How to Make Your Staff Happier: Employee Referral Programs

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How to Make Your Staff Happier: Employee Referral Programs

Ever wonder why your employees complain about being stuck working with people they can’t seem to get along with? Work has become so stressful that it gives you headache in the morning, after waking up from a delightful dream about your boss awarding you a 4-week vacation. There is an easy solution to this: Employee Referral Programs (ERPs).

Referring qualified friends, colleagues or even family can create an excellent source of prospective candidates. Employee referral programs are essentially used by organizations to hire great talent while reducing acquisition time and cost, yet prolonging the duration of employment. In short: employees work with great, trusted talent, the company saves money up front through the recruiting process, and likely increases the return from the specific employee. For full analysis on Employee Referral and its benefits, have a look at the following E-Book: 5 Employee Referral Must Haves.

The Solution: Referrals

Employee Referrals are recommendations given by employee to their managers and HR regarding potential candidates. They can be provided by employees, and management, in addition to external stakeholders such as partners, customers, and friends/family.


Referrals are invaluable; they not only provide critical information but they are powerful because they are created from credible trusted sources. This also alleviates us the pressure of hiring external professionals to find us adequate personnel. Employee referral programs are used to obtain useful information from our employees’ network that will be of use to the organization, further reducing costs, turnover rates and lengthy searches for qualified candidates.

In this blog post, let’s discuss two of the benefits of Employee Referral Programs.

1. Grade-A-Talent Knows Other Grade-A-Talents

Step back and take a look at your network from afar. For many, most of our network is comprised of family, friends that we grew up together as a child, those we met along the way at schools, and finally worked with over the years. Each sociological group, has similar characteristics. As an example, those who tend to go to Harvard are considered to be “intelligent”. High-school jocks are considered to be “competitive” and geographic areas are now categorized. On a granular level, people associate themselves with others who have similar interests and traits. It is therefore safe to assume that similar qualities you admire in your employees may exist in others that they know.  If a particular job, or company culture requires a specific trait, chances are your employees would be quick to identify those in their “social” groups that can help. Your Grade A Talent will know others, and it is imperative for you and your organization to foster a strong recruiting culture.

As baby boomers continue to retire, there is an impending shortage of talents in every industry. It has gotten more difficult for corporate recruiters to go through pools of applicants to pick out the right talent. The best and simplest way to find suitable candidates is through a combination of building a recruiting culture internally via the employee referral program because it creates employee engagement while simultaneously efficiently and effectively finding adequate talent. More on this in upcoming blogs.

2. Lower Cost for Hire

Employee referral programs can lower your cost per hire. A robust ERP can potentially save your organization thousands of dollars a month, allowing for budgets to be re-allocated to other departments that need them. According to a study of Lincoln Financial Group, whose employee referral program accounts for 55 percent of all external hires, the company boasts a much lower staffing cost ratio of 10.9 cents per dollar. This confirms that referrals do in fact, reduce the cost of hiring employees.

An ERP spin off effect is internal mobility. As employees begin to understand what type of candidate would thrive within their business environment, they are more inclined to express interests in the open positions that are being offered in their companies. This cuts down the costs for hiring tremendously, since the company directly “re-hires” the employee, drastically reducing onboarding and training costs.

Employee Referral Programs should be the cornerstone of every organization striving for a strong culture because since fosters employee engagement and increases workplace culture. This critical component in building a recruiting culture will become the new BFF for those in HR.

15 Must Haves

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  • Camillus

    ERP is no doubt a great way to recruit trusted staff with less stress and at a far cheaper cost. I benefited from this process as an employee in my previous job in Accounting. I remember the company placed a high priority on it and it really worked for them. Yes, I see it becoming increasing popular. Interesting article.

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