The document discusses improving the quality of hires from employee referral programs (ERPs). It defines quality of hire as the improved on-the-job performance of referrals compared to other sources. It recommends quantifying this improvement using metrics like output, retention rates, and manager ratings. Benchmark companies are shown to achieve over 10% better performance from referrals. The document outlines several action steps ERPs can take to improve quality, such as being more data-driven, focusing on cultural fit, requiring more applicant information from referrers, utilizing boomerang employees and job references, and learning from top-performing ERPs.

1. The Next Generation Of
Employee Referral Programs
Will Focus On Improving
Quality Of Hire
© Dr John Sullivan
1www.drjohnsullivan.com

2. 2
Definitions and quantifying
the business impacts of ERP hires

3. 3
Definition
Define quality of hire from referrals
 The % of improvement in the “on the job
performance” (i.e. output and retention) of new
hires from referrals
 Compared with the average performance level of
new hires from all other sources
Note: you must somehow “tag” employee referral
applications… in order to later determine whether
ERP hires were better on-the-job performers

4. 4
Outside sources already verify ERP’s
new hire quality
Source effectiveness
1. Employee referrals
2. Large job boards
3. Niche job boards
4. Temp to perm
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
Source effectiveness (out of 5)
1. Employee referrals 3.44
2. Social networking sites 2.98
3. Corporate career pages 2.75
4. Internal job boards 2.52
Source: Aberdeen Group
Employee referrals are #1
and they are 25% more effective…
than corporate career pages

5. 5
Top performers utilize referrals
ERP’s work best when you’re recruiting a top
performer
 “Over 93% of the top performers in their field
do not find their job from a job posting”…
 “Instead, they are referred by someone they
know, such as a friend or networking contact”
Source: Forbes 8/03/2014
BTW, top performers produce the best referrals

6. 6
Q of H Measurement
You can measure the performance improvement
of referrals versus other hiring sources… using 4
basic methods:
1. Comparing the actual job performance output/
retention numbers (sales, customer service, production etc.)
2. Compare the % of improvement in performance
appraisal scores
3. Compare the hiring manager’s rating of the new
hire’s performance on a 1-5 scale
4. Compare the % of new hires that the manager
would rehire after 6 months on the job

7. 7
The business impacts
By working with the CFO… you can prove the
business impacts of better Q of H from referrals?
Start with jobs where the output is already quantified
 The new sales people hired from referrals sold an
average of $869,000 their first year,
 While sales people hired from all other sources
averaged only $790,000 their 1st year…
 The added $79,000 is a 10% performance
improvement
 And $79,000 per hire over 15 hires = $1.2 million
every year they are retained

8. 8
The business impact
Next, quantifying the business impact for jobs
where there is no quantified output measure
 Let’s assume Coke calculated the % differential
in performance appraisal scores of new referral
hires over hires from all sources
 They found that the ERP performance was 10%
higher than hires from other sources
 The yearly average revenue per employee at
Coke is $261,000 (found on MarketWatch.com)
 $261,000 X 10%... means that the value added by
each referral hire is $26,000 for every yr. they stay

9. 9
What performance should you expect
from “the next generation” of ERP?

10. 10
ERP “next generation” performance scoreboard
1. At least 10% better on the job performance
2. Volume of all hires exceeds 50%
3. The highest retention rate
4. The shortest time to fill
5. > 30% of top performing employees participate
6. < 10% low-quality junk referrals
7. They can be the lowest cost per hire source

11. 11
Action steps for improving ERP
quality of hire

12. 12
ERP Q of H performance improvement steps
#1 – The ERP must shift to a data-driven
approach… where data reveals…
 Which employees provide the best referrals
 The best sources for identifying referrals
 The best job performance prediction factors
 The most effective rewards
 The best way to communicate
 The most effective ERP rules and policies
 Common errors and problems

13. 13
Action item #2
Change the motivator to “referring for the good of
the team”
 Emphasizing the reward payout makes
employees focus on the money…
(Only 11% of employees make referrals because of the
“opportunity to earn bonus income”)
 Convince employees that it’s every team
member’s responsibility to be a 24/7 talent scout
 Help employees realize that “with better
players”, the team will win more often
 Convince every teammate that they deserve to
work alongside and learn from the very best
coworkers (no slackers)

14. 14
#3 - Improve applicant quality by
requiring this information
1. The job title or req # you are referring them for
2. Verify they have not “found you” and there is no
personal relationship
3. Show you have seen and assessed their work
4. Assess, rate and then tell us about their skills and
knowledge… and how they are superior
5. Assess, rate and then tell us about their cultural
fit… so they do not dilute our culture
6. Assure us that you have sold them to the point
where they will accept an interview, if asked
7. Honestly rate them with an overall A+, A, or B+

15. 15
ERP Q of H performance improvement steps
More steps for improving ERP hire quality
Provide a story inventory
Provide a referral toolkit to educate your
employees on how to refer (DaVita and Whirlpool)
Referral cards are effective for customer service
Offer a once a year CEO ERP recognition dinner
Use the mobile platform for applying /communications

16. 16
The sources that produce the highest quality
referral hires

17. 17
#1 – The best approach is being “proactive”
“Give me 5” “retrieval cue” approach (Google & DaVita)
Proactively approach top performers and ask them
to identify the top 5 people in their field… using
these “brain stimulator” categories
The best performer you ever worked with
The most innovative
The best team player
The best manager
The best working under pressure
 Then ask the employee to contact these 5
individuals and try to convince them to apply

18. 18
#2 - ERP Q of H performance improvement steps
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%)

19. 19
#3 - ERP Q of H performance improvement steps
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?”
 Consider hiring the reference
 Ask them to be a future reference source

20. 20
#4 – ERP Q of H performance improvement steps
Expand referral eligibility to well-connected
individuals that know and like your firm
Corporate alumni
Retirees
Vendors
Spouses
Strategic partners
Customers

21. 21
ERP Q of H performance improvement steps
Additional great sources for quality
 Ask new hires during onboarding
 College student referrals
 Assigned referrals
 Referrals from those with a track record of
successful referrals

22. 22
ERP Q of H performance improvement steps
Errors that reduce quality of hire
Discourage employees from submitting “they
found you” referrals
Don’t “spam” all employees with referral requests
that cause fatigue
Not giving individual employees feedback about
the quality of their referrals
Don’t withhold payment… ever
Scraping contact lists won’t work simply because
the names have not been pre-assessed or presold

23. 23
Benchmark firms that you can learn from
Google
Facebook
ThoughtSpot
Deloitte
Ernst & Young
Edward Jones
Accenture
DaVita
Aricent
Children’s Hospital
Jobvite
Accolo
CACI International
Acumen Solutions

24. Remember the ERP open
question session Wednesday at
2:30 PM
JohnS@sfsu.edu 24
Did I provide you with a handful of
actionable items?
www.drjohnsullivan.com