Does the referral program always a winner?

“I know someone who knows someone”, “I once worked with an expert in X”. “In my former life at Y..”. Why not intelligently take advantage of the collective network of our organization’s members? In the context of a labour shortage, where organizations are trying to make the most of their opportunities, word-of-mouth becomes a precious ally in attracting new candidates and making your employer brand shine. Thus, implementing a referral program can be an interesting way to achieve this. In fact, at Iceberg Management, we have noticed that more and more organizations, including SMEs, are offering a monetary incentive to thank their resources for their referrals of talented candidates that led to hires. In this article, our Human Resources Consultant, Audrey Othot, CHRP, introduces you to the referral program. And gives clues to answer the question: does the referral program always win?

What goes around comes around

First, let’s put into perspective the fact that our internal resources are often our best ambassadors. Indeed, a happy employee attracts candidates who often share the same values. In addition to acting as an important retention lever, this contributes to sharing an honest image of the position to be filled and of the organizational culture. What could be better than our employees talking about us to their network as an indicator of happiness at work?

A program that pays for itself

A referral bonus is a way to focus on quality over quantity. A job posting strategy is necessary and can easily amount to several thousand dollars.  According to ADP, “filling a vacancy costs employers $4,129 and takes an average of 42 days. The cost of hiring employees increases proportionately with the length of the search, the role associated with the position, and the salary level.”[1] So if the internal referral comes early in the process (or sometimes even before the job posting), that’s a significant savings. Why not use some of it to thank the referring employee? But let’s face it, very often we can’t rely solely on the referral program to get applications.

At the same time, a referral bonus can be an interesting incentive that helps optimize the posting strategy. Your resources will be mobilized to share the news to their networks and necessarily, this will generate traffic on your ads.  There are several advantages, even if the hiring does not result in a candidate known to your employees.

Important monitoring points

Despite the numerous benefits, this initiative requires caution. Indeed, in addition to a clear policy to avoid ambiguous interpretation and exaggeration by less well-intentioned employees, one must be careful with the risk of creating conflicts of interest within the organization.

How do you ensure sound team management in cases where two employees share very personal ties within the same team? It is not uncommon to see employees, sometimes managers, refer their children for seasonal positions. Some also refer former colleagues who have become very close friends. This can be even more delicate when there is a hierarchical relationship added to the equation. How do you take advantage of the referral program while ensuring fair treatment during the selection process and within the work team?

In light of this information and to maximize the success rate of a referral program, it is essential to set clear parameters with the help of a strategic recruitment expert.

Audrey Othot, CHRP

Contributor to the HR Blog – Iceberg Management

[1] Yu, Jea, “Calculating the true cost of hiring employees,” ADP https://www.adp.ca/fr-ca/ressources/articles-et-perspectives/articles/c/calculer-le-cout-reel-dembauche-demployes.aspx [accessed October 14, 2022]