Five Tips for Creating a Successful Employee Referral Program

February 08, 2022

By Matthew Kerzner

According to the U.S. Bureau of Labor Statistics, there were 10.9 million job openings in the U.S. as of the end of December 2021. The manufacturing and distribution (“M&D”) sector has been hit with this reality harder than most, with over 850,000 current open roles—more than double the rate only a year ago. To aid with recruiting, many M&D companies are turning to their current employees through referral incentive programs and for good reason, as employee referrals are one of the top sources for new hires. So just what goes into a great employee referral program?

1. Reward Employees for Engagement and Results

In the competitive hiring environment companies face today, simply offering a pizza party or $20 gift cards as incentives no longer suffice. Companies need to offer impactful rewards and incentives to get employees to truly engage with their programs. In fact, some companies are offering between $1,000 and $5,000 depending on the seniority of the referral.

To promote program engagement, companies have found success by staggering their reward payments based on the amount of time the referred employee stays with the company. For example, with a $1,000 bonus, the employer would pay the referring employee $250 at the time of the initial referral, an extra $250 if the candidate is offered the role, and a final $500 after the candidate completes three months of employment.

2. Be Transparent with Employees

Trust is a two-way street, especially with employee referrals. Consider this, your employees are putting their reputations on the line to vouch that their referrals are a good fit for the company. Additionally, they’re sticking their neck out to colleagues and friends that you’re a good employer.

It’s important to keep the lines of communication open with the referrer every step of the way. If an employee has enough trust in you as an employer to refer someone, they’ll want to know, for example, the status of their referral’s application, if there is going to be an interview, and if there is a job offer.

3. Provide a Clear Procedure for Referrals

As with any process, simplicity and clarity are key. Employees should be able to refer through multiple channels—from handing a resume directly to an HR employee to submitting it through an online portal. The easier it is for your people to bring in new candidates, the more referrals you'll see.

To help with rolling out the process, find a senior manager or HR representative who can own the initiative and serve as its face. For any employee with questions or concerns regarding referrals, they'll have zero confusion with whom to go.

4. Make Sure Your Benefits Are Known

Great referral programs empower employees to champion your business to their network. Ensure your employees are armed with the correct information on benefits, perks and employment to properly set expectations about what it’s like to work at your company. Having a piece of collateral and shareable social media posts with all your employment information, along with details about the referral program, are great resources to empower your team.

5. Get Creative with Marketing Your Program

Once you have determined the process, goals and incentives for your program, you will need to roll it out to the entire company. Communicate the program and its incentives clearly, often and over various channels. A flyer in the breakroom is no longer enough to spread an effective message. Many employers are communicating with their employees through text messages and creating simple videos to promote their internal programs. Also spread the message through other macro means such as during company townhalls, in newsletters, on the organization’s intranet and so forth. Keep in mind that the program should be open to the entire organization, not simply the departments or roles for which you are currently hiring.

It is more important than ever to think outside of the box when attracting new talent to your organization. An impactful referral program that encourages your employees to advocate for your business as well as rewards them for their efforts is a great tool to help you stand out in today's ultra-competitive hiring market.

About Matthew Kerzner

Matthew Kerzner is a Managing Director in the Center for Individual and Organizational Performance and the Center for Family Business Excellence. Matt has more than 25 years of experience in organizational development with a specialization in assisting family businesses and closely held businesses.