If You Build It, They Will Come: The Zen of Employee Referral Programs

I think it’s safe to say that most organizations have at least a rough resemblance of a referral program, and if you don’t, it’s time to cross that bridge.

But how much energy and effort is actually put into your employee referral programs?

We (Talent Acquisition professionals) put an enormous amount of money, time, and effort into streamlining processes and developing creative ways to sell our company’s “brand” to future employees. Now, I’m not saying that isn’t important, but a majority of organizations get a large amount of their new hires each year from employees referring someone into their organization.

So why not spend more time coming up with creative ways for rewarding those employees that put their personal reputation on the line for the company they are employed by, and actually motivate them to do more to drive referrals?

Human behavior studies can be really interesting. All too often, what someone tells you versus what they would actually do are quite different.

Social Pressure CAN Help Drive Change

I used to work for a company called Opower. They were a publicly traded SaaS based software company for the utility industry. And I say “were” because they were eventually acquired by Oracle in 2016. Their co-founder, Alex Laskey, did a TED talk around a particular behavioral study that is intriguing.

This study was done in Southern California during a very hot summer roughly 15 years ago. Graduate students from a local university put four (4) different signs on the doorknobs in a particular neighborhood.

  • One quarter of the neighborhood occupants got a door hanger that said to turn off their air conditioning (AC) and to turn on their fans so they could save money.
  • Another quarter of occupants received a notice that said to help save the planet by turning on fans instead of their AC.
  • The third quarter received one that said they should be a good citizen and help control energy blackouts in the area by turning on fans and not their AC. You would think that these types of messages would have motivated some of the homeowners to turn off their AC? Nope. It had zero impact on decreased energy consumption.

But, there was a 4th door hanger. It said that when surveyed, 77 percent of their neighbors did in fact turn off their AC and turned on their fans, and, to please join them in doing so. You know what? It worked!

What does this tell us? It tells us that moral persuasion and financial incentives don’t do a whole heck of a lot to move us. But the social issue? That’s where change can actually happen. Whether it is social pressure or social recognition, that is where true change can be achieved.

How Most Referral Programs Work

So lets get back to our referral programs. Most organizations simply offer a referral program that pays you $X dollars for referring someone into the company who is hired and stays 90-180 days.

This message is usually skipped over in New Hire Orientation or it’s a quick bullet point on a PowerPoint that employees will never remember. Very rarely are referrals a large talking point or get into a discussion of the value they bring to the organization, or, the responsibility of an employee to bring in qualified talent that they are acquainted with.

Just like a majority of your current employees, compensation is not the No. 1 reason they are still with your company. I find that compensation is usually several notches down the list (reasonable comp) of why someone would want a job or stays at a job. This could be an entire article in and of itself, but let’s skip past that.

Why would we think that simply slapping a $2K bonus sticker on a referral is going to persuade our employees to refer someone? Yes, it will happen. During an employee’s first six months at a job they are more likely to refer someone while the honeymoon phase is still present.

But what about employees that have been there for years and the honeymoon period has long worn off? Now, all they think about is the project that is due Monday morning and they haven’t started it yet. How about engaging with them on a social level where they will take time out of their day to throw a few names your way?

Note: In asking for referrals from employees, do NOT just ask about people they know are looking for a job. I don’t know when my best friends are looking for a new job so it’s doubtful you would know if the person you worked with five years ago is looking either. Instead, ask them who they loved working with and who they would love to work with again? Or, ask who they know who would be qualified for the job? If they prefer their name to not be mentioned, that’s fine, but now you have someone you know is solid and can spend some time on reaching out to a “qualified” candidate.

But, let’s get back to social pressure. Let’s think about what would cause an employee to go out of their way to find people in their network to refer to their recruiters. A few extra bucks on a paycheck is something that no one will turn down. But those few extra bucks — what are they going to? Most likely home improvements, kids day care, student loans, etc. That money will most likely be spent on expenses that the employee will incur on a regular basis, or on a necessity.

