Without question, having a large LinkedIn network is a competitive advantage for any recruiter working on hard-to-fill positions and hard-to-find candidates. This advantage is lessened dramatically with LinkedIn Recruiter, since it includes complete visibility to the 70mm+ people in their network. Since this full-visibility product is off-limits to TPRs, it levels the playing field somewhat for corporate recruiters. But this is not as significant a disadvantage as it would seem to those of us who have to find top candidates the old-fashioned way — networking. Getting pre-qualified referrals from people who will call you back is the real secret of recruiting passive candidates.

With this in mind, I’d like to offer a few of my favorite passive candidate recruiting secrets.

Networking Secrets of an Old-time Headhunter

1. Network in 3D. While the names on LinkedIn are great to have, getting the names of their best connections is even better. As you begin your quest for great referrals, don’t just consider peers. Consider those who these people have mentored, who mentored them, who they most likely worked with on cross-functional teams, and who they regularly work with outside the company, including vendors, customers, and consultants.
2. Track your effectiveness. Don’t waste your time. Networking is not about dialing for dollars. Instead, track how many people call you back, how many are interested in talking about your position, how many are qualified for your opening, and how many referrals you get per call. If you’re not tracking this daily, you can’t get any better, since you won’t know what to work on. If you do track these metrics, you’ll soon discover that great referrals from well-respected people can increase your productivity 5-10X. That’s why the first name found on LinkedIn is not nearly as valuable as a referral from one of these people.
3. Get three referrals on each call. The most important metric you can track is how many high-quality referrals you get on each call. You need to become adept at getting these names. Make sure you highlight the fact that you don’t want to know anyone who’s looking. Instead, ask the person for the best person they know who’s absolutely not looking, but would be open to discussing a potential career move. Thinking in 3D helps here. For example, I’ve called buyers at major retailers looking for salespeople, product marketing people looking for engineers, ad agencies looking for product marketing people, and CPA partners looking for CFOs. The key is not to hang up until you have three great referrals if the person you called isn’t appropriate for the job at hand.
4. Don’t call people who won’t call you back. Great people will call you back if you mention the name of another great person. That’s why step three is so important. Track your callback rates. If you make sure that 80% of the people you call are warm, pre-qualified referrals, your call-back rate will be 75% or better. If you just make outbound cold calls, your callback rate will be closer to 25%. This is a huge difference in productivity.
5. Only call people who are worthy. While getting people to call you back is important, if they’re not worth talking to, it’s a waste of time. That’s why it’s important that you pre-qualify the referral. Just ask the person giving you the name why the person is a top-performer. As far as I’m concerned, a worthy person is someone who is either qualified for the job or knows someone who is.
6. Leave professional and career-oriented messages. Whether it’s a voicemail or an email, suggest you’d like to enter into a discussion regarding what could potentially be an important career move for the person. You must include some substantive proof as part of the message, not hyperbole. For example, “You might have heard that we just merged with XYZ Resources, and are looking for a product manager to lead the first integrated development project. I’d like to chat with you to see if this could offer a significant career move for you.” If you can mention the name of the person who provided you the referral you will more than double your callback rate. Hyperbole — “the greatest position in the world” — will cut it in half.
7. Create instant careers. If you’ve asked the person if they’re open to discussing a possible career move and they answered yes, don’t tell them much more about the job; instead, get them to first tell you a little about them. This is essential. As you quickly go through the highlights of the person’s work history, look for gaps in the candidate’s background your job fills. This could include staff size, scope of the project, impact the person can make, exposure to management, and the like. Mention these as reasons to proceed in the discussion. Of course, if the gaps are too big, or non-existent, smoothly switch your focus to getting three referrals.
8. Don’t take “no” for an answer. In addition to doing everything described above, you also need to be adept at overcoming objections. These cover the range from I’m not looking, what’s the comp, I’m happy where I am, to I’d don’t like the industry, your company has a bad reputation, and I don’t want to relocate. It’s impossible to put 20 years of advice into a single paragraph, other than to say that persistence is the key here. If your position represents a true career move, you owe it to your hiring manager, yourself, and the person on the phone not to give up until the person has the information needed to compare your job to what they’re doing today or whatever else they’re considering. Don’t give up until they do. Even if the person decides it’s not a true career move, you’ll still be able to get your three referrals.
9. Recruit first, network second. You’ll increase your networking productivity by directly recruiting the person first, rather than calling the person on some “networking” premise. To me this later approach should only be used when calling someone who clearly is not a candidate for the job. Recruiting the person first allows you to find out about the person’s background before revealing much about the job. This allows you to determine if you should recruit the person or get referrals. You also establish a different relationship once the candidate has shared some confidential information with you.
10. Become SWK (someone worth knowing). Top prospects want to stay connected with top recruiters who handle important jobs. To become SWK you must know the job, the hiring manager, your company, your industry, and your competition. You need to be seen as a reasonably objective career counselor who is only willing to proceed if the job represents a true career move. You know you’re SWK if you get unsolicited referrals from top people in your area of expertise who want to work with you and give you other top referrals.

What’s great about LinkedIn and its Recruiter product is it gets you in the major leagues on day one. This is an invaluable gift. Regardless, since everyone will soon have access to the same information, your ability to convert a list of names into hot prospects and great hires is the real difference-maker. In my mind, this is the essence of great recruiting.

I had an informative, and reassuring conversation this morning with the founder and head of BranchOut, a Facebook app that I wrote about yesterday, which has a potentially valuable future as a sourcing tool.

Rick Marini, an entrepreneur with an impressive pedigree, was concerned enough about the transparency issues I raised in the post, that he pinged me to clarify a few things.

What he said was encouraging. “We are very aware of the privacy issues,” he said at the outset of our conversation this morning. “We would never compromise privacy.”

In the team’s haste to push out the app, a few things were overlooked, he said. One of them, a rather important oversight, was any sort of explanation about the access to personal Facebook information that BranchOut needs to do its work.

“We didn’t do a good job explaining,” Marini agreed. It’s being fixed, he said. Explanations and clarifications are being added to both the www site and the BranchOut Facebook presence. The first piece, an explanation page that comes up when you refuse to grant the requested permissions, is now in place.

The additions and fixes are all welcome, even if it does suggest that privacy and transparency weren’t priorities until they were raised by others. Nevertheless, recruiters should be heartened by the responsiveness of Marini and his team to the feedback if, for no other reason, than self-interest: BranchOut could become a remarkably useful tool to source candidates and to further employee referral programs.

You can read more detail about what BranchOut does in yesterday’s post. Briefly what it does is tell you where the friends in your network work or have worked and it lets you know if any of your friends have friends in specific companies.

You can post jobs to your own friends network for free. Soon, Marini told me, employers will be able to post jobs and have them targeted to Facebook users that have been identified by BranchOut on the basis of their job or employer.

You can do all this on LinkedIn, and many recruiters do. LinkedIn makes it easy to source candidates.

Facebook is more of an attractant approach. People generally come to you. BranchOut adds the missing dimension. Its sheer numbers — 500 million users as of just this week — make it a very attractive pond in which to go fishing.

What we don’t know is how many Facebook users have bothered to post detailed profiles about themselves. Or, if they have, to make them available. On LinkedIn, the majority — by quite a bit — have complete and public profiles. So far, from what we’re seeing, Facebook is just the opposite.

Thus anything Marini and the BranchOut team can do to instill confidence that data won’t be misused, can only help encourage Facebook fans to complete those profiles. Which will improve sourcing for recruiters.

Without even knowing the name of your organization I can predict that throughout the most recent downturn you let your employee referral program “go,” so to speak. By failing to take advantage of new trends, technologies, and tools, and decreasing efforts to update and keep the program highly visible, your organization has allowed a number of program-performance-degrading-things to occur.

Unlike the previously posted list of program design features that can “kill” an ERP, these factors plague even well-designed programs, rendering them weak and ineffective. While much more likely to occur during economic downturns and periods of reduced or halted hiring, these program degraders can emerge whenever an employee referral program is neglected.

If your program doesn’t seem to wield the power it once did, do a quick mental audit to see if any of these factors may be to blame.

