Don’t Forget Employee Referrals

By Monday, December 2, 2013 Blog No Comments

It’s cliché – “nice to have and must have.” But at a certain point in a company’s lifecycle, an applicant tracking system does become a must-have. The hiring process simply becomes too much to manage manually. From managing reqs and resumes to scheduling interviews and offer letters, hiring out of spreadsheets can only get you so far. But the underlying assumptions driving the hiring process are rarely questioned. Recruiters are often looking to automate the process vs. tying corporate strategy to the hiring process. Typically a recruiter is simply looking to:

  • Automate the application process
  • Created a centralized repository for resumes
  • Provide some level of reporting on the backend

Jobvite is questioning these assumptions, and that’s why I’m here. Successful technology is disruptive. We’re changing the way recruiters recruit – from finding and nurturing candidates, to building an employment brand and leveraging employees’ networks to building a self-sufficient referral machine. The underlying objective for recruiters is shifting from topline automation and process, to bottom line results. And referral hiring contributes significantly to the bottom line (more than you’d think).

We recently finished building an ROI application here at Jobvite which provides savings estimates through the use of our recruiting platform. The big takeaway for me was the savings from hiring candidates through referrals. The “accountability factor” that is inherent in a referral hire has massive business implications that I never fully realized.

We pooled data from our customers, product team, and industry data to come up with conservative savings calculations. Based on our research, there are 4 primary areas of savings from referral hires:

1. Faster time-to-hire. Leaving positions vacant, particularly management and executive positions can cost a company thousands of dollars/day. With an effective referral program, you quickly find qualified candidates and, because you find them faster, recruiters spend less time sourcing and more time focusing on strategic priorities. Referral reqs typically get filled over 50% faster due to less time sourcing at the top of the funnel, a quicker flow through the interview process, and less time at the bottom of the funnel with background checks, references, etc.

2. Better retention. Referral hires stay longer. How much longer varies from company to company. But on the conservative side, based on data from our customers, referral hires stay at least 10% longer. Depending on the position in question, this translates to significant savings during a time when retention is decreasing at many organizations.

3. Better performance. Referral hires perform at a higher level compared to their traditionally-sourced counterparts. This points back to the “accountability factor” I mentioned earlier. Referral hires tend to approach their new job with an “I won’t let you down” attitude. A friend or colleague stuck their neck out to vouch for you and you don’t want to disappoint them. And based on our data, Jobvite customers see at least a 15% lift in performance among referral hires.

4. More likely to refer. Top companies that recruit smart are seeking to continually drive referrals from the top. This translates to bottoms-up growth in referrals because people referred into an organization see the process work firsthand. Therefore, they’re more likely to become a referrer. Doing this effectively will cause your percentage of referral hires to grow organically.

Bottom line – referral hires make sense in every way. This post is not about using Jobvite for referrals, even though Jobvite invented the social referral and though the social sourcing technology from Jobvite is often imitated, it’s yet to have been duplicated (there’s my one shameless plug). But whatever you do, you’ve got to get a formal referral program in place if you don’t have one already.

When I run ROI analyses for Jobvite customers, it’s clear that the value of referral hires can easily eclipse the savings you’ll see from a conventional ATS. The ATS has become viewed as a must-have, but from an ROI perspective, an effective referral program is arguably more important than an ATS. We put out a workbook earlier this year to help guide you through creating and managing a successful employee referral. And I’d love to hear from you guys about the success or failure of your employee referral efforts.

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