Don’t get me wrong; it is great to get some extra money to help pay for those things, but that employee getting the referral bonus has probably already budgeted for those expenses anyway. Plus, after taxes and the 401(k) deduction, they are taking home a fraction of the original bonus number and they know that.

But this extra money in the pocket falls into the moral persuasion category — the same category that did not get any homeowners to turn off their AC. Sure, they told you that “it was awesome,” and probably even thought it would be cool to get some extra money, but in the end it doesn’t truly incentivize them to refer someone.

A Better Way to Do Referrals

So here’s an idea: How about offering a fully paid trip (airfare, hotel, entry fees) to a conference of their choice? Most likely, they would NOT use the referral bonus to purchase this trip, and after taxes, the referral bonus wouldn’t even cover it. It’s one of those “wants” but not “must haves”  — sort of like my Apple Watch.

But letting them attend a conference has a two-fold effect:

  1. They are excited to be able to attend a conference that they are super pumped about. Yes, conferences are a blast and it always feels great to meet up with old friends and talk “shop” about your skill set.
  2. Your organization now benefits by having an employee that may have just acquired new knowledge that they can spread throughout your organization. Also, think of the branding aspect. When that employee is attending a conference, they can’t wait to post all over Twitter, Facebook, Instagram, etc that they are at this amazing event. Go a step further in making sure they have a few company tee’s to wear and they will be increasing your brand as well. It’s a win-win for the employee  — and your organization.

Here’s another idea: Create a cool supply/demand effect with special swag. Look at the world around us. Humans want to posses something that others can’t have. If it’s rare, it’s worth a lot. It’s also worth a lot in terms of the social aspect, too.

Take a look at the craze around Michael Jordan (maybe only sneakerheads will relate.) If a pair of Jordan-branded shoes are one of kind or very rare, people will pay insane amounts of money to get their hands on them and then wear them so the world around them knows that they have something special.

So, create a special company logo to incorporate that you are a “referrer” and throw it on a North Face jacket that someone ONLY gets if they refer someone who is hired. That’s what it takes to get this magical piece of swag. Then people who have referred someone can walk down the halls, strutting their stuff and knowing that everyone else is admiring the fact that you have something that they don’t.

What this does is create a social frenzy, and your employees will dip into their network to try to refer someone and and get this super special swag. It’s also important that the organization publicizes this and makes it well known. You gotta create a buzz around it, because that increases the social aspect.

TA Can Do SO Much Better at This

So, back to why I wrote this article: Referrals are usually a key source of hire for companies, and no matter how lazy and ineffective the referral programs are, that will continue.

But we (Talent Acquisition) can do SO much better!

Employees have joined your company because they believe in your brand and excited about what you represent. Take that excitement to the next level and make your referral program the cool, new trend (but not like the fidget spinner trend). Think outside the box. There is always room for improvement.

PSPlease note that I was not an English major, so excuse any grammatical errors here because I am a recruiter.

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Alan Henshaw is a Talent Acquisition Leader and wanna be nerd. He’s curious about Talent Acquisition/Operations by nature, and that drives him to think deeper around how we can all improve. Alan is also intrigued by how technology plays such a large role in our everyday lives and he loves learning how we can incorporate tech into recruiting seamlessly. Most importantly, he’s a Starbucks Gold Member and firm believer that iced coffee is the real key to success. You can follow Alan on Twitter @henshawsburgh or  connect with him on LinkedIn.




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Alan Henshaw is a Talent Acquisition Leader and wanna be nerd. He’s curious about Talent Acquisition/Operations by nature, and that drives him to think deeper around how we can all improve. Alan is also intrigued by how technology plays such a large role in our everyday lives and he loves learning how we can incorporate tech into recruiting seamlessly. Most importantly, he’s a Starbucks Gold Member and firm believer that iced coffee is the real key to success. You can follow Alan on Twitter @henshawsburgh or  connect with him on LinkedIn.

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