Why referrals (especially in start-ups) should be a top priority
Author: Stephanie Heisz, Talent Advisor, TalentMinded
From the time that I got my first “real job” I learned quickly about the power that employee referrals can have on a company and its culture. As well, after working in the start-up world, I have seen first hand how important it is to tap into the pool of talent in your network to hire people who believe in your company and mission.
As it turns out, I found my current employment through a referral. It’s easy to see why my employer is tapping into their referral network before posting positions online–hiring through an employee referral is faster, more cost effective and generally a better culture fit–and I’m living proof! I would also go as far to say that the majority of people I know found their first and often second job through a referral.
It’s important for companies, especially tech start-ups, to understand the end-to-end value of an employee referral. Here are some of the reason employee referrals should be your number one, if not only source of hire when you are in the early stages of growing your business–and they may be different than you think.
JOB HOPPING HAS BECOME THE NORM
“Job hopping” has become the new norm; 91% of millennial workers only anticipate spending 3 years or less at one company. With so many options out there for a lot of skilled talent, especially in tech, it’s easy to keep fast tracking your career forward with great leaders and great companies.
Being a millennial I can attest to this myself and I see it happening within my network all the time. We have the mindset of always thinking about the next best thing. When I talk to people in my network about their current jobs, the majority are not planning to grow their career within the current employer or foresee the opportunity to do so.
So there are two key points to this:
1. Given millennials may move jobs more often, having someone you trust refer them into your company can be a good sign. Often times we dismiss ‘job hoppers’ thinking they can’t hold down jobs or get fired.
2. Cutting through the noise on job boards and inmail ‘spam’ or avoiding it all together by going direct to your immediate referral network can be a key competitive advantage especially in a tight labour market.
EMPLOYEE REFERRALS = HIGHER RETENTION RATES
We have entered into a time where it is easier than ever to apply to jobs and find them online – or the jobs find you! With tools like LinkedIn and Indeed, people can apply to multiple jobs with ease and/or receive daily notifications about jobs that match their search criteria. When applying to, and getting jobs, is this easy, it is essential for employers to look at other methods of employee retention.
Employers who have employee referral programs have 25% higher retention rates of employees after two years than those who do not. When you already have the inside scoop on a company, and know people who you respect within the company, it helps in making a smooth transition. Employers who use their network for referrals, and not just internal employees, have a better chance at extending their reach into the labour market and attracting talent who are pre-qualified ‘fits’ for the company.
My first experience with this was when I worked at a bank during my undergraduate degree. After my first year of employment, I referred two people to the company–one that I had worked with, and one a fellow student. At this bank, culture fit was very important, and since I had a great sense of what it was really like to work there, everyone I referred was hired and stayed and moved up in the company.
When you think about companies who have had success in hiring through employee referrals, like my current employer TalentMinded, the ROI is in employee engagement, retention, lower cost and time to hire and company growth.
SO HOW CAN YOU INCREASE EMPLOYEE REFERRALS?
A lot of companies, especially start-ups, give employees perks for referring people to the company. It’s standard to have some sort of monetary compensation or tangible reward to motivate employees to tap their networks. We find most companies offer a minimum of $1500 per hire paid out after 3 months or half and half during the probationary period.
There are other things companies are trying in an attempt to fill their pipeline with quality referrals for hire. I have a friend who works for a company that is doing some cool things with their referral strategies and its working. For example, they give their employees extra vacation days if they hire your referral. They also take the employee and their referral out for lunch the first week the referral starts and make sure they publically recognize the employee’s contribution through a monthly newsletter and townhalls.
Another way to increase your referrals and get your employees jazzed about digging deeper into their networks is to give it a brand of its own. Try creating a sub-brand for your program with a logo and tagline to match. This will help get your employees rallying behind something more tangible and visible then just an email reminder from time to time.
The ‘ask’ for more effort and energy in driving an increase in qualified referrals should also come from the top down. A message from the CEO can be more powerful than a standard HR policy announcement or poster in the lunch room.
Lastly, consider rewarding your brand ‘ambassadors’ beyond your company walls. Encourage referrals from external networks and people who know you and the company well. Being a start-up usually means your small, so why not reward ALL the people that care about your success. Extend your reach by expanding your rewards to other raving fans around you. And as we mentioned, it doesn’t have to all be all about the dollars and cents. As stated in one of our earlier posts, “Why don’t companies reward the people who care about them”, it’s the thought that counts – don’t underestimate how far a $25.00 Starbucks card can go in helping you build your brand!
Essentially I am a firm believer in employee referrals based on what I have experienced personally as well as the success I have witnessed through my network and their career paths. Having some sort of employee referral system in place, that employees will actually pay attention to and action, should be a top priority when crafting your recruitment strategy.
Please feel free to share some of the things that your company does to drive referrals!
Author, Stepahnie Heisz, Talent Advisor, TalentMinded