The Social Referral, by Bill Boorman

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  1. 1. The Social ReferralA RolePoint Whitepaper by Bill Boorman
  2. 2. INTRODUCTIONThe fact that you are reading this paper means that you probably already recognize thebenets of leveraging an employee referral program for hiring. In May 2012 Dr. JohnSullivan wrote in ERE about the top 10 benets to referral recruiting: Hard data on the value and impact of employee referrals1. Hire volume - Referrals are the #1 source in hiring volume. 1, 32. Hire quality - Referrals are also the #1 source for new hire quality. 13. Speed (application-to-hire time in days) - Referrals are the #1 fastest recruiting method (29 days for referrals, 39 days for job boards, and 45 days for career sites). 24. Average length of employment of all initial hires after one year (retention) - Referrals are #1 at 46% retention after 1one year(compared to 33% from career sites and 22% from job boards). 25. Average length of employment of all initial hires after two years (retention) - employee referrals are #1 at 45% retention after two years (compared to 20% from job boards after two years and 14% after three years). 26. Percentage of all applicants - Referrals are only 6.9% of applicants. 27. Percentage of all hires - 46% of all hires at top performing rms are referrals4, while for all rms, they range between 28%3 and 39.9% of all hires. 28. Applicant-to-hire ratio - Referrals are #1 and are hired at a rate of 1 out of 3 applications for top-performing rms and 1 out of 10 at average rms. Compare that to an average applicant to hire ratio of 1 out of 18 from all sources. 49. Cost per hire - Job boards hires cost on average $1,671 versus referral hiring costs of $2,306 (only $635 more). 410.Diversity impact - Despite the old myth that referrals have a negative diversity impact, referrals were #1 as the most productive source for diversity hires, well ahead of major job boards, company afnity groups, and diversity career fairs. 31 Source Stafng.org 20112 Source Jobvite index 20123 Source CareerXroads 2011 20124 Source Dr. John Sullivan and Associates research 2008-2011When you look at the data, and it has been well documented, it is easy to see why there has been a clamor to implementEmployee Referral Programs. The most common way of doing this was to offer cash rewards for hired candidates introduced byemployees. Given the cost of agency fees, which average between 20 and 25%, companies could offer signicant cash rewardsand still show a big reduction in the cost per hire. Attracted by this methodology, corporate companies set up schemes butreported problems with long term adoption. This paper will identify some of the barriers to widespread adoption and what canbe done to break them down.RolePoint Inc 2013 1The Social Referral
  3. 3. REFERRALS IN THE OLD SCHOOLThe most common employee referral programs involve making open jobs visible to employees and asking forDening referrals used to be simple; a referral was arecommendations. The process requires the employees torecommendation, and people only referred the people they provide potential candidate details, usually a resume orknew well and probably worked with. This was driven by LinkedIn prole, and to have gained permission from thememory, little black books and personal relationships. candidate to submit. Successful hires are rewarded withVolumes of referred candidates were low, but conversions cash payments, commonly after the completion of thewere high because employees matched on skill, experience probationary period. As payments are involved, there is aand knowledge, and were recommended as a t in all these due diligence process to qualify for payment.areas. There were pros and cons to the old school methodology: ProsCons - High quality candidates with a good t- Low volume of referral candidates - Endorsed skill level and employability- Geared towards new starters - Employees accountable for candidate t- Admin heavy systems - High level of employee inuence with the- Time taken to complete most referral candidate programs - Low cost of referral hires (even after bonuses) - Due diligence of referral rewards - Low conversion ratio of applied to interviewed- Asking employees to have the matching skills and interviewed to hiredof recruiters - Diversity - Speed of hire - On-boarding and new starter mentoring through friends - Opportunity to reward employeesRolePoint Inc 2013 2The Social Referral
