Beyond Cash Referral Programs

Referrals are an excellent way to contribute to the growth of your company and establish a cohesive team of like-minded individuals. LinkedIn serves as a valuable platform for connecting and cultivating relationships, including the crucial aspect of referrals.

So, what exactly is a formal "Referral Program"? These programs are often initiated when companies reach a certain employee count, seeking continuous referrals to streamline recruitment efforts. While the common incentive is monetary, ranging from $500 to $5000 per successfully hired referral, the benefits and drawbacks need careful consideration.

Benefits:

• Higher Volume of Referrals:Employees are more likely to refer individuals, boosting the number of potential hires.

• Strong Team Networks:Teams with well-connected employees often achieve higher hiring rates.

• Financial Incentives Impact:A higher financial incentive can significantly increase the percentage of hires through referrals.

• Cultural Impact:Well-implemented programs can contribute positively to company culture.

Cons:

• Diversity, Equity, and Inclusion (DEI) Impact:Overemphasis on referrals may hinder efforts towards diversity, equity, and inclusion.

• Potential Lack of Diversity in Thought:Favoring referrals over other qualified candidates may limit diversity of thought.

• Friend Referrals:Friendships might influence referrals, possibly compromising impartiality.

• Risk of Dishonesty:Cash incentives may lead to dishonest referrals from employees and candidates.

If you’re thinking about rolling out a referral program to aid in your hiring, here are some guidelines on how to do it properly:

• Personal Connection Requirements: Employees must actually know the person they’re referring.

• Evidence Submission: Employee must submit proof of the dated conversation with the candidate, in which the employee reached out, or the candidate reached out to them - screenshot of Linkedin, text, email, etc.the reason for this is because you most likely have a recruiting team, external or internal, working on your roles. Often, recruiters reach out to candidates about opportunities, and then the candidate pings their friend that works there. You will have a battle around this.

• Recruiting Team Policies: Have the same policy for your recruiting team; when they enter a candidate into the ATS system, or they apply, show proof of the Inmail to avoid confusion and potential ownership battles.

Role-based or time-based parameters?

Role-based parameters mean that getting credit for referring a candidate has to be for the exact role they’re hired for. Meaning the employee needs to submit an application for the referred candidate for the role that they’re referring them for. In this scenario, another employee can submit them for a different role, months prior to the other employee, and they wouldn’t get credit for the referral to the company.

Split-referrals: in role-based programs, you may have to split the bonus between two employees in an example like the one above. You will have people speak up and fight for their referral bonus (especially if it’s upwards of $5K/hire). Be prepared for this.

The more streamlined approach to circumvent the aforementioned issues is time-based. For instance, when an employee recommends a candidate on May 1, 2024, they would retain referral credit for three months, extending until August 1, 2024, should the candidate be hired, even if it's for a different position.

*My suggestion here, since most internal recruiting teams are paid on salary and are not commission based on their hires: if a recruiter sources someone on LinkedIn and they’re already in the ATS system, give them “sourced hire” credit even if an employee gets the bonus. Why? Because you want your recruiters working efficiently, and cross-checking the ATS for referrals before doing cold outreach is not efficient or ideal. You also want your recruiters to feel valued and motivated, and the referral program alone can add unnecessary frustration for your recruiters.

Here are some perspectives of what can happen on in a cash-based-incentive referral program if you don’t set very specific and clear parameters:

• Dishonesty in how well someone knows the referral.I once had an employee go on Indeed and source candidates himself. He had quick conversations with them, told them to go into the office for the interview and say that he referred them. Yes, this happened. We figured it out quickly because the candidate was wildly confused, and definitely not the right fit for the sales role he was interviewing for. The referral program in this case did exactly the opposite of its intention - primarily because of the $1000 bonus that was tied to each referral. Can’t make this stuff up.

• Battling it out with the internal recruiter vs a ‘sourced’ hire (see above solution for this).

• Employees referring for the cash vs referring quality candidates.

Nix the cash, and get creative.

Some great ideas for referral bonuses rather than cash:

• Extra day(s) off

• Employee recognition on team calls and all-hands meetings

• Personalized company swag

• Volunteer day(s) off

• Extra dedicated time for professional development

• Remote work options

• Flexible scheduling

Another idea to add is tracking the referral’s performance. For instance, if the referred employee becomes a ‘top performing’ hire, reward the referring employee for the quality of referral. Consider offering them these types of rewards:

• Sessions with financial advisors.

• Retirement planning assistance.

• Culinary experiences or cooking classes.

• Tickets to concerts, shows, or sports events.

• Book or audiobook subscriptions.

• Meal kit deliveries.

• Streaming service subscriptions.

• Donations to a charity of the employee's choice.

• Sponsorship for community events.

Conclusion:

Before rolling out a referral program, carefully consider its impact on culture, DEI efforts, and the overall bottom line. While cash incentives are common, exploring diverse and non-monetary rewards can foster a more inclusive culture focused on high performance.

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