December 18 , 2018

20 HR Practices That Reduce the Effectiveness of Employee Referral Programs

The very best employee referral programs (ERPs) produce simply amazing results. But unfortunately, many corporate programs were designed years before we had so much data covering what makes the programs effective.

This data reveals that there are many factors that can directly reduce the effectiveness of these programs. Some of those factors include:

Not maintaining operational responsiveness — Without dedicated attention, it is easy for programs with exceptional service standards to slip, resulting in delayed responses to inquiries, slower referral response times, and even complete nonresponsiveness.  Because response time is the number one success factor for ERPs, it’s critical that service standards be restored.

Delaying reward or bonus payment — The second most commonly found negative feature is withholding payment of the bonus for 90 to 180 days post-hiring.  In order to realize how silly this requirement is, you need to ask yourself a few simple questions: Do salespeople have to give back their sales bonuses if the customer stops buying after 90 days? Do you delay payments to staffing agencies or executive search firms?  Well of course not.

So why should you treat your employees more harshly than you do your vendors? Rewards work only if they are immediate and there is no “risk” of not getting them.  Nothing discourages participation more than delaying the reward based on something beyond the employee’s control.

Paying half of the fee upfront is not an acceptable alternative. And you can’t put responsibilities on employees for matters that they have little or no control over.  For example, it’s not the employee’s responsibility to hire a candidate, only to refer them.  Hiring managers do the final assessment and they determine if the person is the right fit.  And if the person does quit prematurely, it’s the manager you should blame not the employee making the referral because they have no control over how the individual is treated and whether the promises that were made are actually kept.

Excluding senior managers and HR people from participation — Many programs exclude Senior Management and HR.  The idea behind a referral program is to get as many people as possible scanning the streets and talking up your firm.  To exclude anyone, especially highly visible individuals like Senior Managers and HR professionals is not advised.

Excluding them makes them feel like their second-class citizens and they will not refer at the same rate if they are excluded specifically from the program and the reward. If you’re worried about these individuals referring people that are qualified just to get the money, then these individuals should be fired on the spot.  The best programs allow hiring managers or anyone where there appears to be a conflict of interest to “opt out” of the bonus or, to give it to charity.

Allowing “I found you” referrals — The idea behind quality referrals is that you seek out individuals and assess their work and their fit with the company over a period of time.  However, as many as 60% of all referrals are not actually referrals but instead are situations where an individual proactively approached one of your employees (because they knew where they worked) and asked them to put their name in as a referral.

In this “I found you” situation, there is no in-depth assessment of the individual and in fact, the referral is made more as a “favor” because someone asked.  The best programs require the employee making the referral to provide enough information about the individual to ensure that they know them.  Program rules should specifically prohibit “I found you” referrals.

Reliance on job announcement spam — Unfortunately, it has become common practice to spam employees with irrelevant job announcements and generic program communications, both of which overworked employees quickly learn to recognize and set aside.

 Repetitive message formats — Years of experience have demonstrated that using the same message format over and over will eventually result in employees tuning out the noise, just as you tune out the billboard that rarely changes on your commute to work!

Repetitive rewards — Program rewards and prizes are intended to excite, but once they become commonplace or “stale” they cease to be effective.

Relying on the original business case — Business priorities change, unfortunately, few HR organizations update their business case for key programs such as the ERP to reflect the changing environment. Without ongoing program positioning, it’s easy for programs to lose their executive champions and for participants to forget all the ways the program benefits them and makes the organization stronger.

Ignoring new tools and technologies — Programs designed even recently might not have taken advantage of newly developed referral tools, approaches, and technologies. In recent years, a lot of development in process and technology has occurred to support vacancy prioritization, electronic referral marketing/communications, social network extension, external stakeholder participation, and automated program administration.

10 More HR Practices That Reduce the Effectiveness of Employee Referral Programs

The very best employee referral programs (ERPs) produce simply amazing results. But unfortunately, many corporate programs were designed years before we had so much data covering what makes the programs effective. In the last article, we looked at 10 HR practices that were hurting your ERPs. Here, we’ll look at 10 more.

A lack of employee education — Even in great times many organizations failed to provide enough tools, training, and support to help employees uncover great talent within their network, so during tough times, it’s no wonder that education efforts all but go away.

Without referral events, manager executed referral activities, smartphone parties, referral open houses, “Give me Five” visits, and priming exercises, ERP’s become purely reactive and fail to produce the volume of flow needed in the most critical areas.

No referral cards — It’s such a simple thing to offer key employees “referral cards” to hand to individuals they meet that impress them. However, most programs either have no cards or they fail to replenish an individual’s supply on a regular basis. The best referral cards include praise for the individual and an action statement that encourages them to apply for a position.

Equal rewards for all jobs — All HR programs should reward performance, and referrals are no different. Referrals for hard-to-fill jobs and mission-critical jobs should get a bigger bonus then the jobs that are easy to fill.

In addition, there should be a supplemental bonus if someone turns out to be a top performer after they are hired. If you fail to include reward differentials, your key jobs will be filled more slowly or not at all. In fact, the best programs allow referrals only for jobs that are high impact or are hard to fill.en the jobs that are easy to fill.

No feedback on weak or bad referrals — Most employees have good intentions when they’re making referrals but if you don’t notify them after they’ve made a particularly weak or bad referral, they have no way of improving their future referrals.

The best process is to notify the individual both when they’ve made a great referral, but also when they’ve made a weak one. The best systems rate referrals and the individuals making them so that future referrals by this individual are given a higher priority as a result of their previous successful track record.

Individual recruiters are allowed to “ignore” referrals — It’s not unusual for regular recruiters to ignore or pay little attention to candidates that come from employee referrals. It’s generally an ego thing because they didn’t initially “find” the candidate. But in any case, there needs to be measures and rewards that encourage recruiters to focus on employer referrals.

Not tracking referral rates — Employer referral rates vary dramatically among departments in almost every firm. If the program manager is to increase participation in these underperforming departments, there needs to be a process to track and report participation by the manager. In the best cases, participation rates are part of the manager’s bonus formula.

Outdated prioritization — Well-designed referral programs prioritize vacancies based on their business impact, and referrals based on the past referral success rate of the referrer. However, over time the organization’s priorities may have changed.

Solution: If you don’t have a prioritization schema, develop one now. If you do have one, work with Senior Management to adjust the schema based emerging needs quarterly or as critical incidents emerge. (Note: Prioritization does not require that individual referrals be treated any differently during the hiring process.)

Failing to do periodic upgrades — The performance of even the best-designed referral programs degrade quickly when program evolution ceases.

Not utilizing metrics — Great referral programs rely heavily on metrics to continually improve, but when times get tough, metrics often all but disappear.

Failing to scale — In tough times organizations merge and get acquired. If your organization has done either, it’s not uncommon for a program designed for a small organization to be ineffective in a larger organization.

No globalization — If your organization has become a truly global one, as many have, it is essential that your ERP be globalized. So look at all processes, communications, and policies to ensure that cross-border referral of talent is being facilitated, and that all possible scenarios have been planned for. Identify what elements of your global program may require localization (communications, rewards, etc.) and develop a matrix specifying each.

Final Thoughts

In order to maintain continued success, referral programs need continuous re-engineering. I recommend that you put together an audit checklist and use it to periodically to assess the program and to identify any potential problem areas.

As seen on HR Daily Advisor on 11/22/2016 and HR Daily Advisor on 11/23/2016.

About Dr John Sullivan

Dr John Sullivan is an internationally known HR thought-leader from the Silicon Valley who specializes in providing bold and high business impact; strategic Talent Management solutions to large corporations.

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