Here’s Why Your Employee Referral Program Isn’t Working

According to a recent report, referred workers are 20 percent less likely to quit their jobs.

And how are these referred workers found? Many are through employee referral programs. Think of them as your one-stop-shop for the best employees around. Don’t just take my word for it, though.

A recent source of hire survey says referrals continue to be the No. 1 source of hire. In addition, referrals are typically of higher quality, and these employees often stay longer than hires sourced from other methods. So, what’s not to like, right?

Despite the benefits of employee referral programs, many are plagued with problems. Let’s explore some of these issues and how to solve them:

1. Problem: No plan of action

Like any other major tactic, employee referral programs should be proactively planned out before implementation. Without a plan, you may as well call it quits before you even start.

For instance, how many members of your network will you reach with the program? Is there a step-by-step guide? How are they supposed to refer candidates? Are there rewards? If you don’t answer these questions beforehand, users may find themselves unaware of how to use the employee referral program.

Solution: You have to understand how your team operates and then tailor your plan accordingly. For example, if your team is remote, create a strategic program that will make it easy for them to participate.

2. Problem: Little engagement

We all know how hard it is to keep the attention of your employees. Similarly, it’s important to keep your employees engaged with your referral program.

Without engagement, you’ll typically find a drop-off in participation rates since your employees either don’t know the value of a referral program or they don’t understand what they will receive out of it. When one of these occurs, engagement suffers and you certainly can’t drive a car without a driver.

Solution: Give employees a reason to participate! How? Use engagement-boosting strategies to keep your employees on track.

For example, gamification may increase engagement by providing challenges and rewards to those who meet those challenges. This keeps them involved in the process in a fun way, without feeling forced or obligated to participate.

3. Problem: Narrow group of referrers

Employees can be great referrers. However, limiting your referrers to one group is like only reading only a few chapters of a great novel. It can limit the candidates you receive. So, although referrals are the No. 1 source of hire, you can differentiate the kinds of hires you receive if you open up your referrer group to more people.

Solution: Look to your external network, former employees, business partners, and vendors for referrals. According to internal research from Zao, 41 percent of referral hires come from non-employees, including trusted business contacts and friends, when they are offered rewards.

When you look at it this way, you’ll not only receive more candidates, but also a better variety from which to choose.

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4. Problem: No rewards

Your workers and network connections are busy people. Although they’re probably happy to help when they can, they do have other priorities on their plates.

Without an incentive to actually participate in an employee referral program, they may put their participation on the back burner and who can blame them? Even if it is really the job of everyone in the organization to find the best talent, other tasks may take precedence.

Solution: Offering rewards can be the motivation your employees need to participate in a referral program. It’s also the motivation your outside network may need, as well. Referral hires are 69 percent higher when companies offered a reward to contacts outside the direct network of employee.

For instance, gift cards, cash rewards, a day off, a parking spot, or even social recognition are all great rewards. In addition, tier your rewards for each step in the referral process. So, if someone refers a candidate and it results in an interview, they may receive a parking spot. However, if that referral results in an actual hire, they receive a cash reward.

5. Problem: Automation issues

Keeping track of every aspect of a referral program is difficult. It’s pretty easy to fall off the employee referral wagon, particularly when you have other tasks to get to. In addition to this, manually sending out jobs and then finding candidates to fill these jobs can be tedious work.

Solution: Make your life easier by automating the referral process! Through your employee referral program, you should be able to share jobs with your internal and external network automatically, instead of compiling them yourself and sending them out manually. In addition, you should be able to set a specific day and time for when you want to send out jobs. This keeps you on track and helps your network to do the same.

Although employee referral programs may have its problems, you can fix them. When you evaluate and then solve these major problem areas, you’ll start to see some real, long-lasting results.

What do you think? What are some other reasons why an employee referral program may not work?


7 Comments on “Here’s Why Your Employee Referral Program Isn’t Working

  1. This is a poorly written article, most of it is drivel.

    What a strong referral program boils down to is incentive for the employee to tap their network. The higher the incentive, the more likely an employee will reach out to individuals and help recruit them in. I would like to see some sort of evaluation around the referral rates of different companies who pay large bonus amounts for referrals versus companies that do not.

    1. Robert,

      I don’t know what you base your comment on but the tips above are based on experience working with many, many companies on their referral programs. Ignore them at your own peril… you’ll probably see very low engagement rates if you do. It’s not just about the size of the reward. Sure, a high reward gets attention, but without the proper tools, plan and execution you’ll raise the reward and be even more frustrated when you see your employees still aren’t engaged.

      We see fantastic engagement in companies with relatively lower rewards – just throwing money at the problem won’t solve it.


      1. I think Robert is saying he wants actual data not just a tool and plan. Without actual data, we would not know how companies actually have been dealing with employee referrals and how effective it was.

  2. Splendid article!!! Captures the basic issues which if taken care of can go a long way to reap great benefits from the employee referral program.
    Extending point 4 (No rewards), would it be a good idea to include a parameter wherein another stage in the referral process could be a reward being given out to the referrer when the referred candidate spends a significant duration (e.g say 6 months..) with the company..this might offer some help in keeping a check on quality of the candidate as well or the total reward cost being split with a part paid out on successful hire and balance on completion of defined duration of the referred candidate!!!

  3. Employee Referral Program Tips that Actually Work!
    Communicate in a Timely Manner
    Allow More of the Right People to Make Referrals
    Step Up Your Rewards
    Proactively Encourage Referrals

  4. A communication mismatch between employer/referrer as a group and job seekers as another group is the major issue facing most employee referral programs, regardless of incentives. Lack of access to each other in a straightforward way is the major hurdle. Experiencing that in my own career, I started to fix that for any party still in the suffering. Users can try out the live demo there to see how it fixes their issues.

  5. This is an excellent article for Employers who value their Employees. This point must be emphasized before any practical advice will work with regards to a referral program…first and foremost, the current Employee base must WANT to refer people to the Employer.
    The Employer must make it a priority to value and retain quality talent by: (1) establishing the Personal Connection with each Employee, (2) establishing a strong sense of Reward & Accountability for each Employee, and (3) providing opportunities for Fun & Enjoyment for each Employee. Once you focus on the primary objective – which is to value and retain your own Employee talent-base, then it becomes easy to plan, implement, and measure the above suggested courses of action for your Employee referral program.
    However, if it SUCKS to work for the Employer and the Employee does not feel valued in the first place, a referral program (no matter how lucrative the incentive or engaging or automated it may be) simply will not work.

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