How Your Employee Referral Program is the Key to Improved Talent Sourcing

Your Employees are Your Best Talent Hunters

March 5, 2024

By Chris Harvey

Not a day goes by without hearing from an HR leader about the challenges of hiring key talent. Some are inundated with resumes, yet finding the right candidate feels like searching for a needle in a haystack. Job seekers, on the other

hand, feel compelled to apply to any vaguely suitable job to secure an

interview. Both sides are dissatisfied, and the prospect of improvement seems


There may be a solution (or at least part of one), and it’s your referral program.

88% of organizations rate referrals as the most reliable source for finding new talent. Which isn’t surprising. Those making referrals today are the ones already working in your company, possibly even performing the same job, and are well equipped to assess future employees who are likely to thrive at your organization.

I worked for an organization where over 70% of new hires came from referrals.

Our CHRO had a “Referral First” approach, considering it crucial to our culture

that the best way to fill roles was through other satisfied employees. She used

to say, “If you wouldn’t invite them to dinner at your house, don’t invite them to be a member of our family (business).”

Also, the company was nationally recognized for its inclusive and diverse workforce.

Our company was an outlier, but it doesn’t have to be.

Today, most businesses fill less than 20% of their open positions via referrals. Possibly the easiest way to improve your talent sourcing is to optimize your Referral Program.

Start turning your employees into your best talent hunters.

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Here are some of the results you can realize from optimizing your employee referral program:

·      Reduced Cost-to-Hire: Organizations typically pay recruiters 10-30% of an employee's salary and reducing dependence on outside recruiters directly lowers the cost to hire.

·      Reduced Time-to-Hire: The average time to hire for referred candidates is 29 days, compared to 39-to-59 days for non-referred candidates.

·      Increased Employee Longevity: Less than 25% of workers recruited through job boards stay for more than two years, whereas 40% of employees obtained through employee referrals stay for more than four years.

Here are some options to consider when optimizing your referral program: 

·      Accelerate Payments: Over 70% of organizations pay employee referral payments once the employee has been hired and in that role for 6-9 months. However, some employers are front-loading or breaking up payments to address the disconnect that can lead to reluctance in making referrals.

·      Turn Employees into Brand Ambassadors: Create a “Candidate Package” for the employee to share with their referrals, providing key information about the organization, such as benefits and PTO.

·      Visibility: Have a process to keep referring employees aware of the referral status is in consideration process. Lack of visibility can be discouraging and create a disincentive for future referrals. Provide specifics on when they can expect referral payments and the amount of each payment.

·      Employee Accountability: To optimize referrals, the candidate should be known to your employee talent hunters – either as a friend, former colleague, or known by reputation. Capture how employees know the referred candidate to reduce potential gaming of the system. Additionally, track who referred each employee and reconsider their inclusion in the program if there is a pattern of poor-performing employees.

·      Employee Praise: It isn’t always all about the money. 58% of referring employees stated they did it to help their company and raise their profile at the organization. Recognizing employees publicly who believe in your organization enough to invest their social capital in helping it grow. Use team or company meetings to thank employees who referred successful candidates.

·      Employee Engagement: Why aren’t more employees participating in referral programs? Happy and engaged employees are excited to make referrals and create a robust stream of talent for the company. Research indicates that employee participation is a proxy for employee satisfaction and may be telling you more than what they disclose on your annual employee engagement surveys. 

What are some referral program concerns?

·      Referral Gaming: While you want a robust referral process, there is a danger that employees may take advantage, possibly referring less desirable candidates solely motivated by financial incentives. Set clear guidelines with your employee and communicate the purpose of the program is to make the organization better for everyone. In addition, It is critical to have a process to evaluate the strength of connection with the candidate. 

·      Homogeneous Teams: There is a danger that employees only refer those with similar life experiences or backgrounds. Consider extending your referral program to enable outside networks to source diverse candidates and expand past the network of your employees. 

Referral Program Design and Administration

Is your program mostly manual now? To efficiently provide referring employees visibility into candidate status, payments, and keep them updated with "Candidate Packages," consider automating these processes.

Bountiful has developed a straightforward solution to help you manage and leverage your referral program to reach your hiring goals for 2024 and beyond.

Here are some highlights:

1.    Automation: Bountiful automates the entire process and saves you from spreadsheets and nested referral links nobody uses. This will save you time and misery trying to manually track important details such as candidate progress updates and when to pay someone. 

2.    Extend the Program: If you want to take advantage of going beyond your direct employee team, you can expand your reach by creating outside talent hunters (instead of external recruiters). We all have great people in our networks. Leveraging external resources expands your network reach and ability to drive a more diverse candidate pool. 

3.    Make it Easy for People to Participate: Providing branded sharable snippets to make it simple and easy for your people to share open roles to their networks. Low friction equals more participation resulting in more qualified talent flow.

4.    Reward Behavior: They give you the ability to “slice and dice” payments any way you want. For example you might want to pay 50% of a referral fee to the person who lands the hire. You can then take the remaining 50% to reward participants who are getting you quality candidates into the interview process (a proxy for quality). Earlier payments will improve engagement in your program (the “instant gratification effect”).


To learn more about optimizing and enhance your referral program, check out Bountiful. It’s all they do.


Editor’s Note: This newsletter is sponsored by Bountiful, a company dedicated to assisting organizations in rethinking and optimizing their referral programs. We were genuinely impressed by their innovative approach and have collaborated with them to bring you today’s newsletter. If you are exploring ways to enhance your candidate sourcing strategies, we recommend you consider engaging with Bountiful to learn about their solution.


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