Best Practices

Employee Referral Strategies

August 2020

This report highlights how leading companies leverage & reward employee referrals.

Employee Referral Programs

According to the Society of Human Resource Management (SHRM), roughly one of every two employers offers a formal referral bonus program. Such programs account for close to 25% of all hires, on average. Many other employers have an informal referral system.

At some companies, such programs cover any job. In other cases, bonuses are restricted to positions with an insufficient supply of talent—for example; an e-commerce company might provide bonuses for software engineers, especially if they’re in a competitive market for tech talent, but not other roles that are easier to fill. The United States government even offers an employee referral bonus program at the discretion of individual agencies to staff hard-to-fill jobs.

Employers often believe that accessing the social networks of the current staff can be more cost-effective than other recruiting techniques, including the use of executive recruitment services. Some research indicates that incentive programs yield a higher quality employee and enhance retention of staff.

Incentives vary greatly by company, with cash, gift certificates, trips, and even cars being awarded. The value of incentives ranges from $250 to more than $25,000 (for executive positions) with the most common range being about $1000 – $2500 according to a survey by WorldatWork. Bonus payments were made in a lump sum about 70% of the time, on average. In other cases, partial initial payment was made with the remainder awarded at a later date (often after one year).

Employee Referral ROI

Case Study: Intel

At Intel, diversity is one of the strategic performance goals that determine 50 percent of executives’ annual cash incentives.In 2015, Intel’s then CEO Brian Krzanich set a goal to reach “full-representation” by 2020. Intel defined full representation as having a workforce that is reflective of the available talent pool in the technology industry, and earmarked $300 million to spend towards strategic initiatives to achieve their goal.

The company has baked diversity and inclusion goals into the business strategy, with 7% of all employee bonuses tied to hiring and retention goals.

To encourage referrals of more diverse candidates, Intel doubled the referral bonus for staff who referred diverse candidates. The company now offers $4,000 for employees who refer a woman, minority or veteran job candidate who is ultimately hired—double the standard referral bonus. The bonus fee is viewed by the company as a way to increase chances of having women and minorities receive more representation in a job applicant pool that has disproportionately consisted of white men. Intel reports the bonus structure helped double its diversity hires in just one year, exceeding its goal of 40% diversity hires by 3%.

Accenture Employee Referral Process

At Accenture, more than one-third of new hires are generated by referrals; rewards range from $2,000 to $7,000 or more. The company runs special campaigns for specific skills that might net higher incentives. Accenture’s one-step referral website allows employees to suggest candidates for specific openings or to make general referrals; its use is open to all employees as well as Accenture alumni.

Accenture’s employee referral program is based on the fact that referring people makes employees feel good; either because they helped out a friend by getting him or her a job and/or because they helped the company find a great
new hire. To maximize this feeling of ‘doing good’ Accenture gives employees the possibility to donate a part of their referral bonus to a charity of their choice – the firm matches that amount.

Accenture has created an internal marketing campaign that includes a variety of communications strategies and a special landing page on the company intranet that includes photos and testimonials of successful program participants; employees can even shoot and upload their own videos. The referral site also features online help that allows employees to track the progress of their referrals in real time.

Accenture also makes it easy for candidates to initiate referrals by adding a “Get Referred” button in job postings.

Digital Ocean Employee Referral Process

Digital Ocean launched its referrals incentive structure in 2017. For each referral candidate who is hired, the referring employee received a $3,500 referral bonus in addition to a $1,500 charitable donation paid by Digital Ocean on the employee’s behalf.

The result?

In its first year, 40% of Digital Ocean’s new hires were acquired through employee referrals.

Key Takeaway:

Structure your employee referral bonuses to serve a good cause. Instead of offering a cash prize, offer to make a donation to your employee’s favorite support a charitable organization.

HP’s Employee Referral Process

Instead of focusing solely on great employee referral awards per se, Hewlett Packard Enterprise build a culture around it. They regularly organize company events to honor and publicly recognizes employees who refer qualified candidates.

By recognizing their referring employees as “champions” and celebrating their success, this company achieves a greater employee engagement.

Key Takeaway:

Don’t focus only on your employee referral awards and forget to thank your employees for referring great candidates! Even if their candidate doesn’t end up hired in the end, you should still think of a way to thank them for their time and effort.

Distillery’s Employee Referral Process

Distillery is a software development company that has struggled to find and attract highly-qualified software developers. This is why they turned to their current software developers and asked them to recommend great candidates.

Along the way, they discovered that their employees are most motivated when offered new gadgets such as a new iPhone or Apple watch.

Key Takeaway:

There is no universal best type of employee referral bonuses that works for every company and every employee. You need to do your research and find out what works best for your own employees.

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