The Top 20 Employee Referral Program Performance Degraders

1. Loss of a program manager — losing or failing to replace a program manager charged with championing the program and keeping it active can lead to disastrous consequences even for a short period of time. Solution: a resource, hold them accountable, empower them with program metrics, and educate them on key ERP success and failure factors.
2. Reliance on job announcement spam — unfortunately it has become common practice to spam employees with irrelevant job announcements and generic program communications, both of which overworked employees quickly learn to recognize and set aside. Solution: use a more targeted approach to sending out announcements, decreasing the overall volume, and making sure each contains information relevant and of interest to the recipient.
3. Repetitive message formats — years of experience have demonstrated that using the same message format over and over will eventually result in employees tuning out the noise, just as you tune out the billboard that rarely changes on your commute to work! Solution: toss out form-messaging templates and craft a real communication that educates, empowers, excites, and calls for action.
4. Repetitive rewards — program rewards and prizes are intended to excite, but once they become commonplace or stale, they cease to be effective. Solution: periodically change or rotate program incentives using a survey sent to a sample of your employees to determine what would or would not work.
5. Program suspension — some organizations completely suspend their program when hiring is slow, resulting in an “out of sight, out of mind” mentality among employees with regards to being 24/7 talent scouts. Solution: regardless of requisition volume, never suspend a program. It’s OK to narrow the scope of the jobs covered or temporarily reduce incentives, but the process and mantra to keep employees scouting talent for future hiring needs must never cease.
6. Not countering “inappropriate now” arguments — when reductions in force occur, it’s not uncommon for arguments against external hiring to emerge on the premise that giving a job to anyone other than those displaced already would damage morale. Solution: it’s unfortunate that reductions in force must occur, but when they do, those shed by the organization are often those in non-core roles or that possess skills no longer as valuable to the organization as their rate of compensation. To assume that a mission-critical or key vacancy could always be filled by the ranks of those laid off is silly. It’s also silly to assume that other organizations would be laying off volumes of talent in previously hard-to-fill areas, reducing the difficulty of recruiting scare talent moving forward. It’s the role of the ERP program manager to counter or prevent such arguments before they get started. In modern agile organizations, hiring can occur in critical business units just as layoffs occur in others. Make managers and employees aware that the development of new products and services (and their future job security) often depend upon access to new skills and technologies. While retraining those displaced is nice, sometimes it is both time and cost prohibitive.
7. Not maintaining operational responsiveness — without dedicated attention, it is easy for programs with exceptional service standards to slip, resulting in delayed responses to inquiries, slower referral response times, and even complete non-responsiveness. Because response time is the No. 1 success factor for ERPs, service standards should be restored. Solution: re-examine the service standard expectations you have set for your program, and if unable to resource the program adequately to maintain them, reduce the scope of the program temporarily or seek volunteer assistance so that every interaction meets expectations.
8. Relying on the original business case — business priorities change, unfortunately few HR organizations update their business case for key programs such as the ERP to reflect the changing environment. Without ongoing program positioning, it’s easy for programs to lose their executive champions and for participants to forget all the ways the program benefits them and makes the organization stronger. Solution: the business case for the employee referral program should be reexamined every quarter and changes should made to the program strategy and operating model in accordance with changing needs. Executives, managers, and employees in particular need to be reminded of the important role the program plays in building better teams and improving organizational performance. The communicated business case should include evidence of improved quality of hire, retention rates, diversity rates and promotion rates. It is especially important to update the “performance differential” calculation, which demonstrates that referral hires produce more on-the-job than other sources of hire.
9. Ignoring new tools and technologies — programs designed even recently might not have taken advantage of newly developed referral tools, approaches, and technologies. In recent years a lot of development in process and technology has occurred to support vacancy prioritization, electronic referral marketing/communications, social network extension, external stakeholder participation and automated program administration. Solution: every quarter reevaluate how technology can empower the world-class process you desire to execute and try out many of the new service/tool offerings among pilot study audiences. With many tool developers adopting agile development methodologies, product offerings are likely to change/evolve frequently.
10. A lack of employee education — even in great times many organizations failed to provide enough tools, training, and support to help employees uncover great talent within their network, so during tough times it’s no wonder that education efforts all but go away. Without referral events, manager executed referral activities, PDA parties, referral open houses, “Give Me Five” visits, and priming exercises, ERPs become purely reactive and fail to produce the volume of flow needed in the most critical areas. Solution: the referral team must develop quick but compelling presentations/exercise kits for employees and hiring managers (available both online and in person). These tools should explain and clarify new and revised policies, procedures, and expectations, as well as walk employees through simple exercises designed to help them identify possible referrals for current and near term key talent needs. Participant research reveals that a majority of employees are underwhelmed with the amount of how-to guidance their organization provides on identifying possible referrals, networking, dealing with “would you refer me” requests, and how to convert contacts into referrals.
11. Not interfacing with related HR programs — in recent years many organizations have invested in social media programs, alumni group development, and contingent labor programs, all of which have logical ties to the ERP, but that might not have been used well during the downturn. Solution: put together a team with leaders from each related program to determine where partnerships make sense, where duplicate efforts are underway, and most importantly where resources/tools are underused.
12. Outdated prioritization — well-designed referral programs prioritize vacancies based on their business impact, and referrals based on the past referral success rate of the referrer. However, the organization’s priorities may have changed. Solution: if you don’t have a prioritization schema, develop one now. If you do have one, work with senior management to adjust the schema based on emerging needs quarterly or as critical incidents emerge. (Note: prioritization does not require that individual referrals be treated any differently during the hiring process.)
13. Lack of recruiter training — failing to periodically update training of existing recruiters and skipping the training of new recruiters regarding the critical success factors of referral programs can degrade a program from within. Solution: program managers need to be continually educated on the latest benchmark best practices and performance targets leading organizations are adopting and develop periodic training/information sessions for recruiters outlining their evolving role.
14. Failing to do periodic upgrades — the performance of even the best-designed referral programs degrade quickly when program evolution ceases. Solution: if you are not now or have not been rolling out program enhancements and promotions at least once a quarter, start now. Tie enhancements and promotions to forecasted critical needs and short-term business issues to create natural excuses to communicate about the program and improve visibility.
15. Not using metrics — great referral programs rely heavily on metrics to continually improve, but when times get tough, metrics often all but disappear. Solution: identify how employee referrals impact business operations and layer program performance metrics into existing finance and operations reports, making the program visible as a performance driver. Do not forget to quantify the dollar impact on revenue of the key quality of hire metrics.
16. Mergers with other recruiting programs — during tough economic times, it is not uncommon for autonomous referral programs to be combined or merged with other recruiting programs. This lack of identity and control will rapidly degrade program performance. Solution: if you have merged your ERP with other initiatives, make the business case to restore its independence immediately.
17. Unfounded legal fears — even well-designed referral programs get “nitpicked” on by “overly nervous” lawyers and HR professionals who often present their personal opinion as unbiased professional guidance. Solution: don’t argue with attorneys; instead, partner with them on the premise that it is the corporate counsel’s duty to find a way to do what the organization “needs” to do in a manner that reduces the organizations exposure to risk. You wouldn’t propose writing their legal documents, so they shouldn’t design your programs! Make the business case for key program features and outline the negative impact of foregoing a practice. Risk mitigation is about balancing the possible cost of litigation with the financial benefit of a practice. If you are not armed with ROI projections, real-world data, and best-practice benchmark examples, don’t expect to fend off unfounded legal arguments.
18. New/alternate ATS — many applicant tracking systems provide an ERP module that becomes more attractive versus operating a separate ERP program with isolated infrastructure during tough times. These modules which allow employees to send an invitation to apply to referrals turn all referrals into online applicants long before they need to be. They also result in a dramatic decrease in the conversion rate of employee-initiated employee referrals. Solution: figure out when it makes sense in your organization for a referral to become an applicant, and structure your technology solutions to empower your process the way you want it versus altering your process to fit the design of an available tool. Hundreds of mashable tools and services exist today that can empower your program as you envision it.
19. Failing to scale — in tough times organizations merge and get acquired. If your organization has done either, it’s not uncommon for a program designed for a small organization to be ineffective in a larger organization. Solution: evaluate what elements of your program can scale to meet the needs of the newly combined organization and which elements need redesign. Until all program elements can function effectively, consider limiting the scope of the program to that which the existing infrastructure can support at the service level desired.
20. No globalization — if your organization has become a truly global one, as many have, your ERP must be globalized. Solution: look at all processes, communications, and policies to ensure that cross-border referral of talent is being facilitated, and that all possible scenarios have been planned for. Identify what elements of your global program my require localization (communications, rewards, etc.) and develop a matrix specifying each.

