Does an employee referral programme actually work?

Because a referral scheme is not a channel you switch on. It is a network you call upon, and a network has a floor.

Work it through. Say you employ forty people. Not all of them work in the trade you are hiring for, so perhaps fifteen know anyone suitable at all. Of those fifteen, not everyone will take part, because putting a name forward costs social credit: if it goes wrong you are stuck with it together. Say eight actually have someone in mind. Each of them might know two people currently open to a move. That gets you to sixteen names at best, and none of them is an applicant yet.

And only then does the funnel really narrow. Not every name wants to talk, not every conversation becomes an application and not every applicant fits. Start with sixteen names and you should not expect more than a handful of conversations.

That also explains the difference between employers. An organisation of a thousand people hiring for the trade most of them practise has a large network pointing in exactly the right direction. A firm of forty hiring for a speciality nobody inside has ever done is asking people to dig in a network they do not possess. Raising the bonus will not fix that.

Three conditions, and all three have to hold.

You are hiring for work your own people do. Fitters know fitters, nurses know nurses. Hire for a role nobody in the building has ever held and you are asking colleagues to search a network they never built. Which approach suits which type of role is covered under roles and target groups.

You have enough people. Not because larger employers are better at it, but because the arithmetic above scales with headcount. In a small team referral can be a useful extra route, but it is not a substitute for recruiting. If too little is coming in, the cause is usually somewhere else entirely, and the usual suspects are listed under too few applicants.

Your people are willing to attach their name to it. This is the condition no policy can arrange. Recommending a former colleague is a statement that this is a good place to work. Ask that in an organisation where people do not believe it and you will get no referrals, which is itself an answer to a different question.

Three things, and they rarely arrive alone.

The bonus becomes the only engine. Money helps, but it mainly motivates the people you do not need: anyone putting a name forward for the payment looks less carefully at the match. The colleagues you do want are the ones who suggest someone because they would enjoy working with that person again. A bonus is a thank you, not a drive train.

Nothing comes back. Someone recommends a former colleague and then hears nothing for weeks, not even when it comes to nothing. That is the end of their participation, and usually of their colleagues' too. Getting back to the referrer within a working day is not a nicety here, it is the programme.

And the referred candidate is put through the same slow mill as everyone else. That is precisely the candidate who can afford to walk away, because they were not looking in the first place. Anyone who recommends a friend and watches three weeks pass will not do it twice.

So what then? Once the network is exhausted, two routes remain: approaching people who are not looking, which is what active sourcing covers, or becoming visible to people you could never have found yourself, which is the point of thought leader recruitment. The two do not exclude each other, see sourcing versus thought leader recruitment.

How large should the bonus be?

We have not measured that, so we will not name an amount. What we do see is that timing matters more than size. A payment released only after a probation year barely works, because by then the referrer has lost the connection to their own action. Split it if you need to, with a small part on application and the rest later.

Does referral work for hard to fill roles?

Usually not, and that is the painful part. Where few people exist, your employees' networks are thin as well, because they all know the same small group. Referral works best for the roles you fill regularly. For genuinely scarce roles you need a different approach, which is what hard to fill vacancies is about.

Is referral cheaper than advertising?

Per hire it often is, and that is not the whole story. A referral programme does not scale: you cannot push a second vacancy through a network that has already been asked. With multiple vacancies open at once, you need routes that grow with them. So do not treat it as a channel with a price per hire. Treat it as a route that occasionally produces someone, alongside the routes you can actually scale up.

What if nobody refers anyone?

Then you have learned something. Either your people do not know the target group, or they are not willing to attach their name to it. The first is solved with another channel. The second is a serious signal and deserves a conversation before you double the bonus, because a larger bonus changes nothing about the reason nobody called.

We do not sell referral tooling, so at SocialFind we will tell you when your own network is probably exhausted and which routes are left. If you would like articles like this in your inbox, subscribe to our newsletter.