Employee Referral Programs and the Engaged Employee

July 18, 2014 Jeff Ford

Employee referral program networks

Employee referral programs made their entry into the workplace before the turn of the millennium. Once considered a form of nepotism or favoritism, these programs are now considered less of a taboo and more of a reliable, cost-efficient recruiting tool and a cornerstone to engaging employees within your organization. After all, if the old saying is true, that you are known by the company you keep, then perhaps the same thought can be applied to an open work position. Employee referral programs have proven to drive cost efficiencies and quality of hire so much that incentives in the hundreds and even thousands of dollars are offered by many organizations for successful candidates.

In a survey conducted jointly by Perks and HR.com, 40 percent of respondents indicated that Employee Referral Programs were offered among their company incentive and engagement programs. Through this offering, employees are engaged in the success and livelihood of the organization. Employee referral programs produce real benefits for your organization that ultimately lead to a greater return on investment dollars including:

  • Greater performance and output
  • Higher retention rates & lower termination rates
  • Fewer non-qualified applicants
  • Superior fill times
  • Stronger organizational fit with culture, value and vision of the organization
  • Enhanced quality of hire & lesser opportunity costs

Engaging employees and employee referral programs

Since employee referral programs encourage current employees to recommend suitable applicants, the likelihood is that the quality of the hire will be superior to that of an external recruit.  Engaged employees are more inclined to refer a friend or colleague as a new hire because they know they are qualified for the job, fit for the organizational climate and culture, suitable for the manager, and possess the experience, knowledge, skills, and abilities being sought out to fill the position.   This is otherwise known as the pre-hire quality of hire.  An additional benefit of having a referring employee is being able to use them as a professional reference to ensure the measurements of “quality of hire” are satisfied.  It is improbable that an existing employee would refer a candidate who is not suitable for a position; not only is there a risk of embarrassment for the referring employee, but also because most referral programs offer a reward after a suggested candidate is selected, many companies stipulate a certain number of years of employment before workers can participate in a referral program.

It is every employer's dream to continually engage employees and have a workforce that stays with the organization long term.  High-quality employees not only favorably impact sales and productivity, but they also reduce hiring and attrition related costs.  It is no surprise that employee referral rewards are, for the most part, interwoven with new hire probation periods.  Statistically, new incumbents who have successfully passed a 90 day anniversary are likely to remain with the company for a minimum of one year; job performance reportedly improves as well.  Reports show that having friends at work encourage greater levels of productivity and is a "key contributing factor to decreased attrition."

As the years of employment for quality hires add up, so does their performance and talent levels. Subsequently, employee satisfaction, empowerment, gratification, and engagement rise as well.

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About the Author

Jeff Ford

Jeff Ford is a co-founder of Perks and was the original architect of Perk’s SaaS incentive solution. Since the inception of the company, he has spearheaded the direction of everything from IT to Operations to Finance. He is passionate about technology and how the web has truly changed how we work and motivate our employees, partners and customers. Jeff’s background, prior to Perks, was spent as a solution architect, web developer and as a controller in the distribution and logistics industry. He holds a Bachelor of Business Administration in Accounting, from the University of Central Arkansas. He brings his dog Xee to work every day and considers himself lucky and proud to be a part of such a great team.

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