Final Thoughts

Very few things that are easy to do have more of an immediate impact than using a failure analysis “checklist” to conduct a quick assessment of an important HR program. With hiring targets growing, there is no more important recruiting program to assess than your ERP, don’t you agree?

It has been interesting to note the recent re-emergence of referral recruiting ventures and ideas. Duh, everybody knows that (employee) referrals have been the No. 1 source of hires forever (as indicated by CareerXroads), and that according to professor Granovetter’s groundbreaking research in the early 1990s, close to 60% of people say they have found their current job through some form of referral. No-brainer, especially with the adoption of social networks like Facebook, LinkedIn, etc., right?

However, between the late 1990s and today, many companies have tried to automate/extend/improve the referral recruiting process: refer.com, jobster, h3.com, zubka, YorZ, KarmaOne, Jobvite, and dozens of others both in the U.S. and Europe. All have failed or moved away from any referral recruiting focus, and in the process perhaps as much as $100m in VC money has gone up in smoke.

Why? No doubt many of the new entrants will back-up their fundraising efforts with the proverbial “But this time it’s different…” statement, so let’s pause just for a minute and consider why I think to date a lot of smart people spending huge amounts of VC money have failed to crack so obvious an opportunity.

Here are some of the key lessons learned from all that cumulative failure:

I — Perhaps the wrong opportunity was targeted: rather than trying to make everybody a productive “referral recruiter” we should have focused on boosting output of existing referral recruiters.

• You can take a horse to the water, but you cannot make him/her drink. Only 4% of people are actual “connectors” (see Malcolm Gladwell, The Tipping Point), perhaps proven by fact that fewer than 4% of LinkedIn’s members are in “500+” category. No wonder that in traditional ERP programs only a fraction of employees actually take part and score (multiple) rewards. It’s great that hundreds of millions of people have a LinkedIn or Facebook account, but 96% of them will never become successful networkers regardless. So all these referral recruiting solutions are wasted on the majority of employees/people.
• “Dude, where’s my network?” Even though most people would never consider making referrals for total strangers, they do expect a referral recruiting solution to come with a large built-in network of high-impact connectors! Crazy? Most people have never heard about Dunbar’s Number, which simply means that in spite of boasting to have 7,000+ LinkedIn connections you still only can have meaningful relationships with about 150 people. Referral recruiting solutions which broadcast referral reward opportunities to the Web will not yield (good) referrals, as people only make referrals for people with whom they have at least a minimal relationship or strong affinity. Successful users need to have a good network plus networking skills to start with. Your own network plus your own social standing will always outperform any hired or public social network.
• Unfortunately, in most corporations recruiters are part of the HR organizations (and not procurement, where they should be). HR organizations are often more focused on risks rather than opportunities, and hence worry too much about allowing non-employees to make referrals/earn rewards, about recruiters doing cool stuff on Facebook, etc. Why worry endlessly about a $5,000 reward to fill $100,000 job when after 30 days you’re going to give the job to contingency recruiters anyhow and pay a $20,000 fee?  The real opportunity for referral recruiting solutions is with hiring managers in organizations without HR departments, as they don’t worry about all the silly stuff. Think about it: 6 million U.S. companies do not have an HR manager, vs. maybe 125,000 companies, tops, which employ HR staff?
• Maybe as many as 70% of all jobs filled by the $8 billion executive search/contingency recruiting industry come from referrals, so one could argue that search fees are in a way referral rewards being paid to the middle-man and not the actual referrers. Given that headhunters usually are excellent networkers and true connectors, if they had embraced these new referral recruiting solutions, these solutions would have been wildly successful in improving their productivity and thereby making their customers even more dependent on them. But do the reluctance to perhaps share a modest portion of their fees with their networks, and fear that referral recruiting solutions could make their customers also good at referral recruiting, make them stay away from referral recruiting solutions?

II — Perhaps the psychology of the actual referral process was not fully appreciated: it’s not about money. It’s not about technology. It’s not about being cool.

• Real “connectors” make incredibly prudent and balanced decisions when it comes to referring a job or a candidate: they will only make a referral if they truly believe they’re doing the right thing for both people on each side of the referral. Whereas a financial reward can certainly add urgency to a referral request, money will not corrupt their decision, as we saw at h3.com where $10,000 rewards never resulted in resume spam and never yielded bad candidates. It’s not about financial rewards; it’s about prudent people carefully managing their social credit balance sheet to first of all help people whose relationship they value.
• Though it’s not about the money, creating the “right” referral reward is quite important. Employees/people who make referrals have a pretty good idea how much money they’re saving the employer. Five to ten percent of the annual salary with a minimum of $5,000 seems to work best for a position over $50,000 salary. Offering a wrong reward is worse than asking for free referrals.

III — Perhaps back-office issues were not fully appreciated.

• If we accept that only a small fraction of a company’s employees are true connectors, and in the same light that only a fraction of our personal networks are true connectors, then it’s obvious why referral recruiting solutions advocate that non-employees should be able to make referrals and earn or share rewards. Resulting back-office issues should not be underestimated, and indeed are a genuine concern for HR managers: W-9, 1099 IRS reporting, etc.
• The perennial complaints about ERP programs has been about the tracking of referrals, transparency for referrers and candidates, plus the adjucating of disputes as to who brought in the winning candidate first. If you reach out to the right number of connectors in a particular labor market segment, it’s quite likely that the same candidate will get referred by more than one person. (Shally Steckerl experienced this in his wildly successful H3.com search, outlined in a 2006 H3 white paper). Sophisticated tracking of referrals across multiple degree social networks is essential. (H THREE Inc./H3.com actually owns a portfolio of four patents (one issued and three still pending), and while at one point there were a dozen companies who appeared to be infringing the patent, startups do not have the funds to pursue such alleged infringements. Hence investing in patents is not useful for startups.)
• Referral recruiting solutions will always be one of multiple recruiting tools which are deployed simultaneously, which means that all candidates will end up in an ATS system, where they will end up being treated the same way as candidates from any other source. This is wrong and upsets both referrers and referred candidates. Since referrers personally vouch for their referrals, both referrers and referred candidates should always be treated with extra courtesy.

What’s Next?

Innovation is all about keep trying to find solutions for problems, and once we realize that the problem is not how to enable all employees to become productive referral recruiters, but how to increase the recruiting yield from the true connectors we have among our employees, somebody will crack this quest for the silver bullet and create great ROI for his/her investors.

Personally, I think SelectMinds and LinkedIn have good chances of getting it right, because both can enable the connectors among our employees to easily and in perhaps a semi-automated way use their networking skills, their positive social credit balance sheet,s and their large meaningful or affinity-based networks.

As a result, there will be employees in the future who maybe have a salary of $75,000 but who make another $75,000 a year or more in referral rewards, and please let’s hope there will no longer be short-sighted employers who will put a cap on the maximum reward money employees can earn in a year, as exists today. What’s up with that?

I have a suggestion for you . . . dedicate your summer to re-building your employee referral program. Now is an ideal time to invest in program design and rejuvenation, as in most cases, chaos surrounding the new year and year end is a fading memory and distant nightmare.

It’s also a great time because economic growth is just starting to ramp up, and with the growth of social networks and an unbelievable array of new recruiting tools available, opportunities abound. Why wait ’till competition for talent is once again über intense; focus now on optimizing a recruiting program with proven results and minute probability of failure. A recent poll conducted with several state-level SHRM chapters across the nation indicates that a majority of organizations are already dealing with significant double-digit growth in staffing needs, and anticipate that requisition volume will continue to grow throughout 2011. Unfortunately, those same organizations report that budgets are already stretched and that the recruiting workforce hasn’t yet recovered.

