Harnessing the True Power of Employee Referrals|Harnessing the True Power of Employee Referrals

Harnessing the True Power of Employee Referrals

A colleague of mine recently forwarded me a link to a journal article that they thought I’d find interesting. Now, settling down with a good book is one thing, but I thought my days of reading scholarly articles had ended when I walked across that graduation stage. Even so, out of respect for their opinion, I downloaded the journal and printed myself a copy. The goal of the article, “Why the Referential Treatment? Evidence from Field Experiments on Referrals,” was to explore the effectiveness, if any, of job candidates who came from referrals versus those who did not.

For many of you, this may not seem like the most exciting topic, but as someone who works in the HR world, I found the study fascinating. Without much effort, one can look toward almost any organization and find some type of referral program — formal or not, they are sure to exist. Looking at the results of the study, it’s easy to see why organizations tend to prefer referred candidates and here is why:

The results clearly indicate that people who are referred to and accept job offers with an organization outperform their non-referred peers.

I found myself making direct correlations between the study results and how HR departments could use the data. At the end of the day, from recruiters to directors, one of the primary goals of any HR department is to ensure that the human capital within the organization is comprised of top performers. Whether the job market is robust or slow, achieving that can be challenging, and the competition between organizations for top talent is fierce. And that’s where the power of referrals comes into play.

From my vantage point as a recruiter/HR partner, referred candidates bring three distinct advantages: time, money and probability. Most employees are likely oblivious to the amount of effort that it took to get them behind their desks. Even with great turnaround, collecting a set of quality resumes takes at least a week.

Referred candidates, on the other hand, typically surface at the onset, or even ahead, of a job opening. And referred candidates do not require advertisements or marketing campaigns; that’s not to say those wouldn’t still be used, but there’s definite cost saving potential there as well. Finally, just as Pallais and Glassberg found, the odds of landing a great employee increase through the use of referrals.

Knowing what we do from this study, how can we groom and grow our current referral programs into dynamic, super-employee-cultivating machines? Additionally, are there potential pitfalls we should look out for?

Current Program Health

  • Referee Criteria. In any organization, there is a range of employee performance, from excellent to adequate. Those who fall below that threshold are typically weeded out come performance evaluation time. Set a standard for which referrals will even be considered. Within the study, only top-performer referrals were hired. If your organization does not have an active employee review system from which to draw, take half of an hour to speak with a referee manager.
  • Simplify. Ensure your program is easy to use. I’ve witnessed countless programs where the number of hoops to jump through was on par with a home purchase. Yes, you need to have a clearly defined process, but ensure that the system is not so rigid that the act of referring becomes too daunting.
  • Analytics. Within your employee files, it’s crucial to be able to identify those who have come in via referrals. Give yourself a snapshot of the last six to eight quarters. Are you able to see any trends with tenure, performance or even localized (department/team) engagement? Both empirically and via research findings, those who have been referred should inject an uptick in your numbers. If they’re not, you should reevaluate.

Potential Pitfalls

  • “Reverse referrals.” Incoming candidates are often asked why they have applied or how they heard about the position — a very common option is “Current Employee” with a dynamic textbox for typing the employee’s name. Make sure you are validating the referral, whether it be a required referral form or a quick call to discuss. I have a good friend who once found themselves in an awkward situation where a mild acquaintance who looked great on paper turned into an HR nightmare — something they quickly learned might happen when their listed reference showed concern over the recent hire.
  • Overuse. While there are many reasons to support a strong referral program, do not forget that this is a supplement to a strong recruitment strategy. Relying solely on referrals and failing to look externally can lead to too much synchronicity, and stagnation can occur.

Yes, there is a reason to have a natural preference for referrals. Whether we’re discussing the latest movie, a babysitter or even a journal article, there is a natural inclination to rely on our trust of others. Organizations are no different, and HR as an industry should include candidate referrals as part of their strategic hiring model. It is unrealistic for the entire organizational population to be comprised of referrals, but a healthy system will certainly include some. Mr. Lee Lacocca summed it up best when he said, “In the end, all business operations can be reduced to three words: people, product and profits. Unless you've got a good team, you can’t do much with the other two.”

Read more of Michelle’s writing on the ResumeEdge Blog, here.