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Employee Referrals Remain a Recruiters Best Friend

December 6, 2010

The old adage “People are our most important asset” is particularly true when it comes to stocking the workforce.

Consider that 88 percent of employers rate employee referrals as their No. 1 source of above-average candidates, says John Sullivan, a San Francisco State University professor of management, who adds that employee referrals top executives’ lists in terms of quality and longevity of hire and return on investment. And, Sullivan says, turnover of new hires from employee referrals is 32 percent lower after six months.

“Employees refer candidates with similar qualifications and skills,” says Anne Murguia, vice president of marketing at Jobvite, a site that merges referral and tracking capabilities with social networking. “They’ve set the candidate’s expectations, so there’s likely to be a better fit.”

Murguia adds a statistic discovered in Jobvite’s research: One in 10 employee referrals are hired vs. 1 in 100 applicants who apply over the transom.

Chicago-based consulting firm Accenture has been recognized frequently for the quality and strength of its employee referral program. Its goal, says John Campagnino, senior director of recruitment, is to make current employees Accenture’s top source of talent.

“The quality of employee referral candidates tends to be very high,” Campagnino says. “There’s a strong sense of stewardship and understanding among our employees.”

Policy and process is key to the program’s success is two critical elements. Campagnino says to build a policy that lays out internal rules and regulations as well as reward and recognition potential. Then craft a process that is easy to use and that lays out intelligence—how the program will be tracked and measured—upfront.

Rewarding employees who make referrals are common and help organizations demonstrate their appreciation. At Accenture, more than one-third of new hires are generated by referrals; rewards range from $2,000 to $7,000 or more.

“We run special campaigns for specific skills” that might net higher rewards, Campagnino says.

R.J. Morris, director of staffing for McCarthy Building Cos. in St. Louis, regularly encourages the company’s 1,600 employees to refer candidates. His program includes a variety of rewards, ranging from gift cards at the interview stage to bonuses up to $5,000 for a successful hire.

Accenture recently launched a one-step referral website that allows employees to suggest candidates for specific openings or to make general referrals; its use is open to all employees as well as Accenture alumni.

Morris says it’s important to make the referral process easy for employees. He relies heavily on referrals as a source of qualified candidates and ensures company colleagues that the staffing team will do the legwork.

“All you have to do is give us a name and a phone number or e-mail address; we will do the rest,” he says.

To Morris, the ability to accommodate outliers is crucial.

“I would much rather spend my day trying to figure out how to fit a really good person into our organization than trolling social networks looking for candidates,” he says.

Company culture underlies policy and process, Murguia says.

“Building a culture of referral is fundamental,” Murguia says. “Employees must be excited about their company, and the company must send the message that recruitment and hiring are everyone’s job.”

If employees feel that they are a part of the company and its success, they won’t refer unqualified people, says consultant Simma Lieberman, who blogs about recruiting for the website Fast Company.

Lieberman says that a robust referral program can also help to increase the diversity of a candidate pool, but “you need to let employees know that you desire that greater diversity,” she says.

Accenture has created an internal marketing campaign that includes a variety of communications strategies and a special landing page on the company intranet that includes photos and testimonials of successful program participants; employees can even shoot and upload their own videos. The referral site also features online help that allows employees to track the progress of their referrals in real time.

To promote the referral program, Morris posts stories about employees and their successfully hired referrals on the McCarthy intranet. He does presentations on the program at new employee-orientation programs at the company’s annual meeting and peppers all staff members with regular e-mails reminding them about the program, its rewards and any special skills the company needs.

Morris says the effort has paid off. In 2009, 36 percent of new hires came through the referral program and received referrals from more than 10 percent of his employees.

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