With that in mind, a key concern on every recruiting leader’s mind should be: “how do we increase recruiting capability and capacity to improve results without placing added burden on an already under-resourced function?” Luckily, it’s an easy question to answer. Retool your employee referral program and start managing it to produce the results you need.

The Many Benefits of Employee Referral (If you need further motivation!)

Having spent more than a decade advising staffing leaders and reviewing the performance of hundreds of staffing organizations, I can attest that when managed well, no other sourcing channel can come remotely close to producing the results of an employee referral program. Unfortunately, what most corporate leaders and recruiting leaders for that matter have experienced are poorly designed, loosely administered programs that despite their ad hoc nature still produce 1:4 hires on average. If you are going to invest the time in rebuilding your program, go big, go bold, and build a business case referencing the proven benefits of a world-class program listed here.

Organizational Benefits

• Quality of hire — while accurately measuring quality of hire is a subject of much debate in many organizations, what is not, is that no matter what method used, on average, hires produced through the ERP rate the highest.
• High-volume capability — even without formal management, the typical employee referral program produces 1:4 hires. When formally managed, several leading organizations have proven that the ERP can produce 75% or more of the organization’s external hires needed.
• Higher candidate quality — data shows that on average 1:5 (1:3 in best practice organizations) employee referrals produce a hire. When compared to other sources, ERP candidates are of significantly higher quality than the average applicant. The reasons for this are simple: no employee in their right mind would refer someone who would make them look bad, who would negatively impact their team, or who wouldn’t fit inside the organization. The primary benefit to the organization of higher candidate quality … fewer people have to be turned away, decreasing the probability of damaging the employer brand.
• Lower attrition rates — turnover can bread instability, and instability leads to non-optimized performance. Because hires produced through the ERP enter the organization with already established social connections, they not only become productive faster, but they turnover less frequently. ERP hires are also 3.5 times less likely to be terminated than hires produced through other sources!
• High-impact hires — a world-class program targets the attention of the organization to quickly fill mission-critical, key, and revenue-generating roles, producing an immediately apparent impact on organizational performance.
• Improved diversity — contrary to popular belief, a well-managed employee referral program does not negatively impact candidate slate diversity. It actually improves it.
• Improved morale — producing a majority of external hires through the employee referral program requires a large volume of employees to be actively mining their networks and talking about the organization and what makes it a great place to work. All that talk reminds employees daily about the little things that may otherwise go unnoticed, keeping the workforce engaged and improving retention.
• Improved network learning — another key benefit of promoting employee referral is that it gives professionals an excuse to proactively seek out and network with other professionals. While not all of those relationships will result in an application, a good number will produce professional interaction, sharing, benchmarking, and competitive intelligence.

Recruiting Function Benefits

• Less recruiter time required — on average, sourcing consumes roughly one-third of a recruiter’s time. ERPs essentially outsource sourcing to the organization’s employees and produce a higher quality applicant stream that requires less administrative time than candidates from other sources.
• Broader sourcing network — because your employees interact with professionals throughout the industry every day, the combined professional and social networks of your employee population dwarf the reach of your professional recruiters. In addition, the existing relationship and trust that your employees have built with individuals in their network make it easier for employees to convert their contacts into recruiting prospects.
• Improved perception — because your employees live the job daily, what they say is likely to be viewed as more authentic than messages on your corporate website or those espoused by individual recruiters. Employee can often provide more detailed and current information about the job and the team than recruiters who service multiple org units.
• Accelerated time-to-hire — well managed ERP processes are proactive; in other words, they seek out referrals when needed instead of relying on ad-hoc referral flow. By using alert processes and proactive priming exercises, the program can pull applicants into the staffing lifecycle when needed to decrease time-to-hire.
• Global scope — the social and professional networks of your employees are now likely to be global, so while many other sources focus on regional populations, ERP can scour the globe for top talent.
• Improved college recruiting — because referral programs can be successfully applied to college recruiting, where applicants are extremely well-connected, your college recruiting results could improve significantly, especially at schools that you can’t afford to physically visit.
• Lower costs — expanding the use of ERPs or focusing them on roles with traditionally higher cost-per-hire — i.e. management and technical roles — can dramatically reduce overall recruiting costs. In addition, well-designed referral programs deemphasize large referral bonuses, often producing hires at a cost-per-hire equal to or lower than average.
• Manager satisfaction — a no brainer; if you could review fewer applicants and make a higher quality hire, wouldn’t you be happier?
• An increased appreciation of the recruiting function — effective ERPs make recruiting highly visible, and as a result, can make the recruiting function a continuous topic of positive conversation for a change. Well-designed programs cause employees to develop a feeling of ownership for the hiring process, and introduce employees to both the difficulties and benefits of recruiting, increasing their understanding of and respect for the function.

Final Thoughts

When you decide that the time has come to rejuvenate your recruiting function, focus your limited time and resources on programs with the highest immediate impact, lowest cost, and smallest chance of failure. You have to get it right the first time, and fortunately, all of the data indicates that employee referral stands out as an opportunity above all others. If you want to look good fast and you can’t afford a long learning curve or to suffer from a major failure, there really is no other choice.

Network With Fellow Program Managers

I’m listening! Some of you have reached out in recent weeks and indicated that you are knee deep in evaluating your program, devising proposed changes, and planning to launch a rejuvenated program this fall. To support you, in addition to repeating my program design and performance benchmark study, I’ve created a new networking group for employee referral program managers on LinkedIn. Join, share your issues, concerns, what you have learned, and collaborate with your peers on what makes a kick-ass program.

Dr. John Sullivan and Master Burnett

Based on the registration response and volume of questions submitted during a recent ERE webinar on Making Your Employee Referral Program Work Smarter, clearly many organizations have retooling their programs on their agenda. With nearly a question a minute coming in from the hundreds in attendance, responding to all simply wasn’t possible. What follows is Part II of the public questions that were submitted (grouped, combined, and summarized) and our brief response to each. Part I is here. Looking for more detail? Use the comments functionality following this article to let us know and we’ll do our best to develop future content along those lines.

Employee Referral Program Management-related Questions

Who manages ERPs in most organizations?

Amongst the organizations in our best-practice sample, it is much more common for the employee referral program to be managed by a dedicated program manager as opposed to a program committee made up of recruiting department staff. This is a key differentiator between best-practice programs and typical programs, many of which are unmanaged or managed by committee.

How much time do best-practice firms dedicate to this, a lot of the suggested elements seem resource heavy? Is this a full-time job within most organizations?

In most organizations ERP management is not a full-time job, but that is because in most organizations ERPs are unmanaged! We don’t really concern ourselves too much with what most companies are doing; we are, however, very interested in what best-practice companies do! Even in smaller best-practice organizations, managing the employee referral program is a dedicated task. In larger organizations not only is the role of program manager a full-time role, it is most often one supported by a multi-disciplined team. The key thing to remember here in that in most organizations less than 5% of the total recruiting budget is allocated to the ERP, which on average produces 1:4 hires. Best-practice firms simply realize that since ERPs produce one of the best yields of any source, it makes business sense to reallocate funds formerly earmarked for less-effective sources. In our best-practice sample, the percentage of the recruiting budget associated with employee referral averaged 31% in 2007.

How many people should be dedicated to the employee referral program for the program to run optimally?

Obviously, the size of the team needed depends on the size of your organization and the design of your program. Ideally, you look at what activities you need to accomplish to generate the flow needed to produce the number of hires needed and calculate how many man-hours will be consumed to accomplish that. For best-practice firms, even smaller ones, it’s not uncommon to have at least three people dedicated to the effort and to rely on help from recruiters and shared administrative staff. A better rule of thumb is that if the source is producing 50% of hires, it should get 50% of the sourcing resources.

You have repeatedly mentioned a dedicated referral team. What roles comprise this and what is each responsible for?

