1. WHY EMPLOYEE
REFERRAL PROGRAMS
SHOULD BE YOUR #1
HIRING SOURCE
Making the business case
2014
©
Dr John Sullivan
Read more at www.drjohnsullivan.com
1

2. Why the increased emphasis on referrals?
Referrals will continue to become even more
prominent because of:
More data proving their business impact
More firms are shifting to a data driven approach
which makes their ERP’s much more effective
The growth of social media and the Internet
make it easy for your employees to find top talent
The visibility of prospects work on the Internet
New technologies are available
New vendors appear every day
2

3. Part I
The business and recruiting
impacts of referrals
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4. The 1ST step is building a compelling business case
Here is a list of the business impacts from referrals
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5. Business impact #1 – High quality hires
ERP’s produce the highest quality of hire
Hires from referrals perform better on the job
than hires from any other source
Let’s look at 2 charts revealing source quality >
5

6. Referrals are the #1 source for new hire quality
Source effectiveness
Source effectiveness (out of 5)
1. Employee referrals
1. Employee referrals
3.44
2. Large job boards
2. Social networking sites
2.98
3. Niche job boards
3. Corporate career pages
2.75
4. Temp to perm
4. Internal job boards
2.52
5. Recruiters
6. Trade media
7. Staffing services
8. College recruiting
9. Career fairs
10. Co-op education
11. Mass media
12. Military
Source: staffing.org 2011
Source: Aberdeen Group 2013
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7. Business impact #2 – High productivity
ERP’s produce improved new hire productivity
Referred hires from average workers produce
25% more output /profit… than non-referred
employees
Referrals from top performing employees
produce 135% more output / profit
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8. Business impact #3 – A high ROI
Calculating the $ value and ROI of each ERP hire
Start with your average revenue per employee
Multiplying that dollar amount by the % of
higher output produced by referral hires (25% up to
135%)…reveals each ERP hire’s $ impact on revenue
At a struggling firm like Sears using the minimum
increase in output of 25%, ($138,200 rpe X 25%
improvement) this means that each ERP new hire is
worth nearly $35,000
At a productive firm like Facebook, using the
maximum 135% increase in output, each ERP hire
could be worth up to $1.6 million
 Compared to a probable cost per hire of less than $10,000
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9. Business impact #4 – High retention
ERP’s hires have a better retention rate
Referred workers have a higher retention rate
and are up to 30% less likely to quit their jobs
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10. Let’s shift to recruiting impacts
The superior recruiting impacts from referrals
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11. Recruiting impact #1 – A high volume of hires
The highest volume of hires - of all sources of
corporate recruits, employee referrals are #1 in
volume at between 24.5% and 44% of all hires
An even higher volume occurs at top firms – at
firms with excellent referral programs… 50% of all
hires come from referrals (Twitter, Facebook and
E&Y) and the top firms have reached nearly 80%
Up to 8 referrals per opening – by assigning
prospects to the right employees… you can get
up to an average of eight referrals per position
Let’s look at a chart revealing source volume >
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12. Referrals are the #1 source for new hire volume
Source popularity
Volume
1. Referrals
24.5%
2. Career site
23.8%
3. Job boards
18.1%
4. Recruiter direct source
6.8%
5. College
5.5%
6. Rehires
3.3%
7. 3rd party
3.1%
8. Social media
2.9%
9. Print
2.3%
10. Temp to hire
1.5%
11. Career fairs
1.2%
12. Walk-ins
0.3%
Source: CareerXroads 2013
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13. Recruiting impact #1 – Hiring volume at top firms
The best firms average 46%
Source:
yesgraph
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14. Recruiting impact #2 – High quality applicants
Higher quality applicants
 A survey of 73 major employers… 88% said
that… “referrals are the # 1 best source for
above average applicants”
 HR executives rated referral candidates #1,
earning a 8.6 on scale of 10
 Referrals also have the highest interview to hire
ratio (17% of referrals are interviewed)
14

15. Recruiting impact #3 – A better hire ratio
A much better hire ratio
Although only 7% of applicants come from
referrals, they produce 40% of all hires
Between 14% to 25% of referrals are hired…
Versus 1% from among all sources combined
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16. Recruiting impact #4 – Time to fill
Faster hiring speed / time to fill
 A referral program can have the fastest “time to
fill” of all sources (29 compared to 45 days)
Source:
yesgraph
 “Blue light alert” referrals are the fastest of all
referrals
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17. Recruiting impact #5 – Low-cost
Lower-cost hire
 A well-managed referral program that doesn’t
focus on the reward as a motivator produces
hires at a lower cost than the average cost per hire
at a firm
17

18. Not all referrals are equal
Top-performing employees submit the highest
quality referrals
Referrals from top performing employees
provide significantly higher quality referrals
than the average worker
(ttp://faculty.haas.berkeley.edu/bo_cowgill/papers/Referrals.pdf)
The worst referrals come from “people that you
don’t know that approach you”
Relative strangers that ask you to “please make
me a referral” produce the worst quality…
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because you don’t know their work or skills