  4. 4. The benets to referral recruiting are undisputed, with the submitted information reported that it took 10.4 referralspros easily outweighing the cons, not least cost of hire. per hire, where as the other sources were in excess of 100.However, the low volumes of referrals means that even themost successful programs result in no more than 35% of allGiven this data, which comes from a respected source ofhires. The 2012 research into source of hire in the US, research, it is easy to see why companies place ERPs at theconducted by consultancy CareerXroads, identied that center of their recruiting efforts, and that28% of hires among the 200 companies surveyed were therecommendations from employees provide the mostresult of referrals. The full data list is displayed in the chart valuable source of hire. The challenge companies face isbelow.nding new ways to increase the volume of referredcandidates, maintain the quality of referrals and sustain theThe remaining 55% of hires were attributed to internalow of referrals on an on-going basis.transfers and promotions. The other interesting data tocome out of this research is that the companies whoSOURCES OF HIRE Referrals Job Boards Company Career Site Recruiter Initiated Rehire Social Media 3rd Part Recruiters Print ad OtherRolePoint Inc 20133 The Social Referral
  5. 5. THE REFERRAL KILLERS and comments added etc. it is a common comment that as much as I want to help out, I have a job to do. The processIt is easy to see why the best referral you are going to get isbehind the ERP needs to be simple and quick, enablingwhen the referred candidate is known by the employee and employees to contribute without interfering with the timethey have worked together. In our research in to how mostavailable to do their real job. The more time involved incompanies employ traditional employee referral schemes,searching, matching, communicating with potentialthere is a big emphasis on asking new starters. A number ofcandidates, recruiters and admin, employees will be lesscompanies gave the example of sitting down with newlikely to continue taking part. A successful ERP needs to bestarters during their on boarding with a blank pad and admin light and built with the employeeasking them to write down the contact details of formerin mind.colleagues and friends who might be of interest to thecompany. The reason given for this is that new employeesare most forthcoming with names, and usually of former 4. Not Their Jobcolleagues. The new employees are also keen to impress,and motivated by their new employer. Logic also followsWhilst an accountant might know plenty of accountants,that as this candidate was successful, former colleagues willtheir main job is working the numbers, not recruiting staff.likely have a similar skill set and experience.The more the accountants are asked to be recruiters and exercise judgment over which candidates to submit, theI have been involved in trouble shooting employee referral less condent they are in taking part. The volume ofprograms that are not generating the expected results. The referrals can be a good indicator of staff morale and thecommon denominator in these programs is that the not my job attitude, so where there is little buy in, whycompany offer large cash rewards, but are confused why refer? It can also be a result of employees lackingthis is not generating the volume of hires they arecondence in making judgment calls, linked toexpecting. When speaking to the employees about whyaccountability. When employees are not required to makethey are not taking a more active part in the ERP when the selection choices, ERPs go up.potential cash rewards are high, I have discovered that themost common barriers are: 5. Line Manager Buy In1. Accountability Line managers need to see the ERP as being important toWhen an employee makes a recommendation, they take a their team, and the most effective way they can recruit. Therisk on their personal reputation andthere is a risk that thecommunication of the ERP internally often focuses on therecruiters or hiring managers feel that their time has beenbenet to the company and often misses out on thewasted. If the referred candidate is hired, there is the benets to the individual employees of working with theadditional risk that the candidate will not work out, and will best people they can, and the part they can play in it. Wherealways be known as their guy, particularly given any time and resources areis invested in getting line managernancial rewards they may have been paid.buy in, they are far more willing to include conversations about referrals in team meetings, one to ones and more. Where referral gures are included in performance2. Transparencyreviews, then the ERP is kept front and center.This is probably the most common one. Where rewards forreferred hires are high, there is a high level of due diligence, 6. Uncomfortable Approaching Friends About Jobsas well as tax implications. Examples I have been given fornot paying the expected rewards are that the candidate Some employees feel uncomfortable approaching theirwas already known to the company and in the ATS, the friends about jobs with their employer and are unsure howpaperwork was incorrectly completed or the employee didto make the rst approach. They also feel that it isnot upload a resume. Where there are cash rewards, there inappropriate to talk jobs with their friends, given theare plenty of reasons for saying no to a claim. The sense of condential nature of careers. The best way to resolve thisinjustice proves to be a real cancer to many ERPs. To get an is to make the process easy and to offer training in theERP to work, the rules need to be transparent and designed referral process and the employer brand. Training andto reward rather than penalize. When the system is seen as development to support the ERP will lead to success, withfair and reasonable, employees are far more willing to takeemployees being more condent in having career relatedpart.conversations. Consider the training plan as part of the launch and on-going participation in the program.3. Time ConsumingTied in with rewards is procedure, and procedure can betime consuming when due diligence is a driving factor.Where resumes have to be sought, uploaded or submittedRolePoint Inc 2013 4 The Social Referral
