by Traci K and BrightMove Providers of Global Recruiting Software and Onboarding Software
Looking at internal candidates to fill an open position is obviously not Recruiting Rocket Science. But when you aren’t able to internally place someone in a vacancy, where do you turn? The first step to your “external” recruitment process should be search internally again, this time with a different request.
Employee referrals are a great way to source qualified applicants who have an immediate reference. People surround themselves with those that have similar personalities or interests, “birds of a feather flock together” and so on. Employees who are ambitious, hard-working, well mannered, etc., will likely refer candidates in whom they see similar traits. They want to make a good impression by giving their recommendation on an applicant that meets the job qualifications.
According to Careerbuilder, there are numerous other advantages to enacting Employee Referral Programs (ERPs).
More bang out of your budget – A robust employee referral program can help lower your cost per hire. The 2006 DirectEmployers Recruiting Trends Survey showed that employee referrals produced the highest ROI of any other sourcing method. According to Staffing.org, companies spend an average of 16 cents for staffing for every dollar of compensation recruited, but a study of Lincoln Financial Group, whose employee referral program accounts for 55 percent of all external hires, revealed that the company boasts a much lower staffing cost ratio of 10.9 cents per dollar.
The possibility of actually getting through that “to do” list. ERPs can cut down significantly on the time you spend sourcing and screening candidates, as they essentially outsource this job to your employees, whose own discretion helps ensure you don’t spend time sorting through irrelevant applicants (see #3). And by holding on to the resumes that don’t turn into immediate hires, you won’t always have to start from scratch when new positions open up (see #4).
A better quality of candidates – Who better to recommend candidates who fit the culture of your company than the very people who live it every day? Because your employees already know what it takes to be successful at your company (and because no one in his right mind would refer a candidate who could reflect badly on him), employee referrals eliminate the need to weed out unqualified applicants.
Make that a steady supply of quality candidates – While not every employee referral will lead to a hire, a well-designed employee referral program will help you build a generous pool of qualified resumes from which to pull as more positions open up.
Less turnover – Employers with robust ERPs tend to have a lower rate of turnover. One reason for this? Hires produced through ERPs tend to stay with the organization longer because they enter the organization with already established social connections and a better understanding of the culture. ERP hires are also 3.5 times less likely to be terminated than hires produced through other sources.
Your employees will have a new appreciation for their job – and yours – ERPs provide employees with a sense of ownership in – and deeper respect for – the hiring process. Employees value meaningful work and a sense of connection to their company even more than they do high salaries, according to the 2009 10th annual Deloitte Best Company to Work For survey. Giving them a chance to participate in the hiring process is a way to foster that sense of connection and the feeling that they are making a positive contribution to the company.
A better-looking employment brand – ERPs turn your employees into brand advocates. If they’re telling friends about job openings at your organization, they are essentially sending the message, “This is a great place to work.” Not every referral will turn into a hire, but it does contribute to the notion that your organization is an employer of choice.
A boost in competitive intelligence — A more indirect – but equally beneficial – result of implementing an employee referral program is that it gives your employees an excuse to proactively seek out and network with other professionals, who can be a resource for gaining knowledge, sharing best practices and, of course, generating more referrals.
You’ll stop resenting the time your employees spend on Facebook. With the widespread use of social networking sites to connect with other industry professionals, your employees today have an even wider range of connections by which to source qualified, trusted candidates for you.
Your new employees will pay it forward – According to the American Journal of Sociology, referred workers tend to outperform their non-referral counterparts and are more likely to refer future employees.
Though there are many obvious benefits to ERPs, it is essential to understand the possible downsides to these types of programs.
URSTAFF Solutions provides a few of these downsides to consider:
- Overreliance on an employee-referral program can lead to underrepresentation of certain protected groups in a company’s job-applicant pool. This can add credence to charges of employment discrimination from rejected candidates.
- Also, some competing businesses may retaliate against your company for stealing their happily employed workers via employee-referral programs.
- Excessive reliance upon an employee-referral program can lead to an inbred organization that lacks breadth of ideas, and it can foster a “stick-together” attitude that masks underlying problems in organizational behavior. Relying too heavily on an employee-referral program can also create cliques within an organization, leading to resentment and friction with other employees.
- Some managers may have biases against employee-referral programs, feeling that referrals are favors done for shiftless in-laws rather than for the company.
- Overly restrictive bonus qualifications or excessive qualifications for employee referrals can lead to disillusionment with an employee-referral program. Under such circumstances, an employee-referral program may actually become a source of employee discontent.
Even taking the risks into consideration, the Employee Referral Program is still a proven method of sourcing quality candidates. As social media infiltrates all aspects of online recruitment, ERPs will evolve (they’ve already started to), incorporating current technology to revamp the way referrals are generated. For next week’s post I will delve into the possibilities this creates for tomorrow’s talent acquisition processes.
Traci K. is an HR Professional and freelance writer based in the Midwest, specializing in recruitment and immigration. When she’s not improving unemployment, she keeps busy with her husband and four children.