We recently measured the referral programs of over 145 companies for some really cool findings. You might be surprised to learn, for example, that companies 4-6 years old have worse performing referral programs than the rest.
Once you look at the data though, the next question is this: “Well, how can I use this to make sure that my referral program works?”
A good referral program should let you kill three birds with one stone. In an ideal world, your referrals should help your company:
- Hire better people;
- Hire them more quickly; and,
- Hire them at a lower cost.
However, there are a lot of different types of referral programs, and not all of them will accomplish the same thing. Some referral programs will get you better quality candidates at a similar cost, while others may drastically reduce cost or time to hire, while keeping quality constant.
What’s more, referral programs aren’t one-size-fits-all, and what accomplishes one thing at one company might not work the same way at yours. Finding the right one for your company will take some trial and error. So where exactly do you start?
First, you need to define your referral program goals
What are you hoping to get out of your employee referral program? Do you care more about hiring better people, or hiring them faster, or at a lower cost?
Once you’ve answered that question, you can decide how you want to measure your progress. To make it easier for you, we’ve listed some common referral program goals, and paired them with useful metrics for measuring program effectiveness.
Goal 1 – Increase employee engagement
Metric: Referrals per employee
What to ask: How many referrals is each employee sending in per month?
Goal 2 – Get better quality referrals
Metric: Interviews per referral
What to ask: How many employee referrals this month have made it to the interview stage?
Goal 3 – Reduce the cost of hiring
Metric: Referrals per job opening
What to ask: How people were referred for the open job on the sales team?
Goal 4 – Reduce time to hire
Metric: Referrals per month
What to ask: How many total referrals were there this month?
Goal 5 – Hire better quality people
Metric: Hires per referral (net conversion)
What to ask: How many referrals invited to interview are ultimately hired (and how are they performing comparatively)?
You can find more data that we collected (and it’s all free) about different referral programs and how to measure effectiveness from 145 companies at referralprograms.org
Vinayak Ranade is the founder and CEO of Drafted, the first referral network. Before that, he served as the director of mobile at Boston-based KAYAK. Vinayak holds a B.S and M.Eng in Computer Science from the Massachusetts Institute of Technology. Follow him on Twitter @pseudovirtual or connect with him on LinkedIn.
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