While there is no standard structure for an ERP management team, most of the organizations in our best-practice sample rely on a combination of roles that include:

• Program Manager (strategy, design, performance modeling/reporting, integration, etc.)
• ERP Communications (workforce segmentation, campaign development/execution, core process communication, broader program marketing)
• Program Coordinator (primary contact, referral screening/routing)
• Program Administrator (reward administration, data entry, conflict resolution)

There is a pretty equal split in our best-practice sample between organizations that maintain ownership of a candidate within the program through disposition and those that transfer or route a referral to a line-aligned recruiter for disposition. In organization that maintain ownership of the candidate, program coordinators are often full life-cycle recruiters allocated to the ERP.

Can ERP principles and approaches be used internationally with the same results?

As few as five years ago, it was difficult to put together a global referral program that was executed consistently across borders, but that is not the case any longer. Around the world, especially in fast-developing economies, ERPs are either the dominate source of hire or the fastest-growing source of hire. Globalization of management practices, largely Western in nature, is also widespread. Remember that social network adoption is also widespread around the world, and that many of the activities behind top-notch referral parallel top-notch networking. The key to success is to institute a consistent program around the world while still allowing for some local flexibility, particularly in communication and reward structure.

Can you give provide more context around why the percentage of top-performing employees referring is a key metric?

A best practice is to proactively approach your employees and ask them for referrals. Most firms that run the data find out that the very highest-quality referrals come from top-performing individuals working in that job family. Given this, it only makes sense if you are going to proactively approach employees and ask them for referrals, that you first approach those who are most likely to know and have strong relationships with other top performers (your top-performing employees in that job family).

I would like more details on recommended software packages for tracking and managing referrals.

While we have many great relationships with a number of vendors, we are vendor-neutral and do not recommend one solution over another. However, we are fanatical about pointing out that vendors must develop products for mass-market appeal, and what benefits the masses is rarely effective for best practice firms.

That said, administering a best-practice ERP is work-intensive and technology can and does play a major role in making it feasible. While we disagree with the design of some aspects of products available today, we champion others.

Most of the solutions developed specifically to support ERPs today either focus on enabling email/social media-based campaigns or administering the application workflow. The modules from the major ATS providers focus more on the latter, using a model of engagement we detest, but provide stronger workflow management. The vertical specific solutions focus much more heavily on campaign management and social network sharing, but often lack robust tracking and administration functionality.

A third category of solution, CRM systems, often provide robust functionality on both fronts, but are complicated to get running and not always developed specifically for use by recruiters.

There are literally hundreds of existing and stealth-mode ventures developing products to support social recruiting and employee referral, many of which will launch products in 2010. While we would love to tell you about them, that might get us in trouble! Firms you may want to check out with products or services available today include: SelectMinds (sponsor of the ERE Webinar), Jobvite, IdealHire, Peerlo, LinkedIn, TMP, Jobs2Web, and your major ATS providers.

Can you share what some of the admin processes are that differentiate best-practice firms producing 45% or more of external hires from referrals and typical programs?

The answer to this question really is what we have been writing about for sometime, but quickly summarized they are as follows:

1. Programs are formally chartered and managed
2. Program strategy developed to specifically support segments of the overarching staffing strategy
3. Program measured against specific pre-developed goals and objectives
4. Prioritization of jobs (limited program scope or differentiated rewards)
5. Prioritization of inbound candidate flow
6. Formally developed program communication strategy and viral messaging framework
7. Proactive approach and priming of employees for referrals
8. Minimized front-end bureaucracy (simple process to invoke for all parties, few policies)
9. Leverages referrer throughout process
10. Empowered with technology
11. Measured from every angle
12. Allows participation by broader group of stakeholders
13. Delivers exceptional candidate experience to all parties involved

Legal, Diversity, And Tax-related Questions

Are there legal concerns with stating we would like employees to refer a greater number of diverse individuals?

The primary answer to this question is that you must look at your ERP as a sourcing channel just as you look at other channels. All firms that have an affirmative action program must by definition reach out to targeted groups. I can think of few organizations that do not attempt to influence diversity of candidate slates by reaching out to venues that offer skewed diversity pools. As long as you assess candidates from the ERP just as you do candidates from other channels, you are not discriminating by asking the employee population to help increase the diversity of your candidate pool.

What are the tax implications of paying a bonus or giving a gift related to non-employee referrals? Often companies like the idea of getting referrals from vendors or people outside the company but they don’t know how to handle the tax issue.

First you need to realize that some of your vendors, customers, and corporate alumni will make referrals without any promise of a reward, if you ask. Apart from that, paying rewards, be they cash or gifts, to non-employees does create a taxable situation that will increase the complexity of the transaction. However, before you dismiss the idea, ask yourself “does dealing with the complexity of paying an outside individual cost more than the value of the hire that will be produced?” In most cases, capturing a few extra fields of data from a referrer to enable tax reporting and triggering the reporting process will cost the organization less than $100 in administrative time and processing per hire. The key is to always weigh the tremendous business benefit generated by a great hire against any minor administrative pain; the benefit will win every time.

Employee referrals and social recruiting, which already began melding through Jobvite, Cachinko, and other tools, are growing even closer as new vendors enter the field and corporations test how well their jobs spread on Facebook and other sites. Jobster has tried this all before, as did H3. But their mixed success did not mark the end of an era, but rather a foreshadowing of what was to come.

A New York startup called Referrio is quietly entering this niche. On that site, Cisco, for example, lists 11 jobs and is offering about $2,500 per job for people who fill the openings by spreading the word through social media sites or email.

Meanwhile, Virginia Mason Medical Center has set up a “grab this widget” tool for employees to share the organization’s jobs. The Seattle-area nonprofit needs to fill a director of nursing informatics job, IT jobs for people with Cerner experience, and more.

Bernard Hodes helped it develop the widget, which recruiters and some Virginia Mason employees are putting on their Facebook pages and elsewhere. But a big push to get employees to add it to their sites is yet to come. First, the center needs to set up a social media policy. ”We’re a little bit new to all of this,” says strategic recruitment specialist Carol Altschul. “I think it’s kind of happening a little backwards. The social media (widget) set up, then the policy created. Right now it’s just kind of growing organically. We’re getting our feet wet.”

At Enterprise Rent-A-Car, employees are adding widgets about company jobs to their personal Facebook pages, and getting paid if the widgets result in a hire, which, I hear, a couple have. Hyatt is testing a widget developed by NAS; Hyatt employees will be listing Hyatt jobs on their Facebook pages and sending them out to friends via Facebook.

At Banner Health, the Phoenix and Western U.S. nonprofit, experienced nurses and occupational/speech/physical therapists are among the highest in demand. Michael Seaver, sourcing program manager, said there was “unreal” interest when the 36,000-employee organization moved to an electronic employee referral system two months ago. About 1,500 people referred candidates in about a month. This was not a social media campaign per se, but that’s likely coming soon. Banner, with help from CKR Interactive, is working on how it’ll incorporate its 16 Facebook pages, 16 Twitter accounts, and YouTube account into employee referrals. Banner was until recently in a transition phase, acquiring other organizations. Now, it is “focusing on the people we have,” says Seaver, and will make it easier for those people to refer others.

One sign of the employee-referral times is that SelectMinds, a company mainly known for its work on alumni networks for corporations, is moving deeper into the referral world.

Michael Mallin, the SelectMinds VP of product management, believes that “innovation stalled” a bit during the recession, which “created an opportunity to do something quickly.” That something is a tool that melds employee referrals with social media. Jobster, Mallin believes, had the right idea, but was simply ahead of its time, just before the real explosion in social media. He says that Jobvite (whose success with TiVo I wrote about in the Journal of Corporate Recruiting Leadership) has a good handle on small and mid-size companies, particularly those that want to use Jobvite as their talent acquisition system, but that SelectMinds’ relationship with large firms, like the biggest accounting companies, will help its referral program succeed.

SelectMinds is planning on having a couple of its clients do a free beta of the referral product for two or three months, starting probably in July. For companies that pay, Mallin says it’ll cost about $2,500 per month for companies with up to a few thousand employees, and higher for the largest firms. Pricing varies based on the number of people you make “referrers.”

