It’s been common knowledge for a long time that employee referrals are good for a growing company, but in a tightening jobseeker’s market where job boards are flooded with postings and hiring decisions need to be made quickly and confidently, a good referral program is more important than ever.
Let’s dive into what this means in terms of tangible ROI created by an efficient referral program.
- Shorter Recruitment Cycles
An effective employee referral program takes some work off of recruiters and shortens the entire recruitment process. How? When recruiters receive referrals from impressive employees, the assumption is that the people they are referring are of the same high calibre. That means that candidates who come in through this channel quickly move straight into the interview process. Intensive resume review and in-depth initial screening are not needed. More concretely, a 2015 Jobvite study indicated that it takes an average of 29 days to hire a referred candidate, 39 days to hire from a job posting, and 45 days to hire via a career site.
- More Accepted Offers
A 2015 study by Glassdoor’s Chief Economist Dr. Andrew Chamberlain showed that employee referrals, “boost the odds of a successful job match by a statistically significant 2.6-6.6 percent.”
In essence, potential candidates in your employees’ network are more likely to be interested in your job posting and willing to accept a job offer because it is being referred to them by a trusted source.
- Lower Cost Per Hire
Time is money. When referral programs are saving you time, they’re saving you money as well. If a referral candidate is more likely to be hired, that means less internal resources are spent weeding out referred candidates as opposed to other sources of hire. Even with lucrative referral bonuses factored in, this method of hiring still comes out cheaper. Thinks about it. Hiring and recruitment agencies charge 20 percent of a candidate’s annual salary, whereas even an incredibly generous employee referral bonus would probably top out at $10,000.
- More Fluid Onboarding
Referral hires already have a connection within the company – generally someone they know well and trust. Having a friend or acquaintance around to ask for advice helps make sure they more quickly assimilate into the company culture. These pre-existing connections convert referral hires to productive employees much faster than traditional hires.
- Increased Retention
Referral hires are much more likely to stick around after they’ve accepted an offer. Forty-five percent of employee referrals are retained after two years, compared to only 20 percent of hires from job boards. More than twice as likely to stick around for two years! How do you save money on your future recruitment costs? Hire employees who want to stick around!
The Big Takeaway
Hiring through employee referrals serves your recruitment efforts in so many intertwined ways. Referral hires save the company money, are more likely to accept an offer, become productive faster, and stick around longer – what else could you want from your employees?
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