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Building an Effective Employee Referral Program

Work with Josh
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Previously, I talked about what candidates can do differently to help get hired at tech companies in 2024. Now I’d like to talk about something that tech companies can do to hire better candidates: improve the quality of their internal referral programs.
Many on the outside have observed that referral programs don’t have the same prominence they once had: They were seen as expensive, believed not to deliver high-quality candidates, there have been concerns around lack of diversity, they had low participation rates, and (unfortunately) the HR, people ops, and recruiting leaders who administered them may have been let go as part of 2022 and 2023 layoffs. In addition, some execs might have decided that a softening in tech employment meant it was now a “buyer’s market.”
Especially for startups, employee referrals should be the best way to hire. But it doesn’t always work out that way.

Understanding Motivators for Employee Referrals

Before building an effective referral program, it helps to understand why employees participate. Here are three reasons listed in descending order of importance:
  • Elevating Network Esteem: When employees refer someone from their network, they're not just recommending a candidate but offering a path to an opportunity where their contacts can thrive. Making a great referral to a great company makes your employee a hero! It elevates their status within their network, as they're seen as a conduit to desirable job opportunities.
  • Internal Acknowledgment: When referring in high-caliber talent, your employees should earn admiration from their colleagues and public appreciation from managers and leaders. They're seen as key players in enhancing the company's talent pool, thus contributing directly to the organizational success.
  • Financial Incentives: Some companies still pay a fee for referrals who are hired. While monetary rewards are not uncommon, they're often the least impactful motivator. 
Not surprisingly, the strongest motivators are relational, not transactional.

Common Pitfalls in Referral Programs

  • Negative Employee Experience: You can’t expect your employees to refer their friends if they’re unhappy at work. This is a fundamental issue, and no referral program will succeed. And if your referral program is failing, you want to rule this out first.
  • Candidate Experience Matters: Treating referred candidates indistinguishably from cold inbounds is a mistake. It’s sort of amazing how often internally referred candidates are ghosted, or are screened out at resume review without even having a phone call. It doesn’t take more than a couple of these before your employees will give up on making referrals. 
  • Bridging the Skills Gap: Many of your employees, especially those early in their careers, may not even know how to make useful referrals. They may not know how to search their network, may not know how to identify strong candidates, and may not know how to talk about open roles. A skills gap means a lack of comfort and confidence in the referral process and makes it much less likely that a referral will happen.
  • Inappropriate Recognition: Monetary rewards are fine, but they can feel impersonal. Again, it’s amazing how infrequently employees are thanked for making a referral, kept up to date on their referred candidate’s progress, or provided feedback on how to improve future referrals.

Crafting a Successful Referral Strategy

In some ways, you can make your internal referral strategy successful by doing the opposite of the section above!

Addressing Employee Morale

  • Employee Satisfaction is Key: Before launching a referral program, ensure that your current employees are happy and engaged. This is the bedrock upon which successful referral programs are built. Collect feedback from managers, consider an employee satisfaction survey, and consider keeping an eye on review sites like Glassdoor.
  • Preventing Embarrassment: A negative work environment, characterized by issues such as poor leadership behavior, can significantly deter employees from making referrals. And if there are public criticisms of the company (e.g., on Glassdoor), you should expect current employees to get questions from their friends.

Enhancing Candidate Experience

  • Personalized Communication: Ensure that all communication with referred candidates is personalized. This could mean emails that acknowledge their referral source and perhaps provide a bit more background about the company or the role they're being considered for. Avoid generic, automated responses. And definitely avoid ghosting them!
  • Expedited or Guaranteed Interviews: Offer referred candidates a faster track through the hiring process. This could be in the form of guaranteed interviews or a more streamlined application process. This shows that you value the referral and the time of both the candidate and the employee who made the referral.
  • Enhanced Candidate Experience: Make their interview process unique. This could include a tour of your office (virtual or physical), meetings with key team members, or an informal chat with a senior leader. Such experiences can leave a lasting positive impression.
  • Feedback Regardless of Outcome: Whether a referred candidate is successful or not, providing feedback is crucial. This should be more personalized and detailed than standard rejection emails. Feedback is unusual, and it will help you stand out.
  • Survey for Continuous Improvement: After the hiring process, ask referred candidates for feedback on their experience. This not only provides valuable insights for improving the process but also makes the candidates feel their opinions are valued.

Celebratory and Educational Initiatives

  • User-Friendly Referral Platform: Implement a straightforward, accessible referral system. You don’t need a complicated, dedicated portal; just use a simple form. The key is to make it as hassle-free as possible.

  • Clear Guidelines and Communication: Provide clear instructions and information about the types of candidates you're looking for. In addition to great JDs, consider listing the 2-3 differentiating qualities that will separate successful candidates from all the otherwise qualified folks. This reduces confusion and helps employees make more targeted referrals.
  • Referral Parties: This is my absolute favorite. Get interested employees together in a room with the hiring manager and folks from HR and spend a few hours tracking down great referrals. You can provide tools like job descriptions, outreach templates, and even pre-written LinkedIn queries to help identify high-quality candidates in their network. With hiring managers and experienced recruiters in the room, your employees get immediate feedback. Add in some food and music, and it becomes a party. It’ll be fun today, and you’re teaching valuable skills for the future.

Diversifying Recognition Methods

  • Public Acknowledgment: Celebrate successful referrals at company meetings, in newsletters, or on internal communication platforms. Public recognition from leaders can be a powerful motivator.
  • Feature in Company Communications: Spotlight the employee and their successful referral in the company blog, video interviews, or social media channels. It sounds silly, but employees love being able to show this kind of recognition to their parents, spouses, family, and friends.
  • Regular Program Review: You’d be shocked, but asking people how to improve a program–and listening to them–could be the most effective way to show that both the program and the referral are important. Conversely, ignoring your employees is a pretty clear signal that their work to create great referrals doesn’t matter.
  • Personal Thank You Notes: Finally, don’t forget the basics. A handwritten note from a senior leader or the CEO can be a simple yet powerful way to express gratitude.

Conclusion

A creative employee referral program is a multifaceted strategy that goes beyond mere financial incentives. It's about fostering a positive work environment, providing a superior candidate experience, educating employees on making quality referrals, and recognizing their efforts in meaningful ways. This not only enriches your talent pool but also strengthens your company culture, making it a win-win for everyone involved.
By implementing these strategies, you can turn your employees into active and enthusiastic ambassadors for your brand, bringing in top talent that aligns with your company's values and vision. Remember, the most successful referral programs are those that are thoughtfully designed, effectively communicated, and sincerely appreciated.