What happens with SelectMinds is that an automated (or manual, if a recruiter wishes to select some employees to send it to) email goes out to people who might be able to help fill a job. Let’s say hypothetically we’re talking about a software job at Nationwide, and that the job is in Dayton, Ohio. An automated email about the job opening might go out to 1) Nationwide employees in any region who are in IT jobs, and 2) all Nationwide employees in Dayton. The SelectMinds email allows employees to either email selected contacts on LinkedIn, Facebook, and Twitter to tell them about the job, or update their LinkedIn and Facebook statuses (and soon Twitter, just not on the demo I saw) with info on the job. The chain of link-forwarding gets tracked as it moves around online, and the employee either gets the whole referral kitty, or can share part of it with a second person, depending on how the company sets it all up.

The employee who’s doing the referring can tell their company, via a short form, how well they know their friend, and what they think of them. The referring employee also gets emails notifying them if their contact has expressed interest in the job.

Meanwhile, recruiters view a dashboard listing how many times a job was referred, and how many applications came in for it. A recruiter can drill down and see who’s referring who.

Mallin hopes the future versions — and he says SelectMinds hopes to release new ones monthly — are “more intelligent.” For example of what he means, let’s take that software job in Dayton. Mallin hopes that a later version will notice that a Nationwide employee may not be in the software field now, and may not even be in Dayton now, but the system knows through combing that employee’s LinkedIn profile (if privacy rules allow it) that she used to work in the software field. Because she may have friends who still work in the field, she’d get the automated job notice asking for referrals. This smart marriage of referrals and social sites is where we’re headed.

Dr. John Sullivan and Master Burnett

The performance gap between the very best employee referral programs and the typical program is growing dramatically wider each day. Benchmark organizations dedicating resources and formally managing their programs are very close to producing 50% or more of all external hires from their programs — nearly double that of the average firm. They are also using their employee referral programs to accomplish objectives not directly related to closing requisitions, including increasing workforce diversity, and influencing their organization’s employment brands.

The increasing disparity in performance is largely attributed to the lack of management. Many recruiting leaders view ERPs as simple programs, requiring little in the way of resources and day-to-day management. They throw together a simple policy and call it a program. Unfortunately, such efforts lack formal design, formal goals, and often ignore a multitude of variables that lead to improved performance and prevent barriers to performance from emerging.

The end result is easy to see in organizations large and small: newly launched ERPs become stale and outdated within months of launching, their performance rising, leveling, and dropping off until someone steps up and once again opts to retool the program.

Based on the registration response and volume of questions submitted during a recent ERE webinar on Making Your Employee Referral Program Work Smarter, clearly many organizations have retooling their programs on their agenda. With nearly a question a minute coming in from the hundreds in attendance, responding to all simply wasn’t possible. What follows are the public questions that were submitted (grouped, combined, and summarized) and our brief response to each. Looking for more detail? Use the comments functionality following this article to let us know and we’ll do our best to develop future content along those lines.

Benchmark Research

Many of our perspectives on employee referral program design and performance are based on benchmark research conducted in 2006, 2007, and 2008. With a data set that includes more than 600 organizations dispersed across more than 26 countries, there is little we have not seen. This fall (September), we’ll repeat our core benchmark study, making summary results available for free to all organizations that participate. If you’re interested in participating, register here, and you’ll be notified when the process kicks off.

Social Media Integration-related Questions

Can you offer some suggestions on making smoother handoffs between the referral program or social networking program and recruiting?

As more and more psycho-social research about the impacts of social networks on relationships emerge, one thing is clear: social media tools dramatically increase the number of close relationships an individual can maintain. Some studies demonstrate that proficient social media users can maintain close relationships (relationships in which they know a number of recent personal details about the other person) with three times as many individuals as nonusers. These expanded networks are a rich resource that many organizations would like to tap, but early efforts to drive conversion from contact to applicant were rarely successful. One of the key drivers of failure in early adopter organizations was an assumption that the same old approach to communicating employment opportunities could be applied to social media communication channels. That assumption ignored the fact that social media tools were developed primary as a means for a close network of people to communicate with one another via a channel free from spam and noise. To better take advantage of social media within the enterprise and to smooth the handoff during conversion, organizations need to invest in three practices.

• First, you need to develop a primer to help employees cultivate professional relationships online. This often entails educating them on how to identify valuable contacts, how to make a good introduction, how to establish a mutually beneficial dialogue, and how to determine if and when referring someone to the organization should be considered. We all know how employees feel about training, but to our surprise, 51% of 15,000+ employees surveyed in 2008 indicated that training on cultivating a stronger professional network was the No. 1 thing their organization could do to improve their ERP.
• Second, you need to develop a way of communicating critical position vacancies to the segments of the workforce that are most apt to be able to refer a qualified person in a manner that isn’t spam. We all know what spam is; the vast majority of HR communications qualify! A good approach uses hyper-defined segments and crafts messages that go far beyond just detailing the openings. Great ERP communications explain why finding great talent for the open positions is important to the organization and to the recipient of the communication. They also include priming questions, or questions that can help the recipients more quickly identify who they may know, and provide interesting information about the role, the team, or the organization that someone may actually want to share in casual conversation.
• The third practice you need to develop is allowing referrers to make a referral in a manner consistent with dealing with a friend, but that delivers value to you the employer. This involves making the submittal process easy but qualitative. You need information, and both the referrer and the referral need a way to provide it to you that isn’t cumbersome. The e-commerce model of sending a link to a referral that takes them back to the online application doesn’t fit this audience and should be dropped like a hot potato. Consider allowing employees to make a referral using a social network ID, and ask them to prequalify the referral using one to three questions.

Having developed these three practices, the organization needs to highlight successes visibly and frequently. Establish goals for both the ERP and the social networking initiatives, because goals give you an excuse to communicate and a target to track against. Reward successes, and provide a means for employees to easily share what is and is not working.

What are some alternatives to social networking sites if these sites are prohibited by the company legal department?

Obviously the most desirable approach is to make the business case to change internal perspectives/policies, but until that is accomplished, there are still some actions you can take. A number of tools make it possible for employees to publish content to their social networks via e-mail; tweetymail is a good example. While this approach will not enable the same rich networking experience as interfacing with the services directly, it can provide organizations with an effective way to use the services within the network policy of the organization. Many proficient social media users also connect to social media services via mobile devices, which your organization may have a policy against using on company time, but which is most likely ignored. Recognizing that adept networkers will always find a way, and developing tools or approaches that lend themselves to the alternative access methods, is a way to be supportive.

What technology have you found most successful in tracking the social media network referrals?

As mentioned earlier, converting social network contacts into referrals can be a daunting activity. Early research has shown that the last thing you want to do is take a newly developed or cherished online contact and force them into the torture process that is the online application. Conversion rates of social media contacts to applicants can be as much as 10 times higher when alternative application methods are used, mini-registration forms on micro-sites and landing pages being the most common. Five years ago there were not many software systems available specifically developed to help administer ERPs, so many best practice firms built their own solutions internally to support their programs. Today, firms like SelectMinds (webinar sponsor) and Jobvite provide tools that can not only help you drive awareness of opportunities, but also track the response. An alternate method involves using a CRM system such as Salesforce.com or Avature and evoking the web-to-lead functionality. Web-to-lead lets organizations rapidly create a number of online forms that funnel data on respondents back into the CRM as leads, which can then be tracked through a defined workflow. The later approach would let you create different referral forms for departments, social media campaigns, locations, etc.

Program Administration-related Questions

My company requires a waiting period after hire of the referral, before paying any referral bonus. I am not sure it serves any legitimate purpose. Thoughts?

Never ever delay payment. It’s a program killer. I do not know where this silly practice originated from, but it is a useless policy that will severely dampen enthusiasm. Unless your organization does an incredibly poor job selecting who to make offers to, 99.9% of the time the referral will outlast the waiting period, saving the organization nothing and penalizing the employee in the process! Delaying the reward just adds another administrative issue, expanding the process time significantly and forcing developing of a tracking element. Most reasons for early turnover are related to the manager or are related to issues beyond the new hire’s control and have nothing to do with the referring employee. If you do have an employee consistently providing bad referrals, coach them. If an individual manager has high early turnover rates from any source of hire, coach the manager.

