The secret to a successful employee referral program

The secret to a successful employee referral program
This article was co-written with Charles Guillemet, a world-class recruiter who have hired a ton of people, at Gusto, then Neuralink, and now is Leadership Recruiting Manager at Meta.

When it comes to recruiting, many companies we talk to have a magical number in mind: 33%. They want to achieve the following mix for their recruiting channels:

  • 33% (inbound - job posting)
  • 33% outbound (active sourcing & reach out)
  • 33% referrals (mostly employees recommendations).

But often, we see them struggle. They have hard time being as high as 33% in referrals. So we went asking the ones who do - some even exceed this number - on how they make it happen. What is their secret sauce. In this article, we share their tactics and technics.

Why Referrals are important and can be powerful?

First things first, here is why everyone wants to have Referrals as a strong sourcing channel

  • Higher reply rates: as most of the outreach will be through warm intros, or quoting the person you have in common, candidates will be much more willing to reply to your requests.
  • Higher conversion rate: In average, you’ll only need 5 referrals to make a hire vs 100 applicants for job boards! So potentially much less work. Which makes sense, people generally only recommend talents they know are great at their job.
  • Faster: Employees hired through referral are hired 55% faster than those who come through a career site.
  • Better hire quality: Booz Allen Hamilton showed in his research that 88% of employers say that referrals are the #1 best source for above-average candidates.
  • Lower churn: After 1 year, referred employees have 40% more chances to stay than the ones from the career site and job boards. Which can also make sense, if you join a company where you have friends (who referred you), you may want to stay longer.

What are the type of referrals and how to activate them ?

  • Alumni: Either you explicitly target people who went to the same school(s) as you or your team members on Linkedin and reach out to them with an ice breaker intro based on that. Or you use your alumni website, or Facebook/Linkedin groups to find great profiles, and reach out. Last option, can to post on your school’s job board, and specify that you are an alumni (it often helps).
  • Former colleagues: make a list of all the people you have worked with in your past, and reach out to the ones you would love to work with again.
  • Friends: same as for colleagues, make a list of the ones you’d like to work with. Or you can reach out not to hire them, but to ask for top talents they have been working with.
  • Investors: This is probably one of the main way they can help you (besides money, advices, and intros). So don’t hesitate to reach out and directly ask them to help you on filling key positions. You can also use the investor update to:
    ▪️ Ask them to help you source talent. And exactly like for the rest of your network, help them help you: add a short description of what you are looking for + unique selling points + a short blurb they can easily copy/past and transfer to their network.
    ▪️ In the “Thank you” section, if you have one, you can thank the ones who did help you source candidates in the previous month(s). This way you’ll trigger a FOMO: the other investors will want to prove that they can bring value to the table too, and will double down on helping you next months. Again, helping you on talent is one of their job.
    ▪️ Follow-up: As everyone, investors can be very busy and forget about your request. Don’t forget to resend them regular follow-ups and ask “did you find someone interesting we can meet”?
  • Employees: We’ll tackle this one in more detail below
2 key tips here:
  • Pull the thread 🧵

When contacting people who were recommended to you, either you try to hire them, when it makes sense (good match + available), or - and this is super key - you constantly pull the thread: Always ask each person you talk to, to recommend you the best 3 (other) persons she knows. Meaning if a person gave you 3 persons to contact, you reach out and talk to them. And then you ask each of these 3 persons to give you 3 (new) brilliant people.
This way you will rapidly build a list of great candidates to contact.

  • Selling mode "on" 👔

When asking your network to help you source for a key role, you should keep a “selling mode” state of mind. Most probably they receive a ton of similar requests like yours, every month. Thus, you need to sell yours better than the others. Instead of just saying “I’m looking for a great VP of Sales, please let me know if you have someone in mind?”, do send them this instead:

  • A short description of the company and the great things you have achieved so far
  • A quick description of the role
  • Most importantly: with the unique selling points, what makes it super sexy.
  • A link to the full job description

This way they have a precise idea of what you are looking for, and they can easily sell it almost as well as you would do.

Why is the 33% number so hard to achieve?

Mostly for these few reasons:

  • Your close network works for a while, and then you consume it all. Or the volumes aren’t high enough to cover your growing needs (more people to hire). Your friends have no more friends to introduce you to, you contacted all alumni that seem interesting etc…
  • You don’t have an employee referral program/system in place, so your employees don’t think about recommending their friends.
  • You do have one but
    ▪️ Employees don’t know about it, or
    ▪️ There are no strong incentives for them (no context on why it’s important and can help the company, no reward, no recognition etc…)
    ▪️ You ask them to help you find someone great asap, when the majority of their friends aren’t looking for a job now.
    ▪️ You ask them to help you find people like them. We tend to ask engineers to help us hire engineers, PMs to hire PMs etc… But their friends are Sales, Designers, or Accountants.
    ▪️ When they do help you, you keep them in the dark. They don’t know if the person they’ve recommended was contacted or not, neither if she’s progressing in the hiring process or not.

