Here’s How Employee Referrals Save You Time and Money
There’s a cliché that says “It’s all about who you know.” When it comes to recruiting high-quality candidates through employee referrals that cliché stands true.
Studies about recruiting candidates through employee referrals have proven that it is the most efficient and effective way to hire top candidates. Why? In a nutshell, recruiting new talent through referrals saves you time, money, provides your organization with the highest quality candidates the market has to offer, and maximizes your ROI. While traditional methods such as posting on job boards and career sites may still be beneficial, recruiting candidates through employee referrals helps to weed out the noise while giving your employees a chance to earn some extra cash or other rewards to help you out. It’s a win, win situation. Here’s how.
Employee Referrals Save Time
Let’s take a look at this scenario: You’re communicating with your HR manager via Slack, trying to understand why your job post has produced 100 candidates but only five of them are qualified. This is a common issue with relying on open job boards where anyone can submit a resume.
Employee referrals can help lighten your applicant resume load during the search. When you ask your employees to refer candidates, they know that you need someone who is a good fit for the job. According to a case study by LinkedIn, the referring employee wants to protect their reputation. They’ll only send you the highest performing candidates they believe are the best for the role. Your employees don’t want to jeopardize their own careers in the referral process. The study also shows that referred candidates take, on average, 29 days to hire. This is compared to a 55-day hiring average for a candidate that responds to a job board post.
Employee Referrals Save Money
Let’s take a look at this scenario: You need to hire a software engineer with a base salary of $120,000. It’s a specialized skill set, you’re having a hard time finding candidates, so you turn to a third-party recruiter. They assure you that they will find your “purple unicorn” for a 20% fee on their first-year salary. If it works, you’re stuck with a $24,000 bill for a candidate that hasn’t proven their worth to you. Instead of paying a third-party $24,000, many companies are opting to pay their own employees a healthy referral bonus instead. This bonus may be anywhere from $1000 - $5000, but on both ends of the spectrum, you’re saving big upfront and maximizing your ROI.
Employee Referrals Provide High-Quality Candidates
Your high performing employees will bring you, other high performing employees. Let’s look at the data. A study by Greenhouse found that hires from employee referrals produce nearly 25% more profit than hires from other sources. In addition to higher productivity, these employees tend to stick around longer. In a study by JobVite, 46% of referred hires stayed at their position for longer than a year. Only 33% of people hired through career sites and 22% hired through job boards stayed on longer than a year. In addition to this, Forbes found that referred candidates acclimate to the company culture much quicker than candidates from other sources. Why? “The new employee is already connected. It's not like they're walking into a strange place.” This creates a sense of community among your staff, allowing for a more enjoyable and rewarding work environment.
If you want a pool of high qualified employees that will be happy to work with your current staff, why not allow your current staff to find the talent for you. Ditch the headhunters, save money and incorporate a referral program. The research shows that these new hires will work harder to make you money, they’ll stay at the company longer, they’re happy to work with friends, and all of this leads to a more productive company culture.