If you can’t develop a business case to stop delaying payment, consider repositioning the reward. Instead of communicating that the reward is withheld until completion of a probationary period, give the referring employee a small reward at time of hire and alter your reward structure to provide a larger reward for all referrals that result in a hire that obtains above-average performance ratings after six months. This approach will encourage the referring employee to support the referral during the early stages of employment and possibly even reduce overall program costs. Our 2008 research revealed that 58% of employees are comfortable with ERP rewards that vary with hire performance and that another 13% are neutral on the issue.

It seems difficult or ambiguous to tie referral credit to someone blogging. How do you identify who deserves credit, especially if the referral wasn’t a warm referral at the first point of contact?

There is a quite simple solution to identifying who gets credit for a referral. Ask the referral who played the biggest role in getting them to apply! If they list a specific blog, video, social network contact, etc. you can use that information both to allocate the reward and to educate your employees about “what works” and what does not.

I understand that it is very important to respond to every referral within an acceptable period of time, but is an automated response enough?

It is certainly acceptable to send automated acknowledgments that a referral has been received, but that should never be the only communication sent to all parties involved. When automated responses are used, they should help establish expectations by outlining the referral process and estimated timeline. All referrals need to be closed; i.e., result in a hire or a decline. A personalized communication needs to be sent to every party involved at each stage of the referral process until the referral is closed, with the first personalized communication occurring within 24 to 72 hours of the referral submission. Think of it like an employee suggestion system; if a suggestion that an employee has worked hard on gets only a generic response, it is unlikely that you will get future well-thought-out suggestions either from them or their colleagues.

What should you do if the referral is clearly not qualified for the position?

This happens much more frequently in programs that lack a design element requiring referring employees to pre-assess or qualify their referrals. You must respond to all referrals, but in the case of outright rejections, it helps to provide the employee with feedback so that they know what they did wrong or the general reason for the rejection. This might include a checkbox list including insufficient education, insufficient experience, or lacking specific skills. If you do not have the resources for customized responses to all, you should at least provide specific feedback to first-time referrers, to well-connected individuals, to senior managers, and to individuals in the hard-to-fill positions.

Is there any research that demonstrates that companies make employee referrals a priority? If yes, how do they maintain two different recruiting processes?

In our benchmark research, we isolate the top 40 performing programs evaluated as our best-practice sample. In 2008, all but one of the firms in the best-practice sample maintained a separate recruiting process for referrals that fast-tracked evaluation and scheduling. Prioritization is becoming more common as more organizations acknowledge that treating all roles and organizational units equitably doesn’t mean equally. Business leaders expect prioritization even though they may not be happy when it negatively affects them. From an economic perspective, ERPs produce the best hire yield for external hires: 1:3 in best practice firms. So prioritizing flow from ERPs is a logical resource optimization tactic that drives not only efficiency, but effectiveness.

Other factors driving prioritization include the fact that all high-quality applicants (and referrals are top-quality candidates), once identified, should be given expedited treatment because they remain in the job market for such a short period of time. Prioritization also encourages your employees to continue referring, by providing a positive experience that validates that their input is valued. Incidentally, prioritizing referral applicants does not imply that they will undergo different screening or assessment, only that the process will trigger faster.

What should happen if a referral that was made for a position that involves a bonus … ends up being a better fit for another position that does not have a bonus attached to it?

Generally referral bonuses are tied to a specific job or requisition number because they are hard-to-fill jobs or are mission-critical. As a result, filling another position with a referred candidate would not automatically result in a reward.

What do you do when two employees refer the same candidate? Do you reward the earliest referrer or split it between them?

Generally, referral bonuses are paid to the earliest referrer but referrals can be set to “expire” after six months or one year. However, even the best-designed referral programs run into conflicts, so the best practice in those rare cases is to have the referral identify who played the biggest role in them joining the organization.

All referrals are important but how do you balance the fairness of someone who really worked hard to get a referral to someone who did not?

The foundation principle behind employee referrals is that employees will only refer those folks whom they desire to work alongside and who can do the work. Rewards primarily focus on results, not effort. I am not aware of a single firm that measures or rewards the amount of effort that the employee puts in to get a referral. Obviously, well-connected individuals can more easily make referrals, but they have over time invested in developing those connections. However, if all employees are given a wealth of information, templates, and best practices, you can certainly narrow the gap between the effort required by the well-connected and less well-connected.

Organizations that collect data on sources of hire consistently find that employee referral programs produce a high volume of high-performing hires with longer retention rates, and in most cases, at relatively low cost.

Unfortunately, when it comes to managing ERPs, there are a handful of organizations doing it really well and a lot of organizations doing it dreadfully bad.

After more than a decade of collecting program performance data, researching program design, and writing a book on ERPs, I can attest that there are many factors that differentiate a great referral program from an average one.

Many recruiting managers with woefully under-performing programs think they have great programs and are somewhat shocked when they learn that, on average across all industries, 1:3 hires come from employee referral and that it is no longer uncommon for more than half of all external hires to come from employee referral in organizations with leading talent management functions.

If your organization doesn’t have an ERP, or has one that produces less than 30% of all external hires, now is the time to benefit from the learning of organizations like AmTrust, Accenture, Amazon, Google, Tata, Aricent, DaVita, and Edward Jones to improve your efforts.

40 Practices That Distinguish Great from Average

The following list is separated into eight categories, based on what the composite practices are trying to accomplish. Benchmark firms are highlighted in parentheses.

Improving the Business Case for ERPs

The best referral programs are well-funded because they have convinced business leaders and managers on the business impact of employee referral programs.

• ERP metrics — top programs emphasize metrics that cover the performance of new hires, retention rates, diversity, participant satisfaction, and program ROI. (DaVita, AmTrust, and Aricent)
• Calculating the dollar impact — using business impact measures, leading ERPs calculate their program’s financial impact on the organization to increase executive and management support.

Improving Program Responsiveness

The No. 1 factor contributing to poor referral-program performance is a lack of responsiveness to inquiries and referrals.

• Rapid response — the best programs provide qualitative individualized feedback to the referrer and the referred individual within 24 – 72 hours of submission. (Aricent and AmTrust Bank)
• Priority processing — referrals are given a priority for processing over other sources to ensure that the employee and the referral feel like they are special. (Accenture)
• Expedited interviewing — make a promise to interview all employee-referral candidates within a certain number of days. (Owens Corning)
• An “on-the-spot” evaluation — when referrals are collected at referral events, provide on-the-spot screening and evaluation with instant feedback (Tata)
• Online tools — offer online assessment and/or self scheduling of interviews. (Alaska Airlines)
• 24/7 help desk — always-open referral help desks to provide information and to answer questions. (Tata and Aricent)

Changing Who’s Eligible

Second-generation referral programs often broaden the scope of who is allowed to make referrals.

• Manager eligibility — because managers and HR professionals are well-connected, allow them to refer for roles outside their organizational unit. (Accenture)
• Non-employee referrals — allow consultants, customers, references, corporate alumni, and other stakeholder groups interested in driving the success of your organization to participate. (Internosis)
• Internal referrals — internal referrals are encouraged to expedite internal movement and ensure that under-used talent doesn’t get overlooked by other internal systems. (Booz Allen)
• Discourage weak referrers — ban individuals who do not follow program guidelines or who consistently produce weak referrals from further participation.

Improving Program Motivators and Rewards

While many top-performing programs use program rewards, rarely are financial incentives the primary motivator.

• Motivate without bonuses — several firms have successfully produced 50%-plus referral rates without using cash bonuses. The key is to excite participants about building an effective team and communicate how hiring top talent leads to job security and improved company performance. (Edward Jones and AmTrust Bank)
• Increase recognition — publicly recognizing employees and managers for participating using personalized thank-you notes from executives and special lunches exclusively for referrers can dramatically improve participation.
• Charitable donations — providing donations to a charity of the referrer’s choosing for successful referrals can be a significant motivator in organizations with a strong social responsibility mission to employees not driven by bonuses. (Accenture and DaVita)
• Reward all referrals — while most referral programs reward only for a successful hire, a growing number of top programs are offering small rewards for the introduction of any quality candidate to encourage more referrals. (Accenture)
• Manager targets — individual managers are given specific targets for the referral volume of their team and themselves to motivate and spur internal competition. (Acumen Solutions, Yum Brands)
• Develop an SLA — the very best programs increase the responsiveness of line managers by instituting service-level agreements that spell out expectations. (Aricent)

Increasing Proactive Referrals

While traditional referral programs rely on the erratic flow of referrals subject to the whim of the employee population, many top programs use proactive components that create flow as needed.

