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Ask a recruiter where she gets the highest quality candidates, and she likely will say from employee referrals.

If employee referrals are so valuable, why aren’t they getting more focus in talent acquisition strategy?

SmashFly set out to understand the state of employee referral programs (ERPs) by conducting a survey of talent acquisition professionals. The results echoed what we hear from our customers about the challenges they have with ERPs, but also revealed some powerful indicators about where referrals should be headed next—and what it will take to get there.

 

Our ERP Survey Breakthrough

According to the survey, 77% of organizations currently have a formal employee referral program and say referrals account for 32% of new hires on average and produce the highest quality of candidates compared to other sources.

The interesting part came when we asked this question: From whom do you formally solicit referrals?

57% limit their program to employees only, but 43% also get referrals from one or more other sources, such as alumni, contractors, customers, vendors, partners and fans of the organization.

The big breakthrough was revealed when we analyzed the differences between the two groups.

The 57% that get referrals from employees only count 28% of new hires from referrals.

But the 43% of organizations that reach beyond employees to invite referrals from their expanded networks generate 36% of hires from referrals—an increase of 28% over employee-only programs—and report 8% higher quality referral candidates.

The data illustrates that extending who can refer candidates into the organization can increase the volume of leads without decreasing quality.

Could this be the answer to how talent acquisition leaders can get even better results from their already best source of hire?

 

The Management Problem with Referrals

At SmashFly, we think the answer is yes. Expanding who can sponsor a referral into the organization shifts the way we think about referrals from the old school “employee referral program” to a forward-thinking (and reflective of the social times) “modern referral network.”

But scaling ERPs to engage other audiences beyond employees can seem daunting if it requires more resources to manage. Every ERP manager will tell you: The problem with referral programs is they’re already a huge burden to manage.

It takes a lot to get those 28% of referrals from employees alone:

  • Producing education material for the onboarding process that always seems to need updating
  • Constantly promoting the referral program through emails and signs that you wonder if anyone even notices
  • Continually reminding employees to look at new jobs available and making it as easy as possible to refer a friend, especially through their social networks
  • Sifting through a barrage of referred names without any context of why they’re being recommended in the first place
  • Answering endless employee questions about the status of their referrals
  • Delicately handling conflicts over reward entitlements and chasing down payments
  • Sorting through tracking data to make sure you’re counting every referral source of hire correctly
  • Proving to leadership the value in having the referral program in the first place given the highly visible and expensive budget line item

With ERPs requiring such heavy oversight, it’s not surprising that among those organizations without a formal program, 44% report lack of budget and resources to offer rewards and manage referrals are what’s holding them back.

So imagine if you expand who can sponsor referrals by the thousands by including people outside of your organization? Every recruiter dreams of more qualified candidates—but what will it take to get there?

 

Referral Benefits Without the Management Burden

Simply, it will take a better way to manage referrals. 51% of respondents currently manage referrals using their ATS, but the ATS is built for application workflow management and compliance. Just look above at the current management challenges of ERPs—not one of them involves managing applicants through the hiring process. The burden with existing ERP management lies in three areas:

  • The front end: attracting, engaging and nurturing both referral sponsors and referred candidates so you stay top of mind
  • The middle: transparently communicating with sponsors on the status of their referrals all the way to hire, as well as managing their rewards expectations
  • The back end: accurately tracking source of hire so you can pay rewards correctly and measure the true value of your referral program

SmashFly believes the key to helping talent acquisition teams get more hires from referrals is to manage referrals outside the ATS and application process using a Recruitment Marketing Platform. If you think of referrals as another recruitment marketing channel—one that requires relevant communications to keep sponsors engaged and targeted campaigns to convert referral candidates into great hires—it makes total sense.

By managing referrals in a Recruitment Marketing Platform, recruiters can leverage technology to automate referral campaigning and other operational tasks so they can get the benefit of referrals without the management burden, and so they can scale the referral program into a modern referral network without requiring more resources.

A major benefit of managing referrals in a Recruitment Marketing Platform’s CRM database is that it keeps referral candidates in a separate system until they become an applicant and enter the ATS. This ensures the organization can maintain a compliant application and hiring process.

In addition, Recruitment Marketing Platforms can track referrals alongside all your other recruitment marketing channels like social media, job distribution, email marketing and your career site. That means that for each job requisition, you can know the true source of hire.

The next evolution of referral programs is here. Expanding who can refer candidates will enable you to leverage the full potential of your organization’s network. If you take this approach, you can truly improve the volume and quality of your hires.

To get the SmashFly survey results, methodology and summary report, “Beyond Employees: Employee Referral Programs Redefined,” download it here.

ERP results CTA

SmashFly conducted the online survey in April 2015 to better understand the state of employee referral programs. The survey included responses from 114 talent acquisition and HR professionals, 74% of whom were manager level or above. The participants came from companies primarily headquartered in North America and represent a cross-section of employee sizes.

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