Rewriting the Rules of Employee Referral Programs

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Why are most referral programs limited to employees only?

In a recent referrals survey conducted by SmashFly, 57 percent of organizations that have formal employee referral programs allow only employees to refer potential candidates. But the 43 percent of organizations whose referral programs reach beyond employees to solicit referrals from alumni, partners, customers, etc., generate 28 percent more hires from referrals over employee-only programs.

When you start looking at the established norms of “employee referral programs,” the rule of employees-only isn’t the only one that could use a refresh. In researching the rules and regulations of current referral programs (yes, we’re dropping “employee!”), we found some recommended program rules from SHRM.

SHRM’s rules were published in 2014, with many of the commonplace concepts we’ve seen in current employee referral programs across organizations and industries. Understandable, but there is so much more opportunity.

It’s time for a fresh approach to referrals. It’s time to rewrite the “rules” of what referral programs should be. But there shouldn’t be rules — there should be customizable guidelines, features, and incentives. There shouldn’t be hoops and barriers — there should be fluid, social, and engaging communication. Here’s how we encourage organizations to consider their future referral programs:

OLD

All Company XYZ employees, except Vice President levels and above, Human Resources personnel, and managers with hiring authority over the referred candidates are eligible to refer candidates.

NEW

All Company XYZ employees, alumni, partners, vendors, contractors, customers, and fans are eligible and encouraged to refer talent into the organization. Only Company XYZ employees, who are not VP level and above, HR personnel, or the direct hiring manager are eligible for rewards.

WHY?

Anyone should be able to refer talent into the organization, but the organizations should have the flexibility to change or limit reward eligibility based on the “Sponsor” (referrer) type. Restricting rewards ensures that those with decision-making power aren’t abusing it. Let’s make sure “anyone” means “anyone,” not just current employees! Think about the breadth of referrals you can receive from other strong relationships you have with partners, alumni, vendors, and fans. Most people don’t refer just because of a reward; they refer because they see opportunity for their network and want to help people progress their careers.


OLD

The referral date cannot be earlier than the date the job requisition is posted. The hiring of a referred employee must occur within 180 days (six months) of the initial referral date.

NEW

A referral can be made at any time for either a specific job position or a general referral to the organization. There is no time expiration of the referral or the eligibility for reward if you meet the requirements. Multiple people can sponsor the same referral.

Why?

This widely accepted rule about time ownership on a referral should be eliminated from every program. Organizations should be trying to gain quality candidates and recommendations at all times. Why must a referral only be tied to one specific job? So if there isn’t a job currently open that matches a potential great referral, the organization doesn’t want to know about the candidate?

Plus, the concept of owning a referral for a period of time doesn’t incentivize employees to continue referring great candidates or be invested in their success, especially if their referral is hired after the 180 days and they aren’t eligible to receive their reward. In addition, there is value in multiple people referring the same candidate. It indicates a high degree of quality. These legacy rules were there to help when paperwork was hard to manage and have stayed for far too long; technology can automate processes and make the approach far more flexible to maintain a consistent referral strategy.


OLD

The referral must represent the candidate’s first contact with Company XYZ. Temporary, summer, contract, and former employees of Company XYZ are not eligible candidates for referral awards.

NEW

Same.

Why?

This is still a valid guideline, as it’s not a referral if the candidate has had prior employment with the organization.


OLD

The referring employee must agree to have his/her name used for introduction.

NEW

The Sponsor must agree to have his/her name used for introduction to the referral; the referral must also accept this person as their Sponsor with visibility into their progression.

Why?

The purpose behind this rule is still valid, and we’d like to push it even further. We see referrers as Sponsors of their referral. The Sponsor must agree to use his/her name for introduction and be available to guide the referral throughout the process if necessary. The referral must also accept the Sponsor who has referred him/her, allowing the Sponsor visibility into his/her progression throughout the hiring process. This promotes transparency as well as more quality referrals, as both parties must accept and invest in the journey.


OLD

To be eligible for an award, the referral must first be submitted to Human Resources and must include a Candidate Referral Form and a resume or employment application.

NEW

To be eligible for an award, the sponsor must officially submit the referral (as simple as first and last name and brief recommendation) and still be an employee, and the referral must be hired and employed for at least 90 days.

Why?

Organizations need to be flexible! We’ve heard from multiple customers that they want (and need) easier, quicker ways for employees to get involved and refer. They also want to incentivize those advocates who aren’t employed by the company to feel they can refer someone without much hassle. Requiring a specific process with multiple forms is cumbersome and time-consuming for anyone, and the referred contact may not have a resume or extensive documentation ready to send. Think email referrals, links to LinkedIn profiles or other social accounts, abbreviated resumes, or expressed interest from a candidate. What’s more important than a form at this stage is understanding the “why” and asking the sponsor to provide a real recommendation, not just a name.


OLD

The first employee to refer a candidate will be the only referring employee eligible for payment.

NEW

All valid Sponsors are eligible to share in the reward for a hired referral.

Why?

Referral programs should incentivize as many people as possible to refer and recommend a candidate — even if it’s the same candidate. It’s a social world, and it’s more and more likely for a referral to have multiple connections with possible Sponsors. With guidelines in place to allow the referral to approve of their Sponsor or sponsors, the candidate should be allowed to choose which Sponsor they want to continue the process with or more than one if the organization’s program rules allow. The more opinions and “vouches” you have for a referral, the better you can determine quality, but it is important to set up a baseline of how to manage and reward one or more Sponsors.


OLD

All candidates will be evaluated for employment consistent with Company XYZ policies and procedures.

NEW

All candidates will be evaluated for employment consistent with Company XYZ policies and procedures; sponsors and referrals must both agree to the Terms and Conditions of the referral program presented at the time of opt in.

Why?

This is still valid, but needs to be part of a Terms and Conditions that both the Sponsor and candidate are required to review and accept when opting into the program. Built-in mechanisms to ensure compliance are vital in referral programs, especially for larger organizations. This is where a technology comes in, managing alerts and workflows for specific referrals and localized implementation of the program. Organizations need to make sure these policies and procedures are available to Sponsors and referrals on the career site or Sponsor hub, as well as proactively communicated to them upfront when the referral is made in order to get both of their opt ins.


OLD

All information regarding the hiring decision will remain strictly confidential.

NEW

As part of a referral confirming their Sponsor, referrals can confirm their willingness to disclose basic information to their sponsor regarding their candidacy within the organization.

Why?

With this consent, Sponsors are given basic information about the process and their referral’s progression as a courtesy for submitting the referral. It also drives home the investment and quality factor; if a Sponsor is going to refer talent, they should want to be aware of their advancement in the interview process, and if a referral is going to confirm their Sponsor, they should feel confident to allow that Sponsor some visibility into their impression on the organization. It is a two-way street.

This is the way forward in the referral frontier: more investment, more transparency, more advocates.

Organizations need to bridge the gap between their outdated, entrenched programs and the results they’re vying for: more engaged employees and more quality referrals. Building a modern referral program requires a strategy that determines the processes and touch-points your organization has with both referral sponsors and the referral candidates and in turn implements this strategy across your recruiting team and technologies.

Don’t silo your referrals — and don’t let the status quo guide your programs. This time, breaking the rules will get you further.

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  • John M

    All these suggestions make great sense. However, none address the reality that a disproportionate number of the best referrals come from the best performing employees. If the referral program’s goal is to simply increase candidate flow then ignoring that fact is Ok but if you want a referral program that drives quality hires then the top performer/top referral connection needs to be addressed.