• Onboarding referrals — ask new hires to make referrals during onboarding. (Eli Lilly)
• Referral activities — visit top performers and coach them through a talent discovery exercise to generate referrals for a particular need. (Quicken Loans)
• Alerts — send targeted alerts to the most relevant employees or those who have signed up in order to make them aware of current need. (CACI International and Quicken Loans)
• Follow-up interviews — following a successful referral, interview the referring employee to thank them, find out how they sourced the hire from their network, and to ask for additional referrals. (Amazon)
• Referral cards — provide both paper and electronic referral cards to highly visible employees in order to increase referrals. (Accenture and Southwest Airlines)
• Referral events — hold referral events and hiring parties for referrals in order to garner attention, to educate, and get spot referrals. (Monster.com)
• A referral database — develop a pool of referrers who can be proactively approached. Select these individuals based on their past referrals and the likelihood that they know someone with a particular skill set. (Accolo)
• Provide feedback on quality — provide employees with honest feedback on the quality of their referrals so they can continually improve. (Accenture)
• A diversity emphasis — emphasize and proactively seek out diversity referrals, using metrics to track what is and is not working.

Using Social Networks

The lack of a robust social recruiting strategy in most organizations means that employee networks and social media tools are often not being usedeffectively to support employee referral.

• Educate and encourage — fight corporate policies that discourage social media participation and educate employees and managers about how to effectively use social networks for professional purposes, then encourage mass participation. Build online training resources that instruct on quality profile creation, information sharing, online networking, and converting network contacts to referrals. (KPMG, Acumen Solutions)
• Give them something to talk about — most professional social network activity relates to the sharing of valuable information or interesting stories. Make content that features your organization available in formats that are easy to share. Publish shortened links to new stories, blog posts, product announcements, article shares, etc. to Facebook and Twitter so that employees only need acknowledge the post to share it amongst their networks. (Microsoft, Facebook, PepsiCo, and Zappos)
• Create learning networks — one of the best ways to take advantage of micro-blogging tools like Twitter is to create learning networks where people inside and outside the organization can share links to articles they find of value professionally. Source micro-bloggers posting relevant content to specific groups within your organizations and encourage employees to follow them and to comment of shared content or possibly contribute complimentary or contradictory content.
• Provide help — the social media landscape changes daily, so getting started can be daunting. Consider hiring an ERP coordinator dedicated to helping/coaching top performers on establishing and leveraging their social networks.
• Accept social media profiles — few things can kill conversion of a referral initiated via social media more than forcing the individual through the ATS application from hell. Consider maintaining the social media experience by accepting complete profiles on social media sites in lieu of a resume or online application. (Sodexo)

Changing the Program Scope

Many organizations either over-restrict the scope of their ERP or don’t provide enough program structure.

• College referrals — referrals work even better among the college population because they are well connected through social networks. An advanced program must include referrals for college hires and interns. (Endeca)
• Executive referrals — include executive openings and encourage executives to make referrals across the board.
• Boomerang referrals — devise program elements that focus on top-performing employees who quit or were laid off. Corporate alumni can also be the source of referrals. (DaVita, Deloitte, and Booz Allen)
• Global referrals — do away with regional barriers to participation and open up referrals from anywhere to anywhere. (Tata)
• Limit the scope — the very best programs do not treat all jobs the same; instead they prioritize key, mission-critical; and revenue-producing roles. (Accenture)

Improving Program Administration

One of the key differentiators between average and exceptional programs is program management.

• Employees can track their referrals — allow employees to continually track the progress of their referral using an ERP portal or stage-triggered communications. (Accenture and Aricent)
• Require the employee to pre-assess — exceptional programs require the referring employee to submit an assessment of the applicant being referred. By requiring employees to actually know the work of referrals and to assess them based on skills and fit, you help eliminate junk referrals. (Aricent)
• Website customization — provides detailed information to first-time referrers and those seeking assistance, but provides fast-track option for submitting referrals for individuals with prior experience. (Accenture)
• Hire a dedicated program manager — every one of the top performing programs I have evaluated had a dedicated program manager and many had dedicated supporting staff members. Establish program performance goals, and hold the program team accountable for producing a program design capable of meeting/exceeding them. (Tata, Owens Corning, Amazon, and Aricent)
• Avoid program killers — the very best referral programs avoid common program-killing features, like delayed or partial bonuses, failing to update marketing materials, and extensive program rules.

Final Thoughts

The “build-it-and-they-will-come” mentality that many organizations approach their ERP with is silly. In recent years, employee referral programs have become the dominant source of external hires, and they deserve a level of program strategy and management commensurate with that status.

Exceptional referral programs are extremely sophisticated and require highly coordinated resources. If your program is woefully out of date and under-performing, I’m sorry to inform you that buying new creative from your recruitment advertising agency will not bring it up to par. Program excellence comes from design, and now is the ideal time to rip out your existing program and replace it with one that can produce results in the incredibly challenging years to come.

We have some great hits from the community so let’s get started!

Here’s what’s going on in the ERE community this week:

1. The dreaded employee referral?
2. Internet background checks on prospective hires
3. Being yourself and why it works
4. Is the 6.2% payroll tax incentive helping to hire more unemployed people?
5. How recruiters should respond to a vague sales manager
6. Featured group of the week: New England recruiters

1. The dreaded employee referral?

Simon Meth writes: “Popular opinion is that employee referrals are the #1 source of hire in a corporate environment. I believe that to be true. But are employee referrals the #1 source of quality hires? I doubt it! Following are some thoughts from my own experience. Your mileage may vary.

Can employee referrals backfire? Are they the number one source of quality hires?

2. Internet background checks on prospective hires

A community member asks, “Are any of you on the corporate or in-house recruitment side doing routine Internet searches on prospective candidates or new hires? If so, do you have legal counsel support for it? And, how is it going? I have been tasked by the VP of HR at my site to look into this. I have consulted two attorneys — their opinion is that its okay to do but know that the info is not reliable and should not be used for a go/no go decision. Our third party background check company won’t touch it either. I’m interested to know if any of you out there are doing it and if so, what kind of results are you getting?

Do you do Internet background checks? Let this member know in the forum.

3. Being yourself and why it works

Matthew Hakaim writes, “My ‘perfect world’ had just crumbled in a matter of seconds. I was faced with the need to find new work, and I had no clue what I wanted to do. A few weeks later I was introduced to a guy who owned a recruiting company that specialized in finding talent for the video game industry. After a few short conversations I had accepted a job at their firm as a recruiter. There was a slight hurdle to overcome though. I was not a gamer by any stretch of the imagination and I really had no clue what a recruiter was.

I like the simple message: be yourself and life will be a lot easier!

4. Is the 6.2% payroll tax incentive helping to hire more unemployed people?

Maureen Sharib posted some interesting information in the Compensation and Benefits group: “Employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010. More here.

I have to wonder if these incentives will actually help employ more unemployed people. Is this the start to recruiters preferring active candidates over passive ones?

5. How recruiters should respond to a vague sales manager

Lee Salz started an interesting conversation in the Ask the Sales Hiring Expert group: “Sales managers are infamous for asking recruiters to find “great sales people.” Yet, that isn’t enough information to surface the right candidates. What should recruiters do so they don’t waste time spinning their wheels?

What’s the best way to nail down criteria for sales people from sales managers?

6. Featured group of the week: New England recruiters

The New England recruiters group is a networking group based around the states of Maine, New Hampshire, Vermont, Massachusetts, Rhode Island, and Connecticut. While it has been dormant for some time, we’ve started to revitalize the community through some discussions and e-mails about where to take the group. Take a look at our most recent discussion about using Facebook as a recruiting tool or join up and start your own discussion!

To see what else you’ve been missing, check out the ERE community.