The secret sauce ? An employee referral program designed for the long term

To make it work, and achieve the magical 33% number ✨, you need a strong employee referral program that combines short term, and much more importantly: long term best practices.

Short term - For current open positions (can work)

  • Have an employee referral program that is attractive (can be money based or not, see below).
  • Add it as a key step of the employee onboarding: in their first week, new hires need to know about it.
  • Always keep employees posted. Let them know how the person they have referred is progressing in the interview process.
  • Communicate regularly about it :
    Typically if you or your team send a weekly or monthly note to all employees, or even better if your company have an “All-Hands” meeting/call, at each of them:
    ▪️ Emphazise which roles are you hiring for currently. And if it’s a written note, as said above, make it super easy for them to source in their network by adding infos about the jobs + short blurbs they can copy/past and share.
    ▪️ Remind everyone about the existence of the program.
    ▪️ Remind everyone about the referral process - where they can send candidates.
    ▪️ Important: If in the last period (week/month), some employees did refer some candidates. Celebrate it and publicly thank them for their help. Even if it didn’t result in hires.
    ▪️ Super Important: If some candidates ended up being hired, celebrate it even more, publicly thank these persons for their huge help, and remind everyone why it is so important for the company. Plus, if you have a reward program for referrals, you can also disclose how much money or which reward(s) they will get, to push others to want to do the same.

Long term - No specific needs in mind (works much better)

What most people maybe misconceive is that referral programs aren’t really designed for the short term, they aren’t efficient enough for today’s open positions. They work 10x times better if you build and design them for the long term. I've seen many companies overpass the 33% rate when building their program this way. Charles Guillemet, a world-class recruiter who have hired a ton of people, ex-Gusto, ex-Neuralink, and now Leadership Recruiting Manager at Meta

Here are Charles’ advices to do it like the bests:

  • Build a database of brilliant talents which you can tap into over the years. To start with, it can be as simple as a shared spreadsheet.
  • On day one of someone’s onboarding in your your company: ask them to give you the top 5 employees they have ever worked with.
    Very important: No matter the role, don’t ask engineers to recommend you engineers only. And tell them this explicitly “Across all departments and jobs, not just yours, can be an accountant or an SDR you have worked with” Why? Because you genuinely want the best talent and an open question like this will get you top talent vs. available talent (matching you current open positions). Some companies do it live too.
    During the onboarding phase they sit down and ask the question, wait for the new employee’s answers. One technique is to ask questions in a chronolical way, to help people remember all their contacts: start with high school, then higher education, then internships, and then previous jobs. This sheet template by Sequoia Capital is a great tool to help you do that!
    And then ask them if they don’t mind going through their Linkedin’s Network and try to identify additionnel talent they maybe didn’t instantly think about.
Ask them to give you the top 5 employees, no matter the role. Why? Because you genuinely want the best talent (across all jobs) and an open question like this will get you top talent vs. available talent.
  • Create a "unicorn" internal repository → this is so that your employees can refer talent at your company at any time. And then have your recruiters scan that list monthly. If done well, there will be a lot of hires from this list over time, that’s for sure.
    Tip: If you don’t have an ATS/CRM yet that handles it already, you can quickly build a Google form or a Typeform (asking as few questions as possible, can be 1/ your name 2/ candidate’s Linkedin URL), connect it to your referral database (spreadsheet), and share the link to the form with all employees. Every time you can.
  • Add all skilled people you meet in the database too. This is an undervalued technic. Whenever you or someone in your team meet someone great, you add them too. Could be a supplier’s sales person who performed well during a demo. An engineer who helped you on a bug you had with their tool. A customer specialist who was amazing when you reached out on support chat etc… Literally anyone who seemed outstanding at his job.
Whenever you or someone in your team meet someone great, you add them to the databse too.
  • When you reject candidates from positions you are hiring for, ask them to provide you with referrals too. Why? a/ It shows they had a great experience interviewing with you (which is super important) b/ they know the job since they interviewed for it, they know who could be a great fit.
  • Structure this process. Everyone in the recruiting team needs to check this database regularly, to nurture the relashionship with them, and always checking this list first when opening a new role. As well as keeping it up to dates, typically with notes from interview calls.
“If done well, there will be a lot if hires from this list over time, that’s for sure”. Charles Guillemet

Start a conversation, build relationship

When you talk to referrals, the goal is to start the conversation and build a relationship. Like any informal first discussion, each will be curious to hear the other's story, learn things, and try to bring value.

