral messages, whether its direct s or social media updates. CONTENT MARKETING Innovative companies are providing their employees with content that allows the outside world to see what it s really to work at their company. Some organizations like Groupon, for example, have achieved incredible results with their GrouponPeople blog. Within 8 months, they were able to drive 50,000 unique pageviews, an impressive achievement, especially from a marketing perspective. Leveraging content into your ERP adds a new dimension of authenticity to your programs. 27

28 Case Study: Rent-A-Center Rent-A-Center (RAC) is an American retail chain that supplies brand name goods on a rent-to-own basis. They have over 20,000 employees with more than 4,000 stores globally. RAC wanted to increase employee referrals by leveraging social media to increase their brand exposure to passive candidates, reduce turnover and increase the quality of incoming applicants. RAC leveraged Careerify s Employee Referral Software to tap into their employees vast social networks and saw a drastic increase in their program performance. The Power of Social on Employee Referrals Achieved over 10,000 social media impressions daily Increase quality of applicants with a 7:1 application-tointerview ratio Increased overall hires with an 11:1 application-to-hire ratio Accumulated 1,500 referrals through social alone within 3 months of launching program Hit 100,000 impressions within 7 days with only 50 employees 7:1 Applications turned interview 60% Interview turned hire 11:1 Overall application turned hire 28

29 REQUEST DEMO VIDEO ABOUT US Careerify is a Talent Acquisition Platform that allows companies to globally manage employee referrals, internal mobility and employer branding in one simple solution. Learn more! CONTACT US Give us a call: us: Visit our website: Keep learning: The Resource Library Read our blog: 29

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