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March 10, 2009


A group of HR managers responsible for their firms' employee referral programs (ERPs) gathered recently in Orlando, Florida, brought together by the International Quality and Productivity Center.

The recruiters shared tips, quibbles, gripes, and tactics. Here's a set of ERP characteristics about which there was universal agreement in the group:

  • Employee referrals lead to more-motivated staffers.

  • These hires are more loyal (as in less likely to leave) than others.

  • Their performance levels are higher.

  • Time to hire is shorter for these staffers than for others.

  • As a source of recruits, employee referrals are less expensive than two other popular methods-search firms and major media advertising.

Other trends

Average awards to existing employees who refer a successful hire range from $250 for part-timers and $600 to $1,000 for mid-level recruits to $2,500 or even $5,000 for a hard-to-fill or hot skills position. (One firm tried $10,000 and got feedback from employees that the award was too high!)

Most members of the group reported that, in addition to receiving individual awards, successful referrers had their names entered in a quarterly or, more commonly, annual drawing for a big-ticket prize - a Volkswagen Beetle, an SUV, a European vacation.

But speakers and conferees pointed out that not all successful ERPs feature cash awards and major prizes. SBC (the large telecommunications company formerly known as Southwestern Bell Corporation) gives no cash, substituting trips, parties, and getaways.

And Home Depot gives only polo shirts bearing the company's logo, but they are highly prized by employees. Their perceived value may arise as the result of another recommendation with which virtually all attendees agreed: It's essential to promote and publicize the program internally - frequently and enthusiastically.

Many companies change the look, and sometimes the theme, of their ERP every year, often featuring the drawing prize. Paycheck stuffers, intranet reminders, employee newsletter ads, e-mail reminders, lunch-table tent cards, and bulletin board posters are popular media. Some firms distribute at least one mailing to employees' homes each year, in an attempt to widen the circle of referrers to family members.

And most stressed that including a good presentation of the ERP in orientation sessions for new hires is a key step.~Consensus Winners

Further, an effective ERP should yield between 30 and 50 percent of the company's hires each year. Keep the rules and procedures for the ERP as simple as possible, and win top management approval and support before launching or reactivating a program. Obtaining funding for a new effort is always tricky, but it's easier for ERPs, because money previously budgeted for more expensive recruiting methods, especially search firms, can be earmarked for a new ERP. If the program works as well as it should, it will fill more slots for the same dollars than search firms could have yielded.

Additionally, it's important to the effectiveness of the program to give the resumes of employee-referred candidates higher priority for review than those from other sources. It's also crucial to keep employee referrers apprised of the status of their referrals - nothing's guaranteed to kill an ERP faster, conferees agreed, than a process where referrals fall into a "black hole." But group members disagreed about how to keep employees informed.

No consensus on some issues

One firm has so extensively automated the process of helping referrers track the progress of their candidates that each referral's status is posted on the intranet for all to see. But information is limited to general categories, such as "no interest at this time," "interview pending," and "offer pending." Other conferees felt this method either didn't keep referrers as fully informed as they wish, while others argued that publishing the status breaches the confidentiality of both referrer and candidate.

A compromise with which many group members agreed was to send personalized e-mail messages to each employee about the status of anyone that person had placed in the pipeline. And, most agreed that general HR work can grind to a halt if department members are deluged with inquiring telephone calls from referring employees.

Another point of contention was whether all employees should be eligible to participate in the ERP. Most firms make recruiters ineligible, but that's where agreement ends. Other common exclusions are HR people who act as recruiters, or all HR people, plus top management.

The question of eligibility can go lots of other places. Some advocates urge firms to invite vendors, contractors, customers, and former employees to participate. Others place limits on the eligibility of employees in general, such as that the candidate must know that he or she has been referred, must be known personally by the referrer, or cannot have been previously referred by any other employee. Here, too, conferees did not agree.

The final point of contention about ERPs is this: Do your wait until 90 days after the referred new hire has joined the company, or bestow the award on the referring employee sooner, or even immediately. Most conference members said they wait the full three months.


Filed Under: Workplace Issues

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