Active recruitment is a crucial activity in almost every organization that sets the pace of business operations. But to maintain the recruitment cycle, your hiring team works hard to post job ads, pre-screen qualified candidates, and conduct interviews before the final selection. But it often happens that many business owners like you fail to look for answers to some of the intriguing hiring-related questions, which are:
- What is the average number of applications for an open job position with your organization?
- How long does it take to hire an individual – both executive and experienced?
- What are the expenses involved in hiring an individual for your organization, excluding the compensation package offered?
When you are posting ads or running recruitment drives, you are actually spending money to advertise the available job positions. According to SHRM benchmarking data, the average cost per hire is around $4,700. As an employer, you would want to reduce this number to a feasible value by modifying your hiring strategy. One way to do so is by involving your existing employees to build the candidate pipeline for you via employee referrals.
The employee referral approach differs from the traditional hiring process which involves posting a job ad, accepting resumes of potential candidates, and then taking the application forward. Here, you need a well-structured employee referral program to set things in the right direction.
Before we talk about setting the referral program, let’s understand the importance of this hiring approach.
Why Should You Accept Employee Referrals for New Hires?
Employee referral can be simply defined as an internal hiring method to find potential candidates for open job positions within an organization. It forms a crucial component of a structured program that companies use to find the right talent by asking their existing employees to recommend candidates from their individual networks.
In most cases, referred candidates do not follow the usual hiring process. Instead, an internal employee will submit the resumes of candidates or acquaintances they want to refer directly to HR. Based on the hiring practices and job criteria, the hiring team will determine if they would like to proceed with the application.
If you closely look at the employee referral process, you will find that it does not require you to post a job ad or invest heavily in its promotion. Other than the financial implication, it has its qualitative side as well.
According to a study about recruiter sentiments, it has been found that the evolved job market is 90% candidate-driven. It means the candidates pick you and your company, and not vice-versa. Eventually, hiring skilled professionals has become challenging, time-consuming, and expensive.
This is where employee referrals come to the rescue. It has become one of the most reliable and productive methods to find the right talent.
Still wondering if you should work on devising an employee referral program? Let’s explore the benefits.
5 Key Benefits of Employee Referrals
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Improved quality of hire
From pre-screening candidates to conducting several rounds of interviews, the core purpose of the process is to understand if a candidate will be the right fit for your organization. The final quality of hire depends on the convergence between the hiring team’s notion about a candidate and the overall culture of your company.
The underlying reason why employee referrals work is that your existing employees have experienced the mission, vision, and culture of your organization. It also means that they can better recommend candidates who would be the best cultural fit. Since many passive candidates can be the best fit for a job role, outreaching to them can make a significant difference in the hiring quality.
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Higher employee retention rate
On average, losing an employee can cost around 33% of his/her annual salary. This can be the reason why you want to provide adequate compensation to the best talent working for your organization. But interestingly, the quality of hire does play an important role in employee retention.
The better the quality of hire, the more likely a candidate would want to continue to work for your organization being a perfect fit. As said above, you can improve the hiring quality with employee referrals.
On the other hand, if you hire someone who is not the right fit, he/she will most likely leave your organization sooner.
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Reduced time to hire
When you post a job role on a job board, it is going to take time before you start receiving some applications. Then, there is the pre-screening and resume checking part, followed by conducting interviews for the shortlisted set of potential candidates. All these steps involved in the hiring process can take a lot of your precious time.
Now, look at the employer referral side – when you get the resume of quality candidates straight into your inbox, you simply go ahead and ask them for an interview. This omits the steps of sourcing and screening of the applicant, hence reducing the overall time to hire.
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Lower cost to hire
Look at the cost-side of different steps involved in a traditional hiring approach.
- You post an ad on a job board. You pay for its promotion on the portal.
- You source candidates externally. You pay for it too.
- You screen their applications. You are paying for the man-hours involved.
When the time to hire reduces (as explained above), you would need fewer human hours to fill any specific job position. This will ultimately make the hiring cycle more efficient and productive.
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Strengthened employer brand
Whenever you allow your current employees to recommend someone for a job role, how would they do that? The obvious way is that they will talk to the candidates first and explain what the role has in store for them. Since interested job seekers believe the words of an existing employee more than an ad from the corporate branding side of your company, this will ultimately build a ripple effect for time to come.
Once new employees are hired through the referral program, they will benefit from the same by referring candidates from their network, and the cycle continues.
How to Set Up an Employee Referral Program?
Given below is a four-step strategy to set up your employee referral program:
Step 1: Include referrals at the right stage of hiring
Before you ask your employees to refer candidates, you need to decide whether you want to do that after trying the traditional recruiting approach or at the very start. Similarly, you need to assess if you want to include all the open job positions in the referral program or keep it limited to some specific roles that are hard to fill.
You can easily find the right answers to such questions by setting the hiring goals first. For example, if the goal is to recruit the right candidates faster than usual, it makes sense to ask for employee referrals straight in the beginning.
Step 2: Share the employee referral program details effectively
The effectiveness of your employee referral program depends on how well your employees know about it and are engaged in it. Therefore, you need to ensure that they know the steps to refer potential candidates and have easy access to the open job positions in your organization.
You can expect the employees to respond to the program once you have structured and communicated the process with them. Also, you need to ensure that there is a reminder system (like an internal email notification) in place to bring forward some of the top positions that they can refer candidates for.
Step 3: Reward your employees for successful referrals
Each of your existing employees has his own projects and tasks to cater to, which may make it difficult to keep in mind to refer potential good fits. To bring the motivation to do so, incentives always work. As a part of the employee referral program, you can incentive each referral depending on the job roles and their grades in the company’s hierarchy.
When the employees feel there’s something they can get, they are more likely to recommend people from their network. At this step, you need to ensure that they are quite familiar with the terms related to the referral bonus to set the right expectations.
Step 4: Track employee referrals
Once the program is up and running, it is crucial to analyze its success from time to time based on the HR metrics. These include:
- Number of hired referrals vs. number of total referrals
- Number of referrals per department
- Turnover rate for the referred candidates
- Retention rate for the candidates hired via the referral program
Considering all these metrics will help you understand whether the recommended candidates improve the quality of hire or not. In case the current employees recommend candidates more often but do not qualify for the best fit, you need to explain the requirements more clearly to them.
The Next Big Thing – Can You Rely Only on Referrals for the Hiring Needs?
Employee referrals do provide immediate access to talented prospects as they are sourced through the personal or professional network of your employees. Indeed, it cuts a lot of time from the hiring process that your team would otherwise spend on sourcing, screening, and coordinating with several job applicants.
However, you are advised not to make your hiring process highly dependent on employee referrals. Doing so will cripple the hiring cycle in case there are not many referrals received corresponding to the open job positions. Besides this, when you want to hire experienced professionals for the top positions in your organization, getting a referral from lower-level executives may not help.
For such needs, you can incorporate freelancers or hire a renowned staffing agency to build a pipeline of candidates.
Pair Your Employee Referral Program and Specialized Hiring with Connect Tech+Talent
Employee referrals reduce the time to hire and cost to hire. To further boost the hiring cycle with external help, hire Connect Tech+Talent – a leading staffing agency having experience in building a customized hiring strategy for your organization. To know more, click here.
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