No Doubt About It: Employee Referrals Are Still the Best Source of New Hires

Last summer, RecruitingDaily contributor Alan Henshaw asked a great question: Why don’t organizations develop more  creative ways for rewarding employees who make candidate referrals?

It’s a great question, because in my book, even an imperfect referral program is usually a better recruitment tool than just about anything else you can come up with.

How much better is it? Fast Company magazine recently wrote about how Ernst & Young may need to hire upwards of 15,000 people in the next year. E&J knows about the power of referral, and back in 2010, reported that they made up nearly 30 percent of the company’s hires.

But now, with so much more pressure to hire, Ernst & Young is counting on referrals to be the source of half  — yes, 50 percent — of its hiring needs. That’s a huge number that most organizations can only dream of.

Here’s why referrals really work well

Dan Black, Ernst & Young’s recruiting leader for the Americas, is very specific about why employee referrals are such a strong source of hire for them:

Referral candidates perform better and stay longer. In fact, external research has shown that referred workers are up to 30 percent less likely to quit and have substantially better performance on high-impact metrics. Other studies indicate that even so-called “weak” connections are likely to lead to placement and better job outcomes.”

And E&J is putting some big money behind their referral program; they paid out more than $8 million in referral bonuses during the 2016 fiscal year. That’s a significant number, and it shows that the organization is clearly focused on getting the right people on board — and is willing to pay what it needs to in order to get that done.

But as we all know, referral programs aren’t perfect. Liz Ryan wrote about this in Forbes, and she made this point:

An employee referral program is a flame-y idea. When I say “flame-y,” I mean that a successful employee referral program has a lot to do with trust and good feeling. There are mechanical aspects to the program, of course, but they are less important than the less measurable but more high-impact factors in your program’s success.

Simply stated, if the employees don’t feel good about the place, they’re not going to subject to their friends to the environment. What kind of friend does that?”

Authors

John Hollon

John Hollon is managing editor at Fuel50, an AI Opportunity Marketplace solution that delivers internal talent mobility and workforce reskilling. You can download the research reports in their Global Talent Mobility Best Practice Research series at Fuel50.