19. Part II
What are the key elements that
are present in top-performing
referral programs?
19

20. What elements differentiate the top performing
programs from the average ones?
Key differentiator elements…
ERP elements for increasing referral quality
20

21. # 1 - Prioritize jobs to focus on quality
Focus ERP efforts on high priority jobs (40% max)
Mission critical jobs
Revenue generating jobs
Key jobs in high profit and high-growth SBU’s
Jobs with a high previous referral success rate
Hard to fill or high-volume jobs
“Sudden” key vacancies
21

22. #2 – Motivate using a “help the team approach”
$ rewards can reduce the focus on quality & impact
Use a “help the team" approach that emphasizes:
It’s part of your responsibility as a team player
An opportunity to work alongside great people
and… you won’t have to work alongside slackers
You will learn more from higher-quality new hires
You will be recognized for “helping the team”
Your team will “win” more frequently
Providing this competitive advantage… will
improve bus. results, stock value and bonuses
Show employees the correlation between better
business results… and a higher % of ERP hires 22

23. #3 – Use proactive approaches, not spamming
Proactive means seeking out the best referrers
It is true that “Great people know great people”,
however… most employees are extremely
busy… so in order to get quality referrals… you
must proactively approach them
Proactively approach the teams that have the
hardest openings to fill… as well as your top
referring employees
Here are 2 proactive ERP tools to consider >
23

24. “Proactive” referral tools
A) The “give me 5” approach (Google)
Proactively approach top performers and ask them
 To identify the top five people that they know in
their field… in these categories
The best performer you ever worked with
The most innovative
The best team player
The best manager
The best under pressure
 Then ask your employee to contact these 5
individuals and try to convince them to apply 24

25. “Proactive” tools
B) Reach out to job references for referrals
 Identify top performing hires from last year
 Call their references that said accurate things
 Thank them
 Ask them “Do you know anyone else as good?”
 Ask them to be a future reference source
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26. #4 - “Assigned referral” tools
4 Assigned referral approaches to consider
A) Use a referral community - for each of its
jobs, Accolo selects a few employees based on the
likelihood that they will know the right person for
a job opening… they average 8 referrals for every
job
B) Assign an individual with a strong connection –
Zynga executives identify an important recruiting
target and then select the employee that has the
strongest social media relationship with them. That
individual is then coached to make the referral
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27. Another assigned referral tool
C) Assigned boomerang referrals
 Utilize your corporate alumni group to… identify
top-performing alumni that work in high need
areas and assign an employee to them (DaVita 16%)
27

28. Another assigned referral tool
D) “Most wanted list” of assigned referrals
 Executives identify… a list of gamechangers
and potential “magnet hires” at the beginning of
the year
 Key employees are asked to seek out these highly
desirable individuals and to build a relationship
with them over social media
 When they eventually agreed to consider becoming
a referral… speed hiring is required
28

29. #5 - Require this information to ensure quality
You must require these 6 pieces of information
1. The job title or req # you are referring them for
2. How / when you have assessed their work
3. Assess and then tell us about their skills and
knowledge… and how they are superior
4. Assess and then tell us about their cultural fit…
so we do not dilute our culture
5. Assure us that you have sold them to the point
where they will accept an interview, if asked
6. Honestly rate them with a A+, A, or B+
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30. #6 - Clear expectations can limit junk referrals
Set expectations before an employee refers
1.We are exclusively seeking superior individuals
that will make our firm significantly better
2.Because we only want the very best… we expect
no more than 3 referrals per employee a month
3.Throughout the referral process… we expect you
to put the firm’s best interests first
4.Except in extraordinary cases, we do not want
referrals from relatives or individuals that
approached you and asked to be referred
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31. Referral program success factors
Look for people that
 That have skills that you don’t
 That beat you
 That you learn from
 That you admire
 That can do things you can’t
 That have answers
 That are future focused
 That see the glass as half empty

32. #7 – Great referrals require education & coaching
Source: Whirlpool
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33. #8 – A story inventory is critical
A story inventory for recruiters and employees
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34. An example - How to generate stories
Microsoft “Spreadthelove” internal website
Their “Spreadthelove” website allows Microsoft
employees to "write up" their own individual
story about their career with Microsoft (their story
might include pictures, testimonials and video)
 Employees can then share the web link and
"spread the love" with targeted friends, family
and potential referrals
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35. Now let’s shift to actions that increase volume
Actions for increasing referral volume and
participation rates
35

36. #1 for volume – Responsiveness is essential
Responsiveness is the key to continued success
 The #1 volume reducing factor is a slow response
 Dedicated recruiters – can improve candidate
relationships and much more effectively sort and
expedite top referrals (CACI)
Develop service level timelines like:
 Responding to all referrals within 24 hours
 Offering at least phone interviews to A+ and A
candidates within 5 days (Owens Corning)
36

37. #2 for volume – Everyone is a “Talent Scout” (Tata)

38. #3 for volume
Focus on attracting “passive” prospects
Here are 4 passive approaches to consider >
38

39. A) Referral cards can attract passives
Your customer service just now was exceptional.
I work for the Apple store and you’re exactly the
kind of person we’d like to talk to.
If you’re happy where you are, I’d never ask you to
leave.
But if you’re thinking about a change, give me a call.
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This could be the start of something great.