As a recruiter, I can talk about my company, the main challenges we are facing right now. Ask how they do it in their company, and what's their learnings. I can maybe provide insights on the current talent market for their roles: Salaries, companies who are hiring etc... Ask them about their compensation package (improve my market knowledge), what are their next steps, what fields and roles are they may be interested in.
Plus, I'll learn more about what a "great" profile for this kind of role looks like.

Sometimes, if it's not a match for me, and they've clearly expressed their desire to change. I can do intros to other companies. At least I would have helped, and it will be remembered, both by the candidate (for future referrals when I'll ask, or a future hire in my company when it'll be a better timing) and the company I've helped hire them.

While candidates will talk about their careers, their desires, and can be interested in knowing more about the current talent market typically (career paths, compensations...), or knowing more about how we do things in our company (team composition, org chart, processes...).

I've found that often the best talents are curious, kind, and friendly. So I'm rarely losing my time.

Note about rewarding referrals: Should you give money to employees, for their referrals ?

Many (if not most) companies give money. And sometimes a lot of money. The logic is the following
1/ it will motivate everyone to make referrals,
2/ it can be cheaper than paying for a recruiting agency or marketplace who often charges from 15 to 25% of the 1st year’s salary,
3/ they prefer to give this money to their own employees rather than to external persons/companies,
4/ Even when it’s quarter or fifth of the price of an agency it’s till a lot of money for an individual person (= the employee), while being much cheaper for the company.

Some others, try to avoid it. Mainly because they think that giving such a big importance to referrals, as a sourcing channel, may be risky in terms of team diversity (see below). A risk they don’t want to take.

Some others don’t think it’s “bad” per se, but that it’s not efficient. For instance, Google did try to give more money to their employees (they doubled the reward from $2,000 to $4,000), but as explained by Laszlo Bock in his book Work Rules, it didn’t work.

“It turned out that nobody was meaningfully motivated by the referral bonus,” Bock wrote in the book. “People (who referred other employees) actually loved their work experience and wanted other people to share it. Only rarely did people mention the referral bonus.” Laszlo Bock

Alternatives to cash rewards:
If you choose not to give money, here is what you can do instead:

  • No money, just a nice moment when you thank them for their help, in front of the team, and/or in internal notes or “All-Hands” meetings. Many will appreciate that you did.
  • Gifts: Phones, Airpods, Amazon cards etc... Some companies even have points systems: If an employee refers 5 people she’ll have 500 points, 3 people she’ll have 200 points and so on. And after a while she can convert these points into gifts.
  • Team gifts. Another interesting idea is that instead of offering it to 1 person, you offer gifts that can be shared with the team. Either it’s a gift for the whole team (Paintball game, Lazer-game…). Or a gift for a few people (Wine tasting, travels…). This way you will also promote the team spirit.
  • Charity. Give money but not to employees, to charity. Employees can choose the non-profits they want to give money to, and the company do the wire on their behalf. Which can be very fulfilling for employees. Especially that employees are more and more sensitive to social impacts.

Note about diversity and inclusion (DI)

Some companies try to not push for referrals, to avoid having employee clones. They want to avoid that employees end up recommending people who look like them, and have similar backgrounds. Which is something you should definitively pay attention to. Especially that besides the fact that this is the right thing to do, a lot of studies showed that it is proven that diverse teams perform much better. Maybe one way to reconcile both is to be super explicite when asking for referrals about how much diversity is important to your company, and that you strongly recommend to your employees to look beyond their immediate circle, and go wide when searching into their academic & professional networks.

Plus, as we said above, ideally when sharing the positions you want to fill, we recommend sharing scorecards of these jobs too, this way employees will focus on the skills and competencies needed, not on the profile type of candidates.

This article is part of a hiring guide series, subscribe to the blog to get the next ones right in your inbox

Did you know ?
When using Crew, you can super easily manage referrals, centralize all recommended talents in one place, and structure your employee referral process. For instance, a lot of our clients give the “Crew chrome extension” to all their employees, which lets them source great talent they know with just 1-click, anytime, anywhere. And thanks to the “sources management” feature, they can track how this sourcing channel performs (vs inbound or outbound for example). As well as at anytime know which candidates in your pipeline were referred, so that you can always keep your employees updated about their progress in the interview process.