  6. 6. 7. Poor Candidate Experience THE SOCIAL DIFFERENCEWhen an employee reaches out to a contact, gains their Over the last 3 years, social networks have experiencedinterest in an opportunity and gets them to make anexponential growth. Employee networks have grownapplication, they have an expectation that they will beaccordingly, offering access to structured career datatreated in the right way. Global consultancy businessthrough sites like LinkedIn in particular, and unstructuredAccenture have adopted a highly successful ERP, whichdata through networks like Facebook. Employees areplaces candidate experience at the center. This is driven by continually adding new contacts and growing personala service level agreement which sets time-scales for the networks. Job posting tools that share jobs into socialreview of referred candidates and for feedback. Whilst networks are often described as social referral tools,employees do not expect every candidate they refer to getthough this is an inaccurate and misleading description. Thean interview or a job, they do expect timely feedback andmore sophisticated of these tools create unique links fordue consideration, and when this does not happen, thesharing that enable employers to identify which of theirreferred candidate will go back to the employee whoemployees originated the share. This is useful fororiginated the application. Negative feedback to candidate recognition and reward, whilst the practice of sharing jobsexperience will strangle any ERP initiatives. Recruitmentin the wider network is to be encouraged in order to reachprocesses should be designed to operate referred job seekers who are browsing or using search engines tocandidates as a separate channel, with time scales for identify opportunities. Job seekers are increasinglyreview and feedback to both the candidate and theconnecting with their peers in organizations they want toemployee who originated the application. work for. Encouraging employees to share jobs into their networks offers the potential to reach these connections, but it is only a chance. A direct message is always going to8. Forgetting the ERPprove to be more effective.Most ERPs launch with great intentions, publicity andA referral is best dened as a personal recommendationfanfare but after a few months, employee enthusiasm andfrom one person to another. The traditional referralparticipation weans. There is always a new initiative each highlighted at the start of this paper is a good example ofmonth, and referrals drop off the radar. This need not bethis. The difference, though, between an old school referralthe case with careful planning. When structuring an ERPand a social referral is the potential depth of thestrategy, you need to think how you are going to promote relationship. All networks consist of an inner and outerthe program and keep it prominent in the thoughts of circle. The inner circle, in terms of referral, includes thoseemployees. These are some of the tactics companies haveconnections where an ofine relationship exists based onemployed to keep the ERP current month after month, year work interactions and personal knowledge. The outer circleafter year.consists of those connections who have connected online through a shared interest, mutual connections or similar.- Weekly most wanted posters and communication This offers access to data for mining and matching, and- Weekly referral huddles and awards reach for personal messaging via an established connection.- Referral points and league table- Referral T-shirts (Rackspace use the caption: Takes oneWhen you consider the potential reach offered by theto know one. Certied Racker Referrer) combined population of all of your employees who are- Weekly e-mail or newsletterwilling to sign in to a social referral program, its easy to- Monthly referral picnic/partyrecognize the potential of operating your ERP around- Seasonal initiatives, Christmas etcsocial connections rather than personal address books, as in the traditional referral. The key here is to enable- Dedicated referral portal with alerts employees to weight the referrals they make, giving priority- Referrer awards and recognitionto those in their inner circle whilst leaving the way...

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