40. Focus on passives
B) Names alone can start the referral
Pay $100… just for a name in key jobs… even
if they are not hired (Must provide contact
information, they must be someone working in the field
and be interested in a new job at Children’s hospital in
Dallas)
25% of the names result in a hire
40

41. Focus on passives
C) Accept profiles – at least initially, allow
LinkedIn profiles in lieu of the “slow to
acquire” updated resume
D) Look for great work online – encourage
employees to seek out examples of excellent
work on the Internet and convince those
prospects to become a referral
41

42. #4 for volume – Expand program eligibility
Expand eligibility to execs, managers and HR
Executives are encouraged to refer - a “white
glove treatment” recruiter can be assigned to
encourage executives to make referrals (Deloitte)
Managers and HR are made eligible – managers
and those in HR are also well connected, so they
should be eligible to make referrals (Accenture)
Give it to charity – you can motivate those not
driven by money and minimize conflicts of
interest by offering the option of donating their
reward to charity (Accenture, DaVita)
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43. Expand eligibility
Expand eligibility to non-employees
Open up referrals to non-employees including
Family
Contingent workers
Consultants and vendors
Customers
Board members
Corporate alumni
(Internosis, Clearlink, CACI, Verinon)
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44. #5 for volume – Broaden ERP coverage
Broaden referral coverage
Add on-boarding referrals – proactively ask new
hires for referrals during on-boarding (Eli Lily)
Add college referrals – the college population is
well connected through social networks, so add a
referral sub-program for college hires and interns
(Endeca, Intuit)
Add referrals for executive positions – advanced
ERP’s also cover openings for executive positions
44

45. 8 additional practices for increasing volume
1. Alerts – send targeted “I need your help today
alerts” to the most relevant employees with a
successful referral track record (CACI International
and Quicken Loans)
2. Competitions – friendly internal contests between
teams can dramatically improve results (Deloitte)
3. Hold referral events – hold physical referral
events and “virtual hangouts” or “meet ups” in
order to garner attention, to educate, and to get
"spot" referrals (Monster.com)
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46. 8 practices for increasing referral volume
4. Harness social networks – closely integrate
referrals with your firm’s social media effort
5. Develop professional learning communities and
have your employees make referrals from the best
participants (Microsoft)
6. Recognize managers – set targets, make it a
promotion criteria and then…
track, report, recognize and reward individual
managers for high referral rates within their team
7. Ninja searches – periodically approach top
employees and ask them to search their
phone, social media and computer databases
46

47. 8 practices for increasing referral volume
8. Conduct a follow up interview – after a
successful referral, send a recruiter to interview
the employee in order to identify best practices
and to ask for additional referrals (Amazon)
47

48. If you’re going to include rewards…
utilize high-impact but low-cost rewards
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49. Reward best practices
Action steps for improving rewards
 Realize that the average bonus amount generally
falls between $500 and $1,500…amounts above
$1,500 have proven to have little impact
 The best ERP’s never pay "equal" bonuses and
most vary it by job, location and competitor $
 "Grossing up" bonuses (so that they are in effect
tax-free) really WOW’s employees
 Pay off quickly and consider a “prize patrol”
approach to add excitement (Quicken)
49

50. Reward best practices
Inexpensive rewards to consider
 A referral dinner/luncheon held once/ twice a
year with the CEO to celebrate referrers
 A $25 gift / Starbucks card for your 1st referral
 A handful of free movie tickets for the family
 First choice at vacation, schedule or other
desirable work items
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51. 4 Final strategic program elements
1. Realize that a focus on diversity referrals will
actually increase your diversity hires
2. Track referrals to identify the high and low
referring teams
3. Notify employees when they make a particularly
weak referral
4. Use referrals for internal openings
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52. Part III
What elements drag down the
performance of average
corporate referral programs?
52

53. Be careful
Homer will refer
people also
53

54. The 4 most impactful referral program killers
1.Do not allow executives to win the argument that…
you don’t need a formal ERP program and a
marketing effort… because “it’s part of their job”
2.Do not withhold rewards until the probationary
period is over (consider an added bonus if they stay)
3.Avoid “referral spam” where a high volume of
the same message causes your targeted employees
to eventually ignore all referral messages
4.Avoid sending employee referrals to apply on
your standard corporate careers website (not tagged)
54

55. And finally…
Benchmark firms that you can learn from
AmTrust Bank
Deloitte
Ernst & Young
Edward Jones
Accenture
DaVita
Aricent
Twitter
Facebook
Accolo
CACI International
Acumen Solutions
55

56. Are you convinced of the power
of referral programs ?
JohnS@sfsu.edu
56