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Why Employee Referral Programs Should Lead Recruiting Efforts

It’s strange for a job placement agency to tout the benefits of an employee referral program. But hear us out: There’s certainly a place for both within your recruiting efforts. In fact, as Human Workplace CEO Liz Ryan confesses, if you’re not getting one-fourth of your new job hires from employee referrals, you’re wasting time and money.

In a 2013 study, big data company Evolv found that referred employees have 10 percent longer tenure than non-referred employees and demonstrate approximately equal performance. The study also found the benefits of a referral program appear to outweigh the costs by a factor of 2 to 7.5.

Companies are taking notice. In fact, LinkedIn recently acquired employee referral software maker Careerify for an undisclosed amount.  With the move, LinkedIn is hoping to help hiring managers find prospects from within their own employee connections. As TechCrunch’s Ingrid Lunden explains, “The problem that Careerify is solving is fairly common, and possibly one that you have come across yourself: When job openings come up at your office, and you get that email asking if you have anyone to refer as a potential candidate, you may be too busy to answer, or just unable to think of anyone suitable. The software from Careerify essentially automates that process — not unlike how LinkedIn automates a lot of its reading and connection suggestions to you today.”

Fellow Austin Business Journal Fast 50 company Invenio Solutions covered the topic of employee referrals in its own blog series, adding that innovation can help in other ways from online portal-based submissions, to creative incentives like charitable donations and gamification.

Companies that turn to employees first—and dedicate at least 25 percent of their recruiting efforts to employee referrals—are rarely disappointed. Take e-commerce powerhouse Bigcommerce, for example. For a glimpse into its employee referral strategy, take a look at this previous post which highlights exactly how the company uses employees not only for job placements, but to gauge employee satisfaction as well. In 2010, about 23 percent of accounting firm Ernst & Young’s nonentry-level placements came from employee referrals. By 2013, employee-referred placements at the firm nearly doubled to 45 percent. And since resurrecting its own Employee Referral Program, Vistaprint’s job openings went from 19 percent to 42 percent employee-referral filled.

If you are disappointed in the amount and quality of referrals you’re getting from employees, perhaps it’s not the employees at fault. It’s a big indication that your company’s culture may not be the shining beacon of light you thought it was. As Forbes’ Ryan puts it, “Simply stated, if the employees don’t feel good about the place, they’re not going to subject their friends to the environment. What kind of friend does that?”

What’s your combination for success between employee referrals and other forms of recruiting? We’d love to know!

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