Reimagining Employee Referral Programs

In the era of ‘Great Resignation,’ with the current high demand for workers, the job market is buzzing. Job searchers have their pick of roles in a variety of organizations, and companies need to evaluate how they can make the best use of their recruiting tools and techniques. One of these valuable recruiting tools are employee referrals. There’s a reason why referral bonuses are common in organizations; referrals are one of the best ways to attract and hire candidates that are more likely to succeed within the organization.  

Research tells us that referrals are great for finding candidates that are likely to fit the organization’s culture. Referral programs also cut down on recruiting costs, with candidates who often know more information about the organization and are highly motivated to join. Although research demonstrates that referrals have the potential to limit the diversity within an organization, employee referrals can provide candidates who are more likely to receive and accept an offer, stay for the long haul, and perform better (Harvard Business Review, 2020). Employees that are referred to the organization often have values and interests that coincide with the organization’s culture, leading to a better fit. They also often have a deeper understanding of the organization prior to joining because their referrer can provide a realistic preview of the organization and the role. The referrer can provide their genuine perspective on aspects that are not so obvious through a formal recruitment process, like the organization’s leadership, culture, pay, and role responsibilities (Harvard Business Review, 2020). 

Personal connections are a powerful recruiting tool, and FMP has been successful utilizing these referrals. Often, when we think about referrals, we think about reaching out to our discipline’s professional organization or our degree’s alumni network. However, within FMP, we have found success with those relationships as well as slightly less obvious referral relationships, like childhood friends and even family members. For example, Thuy referred Savannah in the beginning of 2021, when she was finishing her master’s in Public Administration. Our connection was through University of Tennessee at Chattanooga, where Thuy studied I/O Psychology and Savannah received her bachelor’s degree. We met in DC, and even though Savannah’s educational background is not in human capital management, Thuy considered the other skills that are needed at FMP and in a consultant role. Thuy knew that Savannah’s master’s program focused on government and cultivated skills like data analysis, writing, and presenting, which fit the skillset of a consultant. Referrals like this – where the candidate has a different educational background than other workers – can lead to diverse skills and new perspectives.  

Referrals as a recruiting tool should be incentivized, and a best practice is to do this with a monetary bonus.  Referral bonuses can also be adjusted to further incentivize diverse hires, with larger bonuses for people who refer potential new hires from underrepresented groups. This framework, with a tiered bonus structure, can be a useful tool to combat some of the potential diversity issues that can come from referrals. Underrepresented groups can be defined by an organization, depending on the makeup of the workforce. When companies request employee referrals, recruiters should encourage them to think outside of the box. Providing a job description with the core competencies and skills needed for a role and providing examples of potential nontraditional referrals can encourage employees to think beyond the typical referral relationship.  

Companies can also encourage employees to expand their community and network through career fairs, community engagement, and conferences, which would provide employees with an influx of people into their network who may be from different backgrounds. Another way to expand referrals is to encourage employees to utilize their ‘soft’ connections. Instead of referring someone that the employee knows very well, employees can connect recruiters with organizations such as their former university student group, which can provide an informal referral. Referrals through shared organizations can create new opportunities for those members. These types of referrals can also take some of the pressure off the employee since the referral is through an organization and not necessarily an endorsement of one individual.  

Current employees are a powerful marketing and recruiting tool for organizations. Encouraging and incentivizing employees to refer candidates can mean a faster hiring process, higher employee retention rate, and better culture fit. Companies can reframe referrals in employees’ minds to include softer connections or people outside of their educational background and create a bonus structure that encourages referring candidates from underrepresented groups.  

Thuy Truong joined FMP in June 2019 and has obtained her M.S. in Industrial-Organizational Psychology from the University of Tennessee at Chattanooga. Thuy works on Organizational and HR Assessments and DEIA internal initiatives and projects at FMP. Thuy is from Fort Worth, TX and enjoys listening to music, attending concerts, and exploring DC in her spare time. 

Savannah Roder joined FMP in May 2021, and currently works on organizational development and learning and development projects. She is originally from Memphis, TN and graduated from George Washington University with a Master of Public Administration. When she is not working, Savannah enjoys baking, reading, and exploring DC.