Why Employee Referrals Are Still a Really Good Way to Recruit and Hire

Employee referrals aren’t the perfect way to hire, but a good referral program is usually a better recruitment tool than just about anything else.

How much better? Fast Company recently wrote about how Ernst & Young thinks it may need to hire 15,000 people in the next year. Back in 2010, employee referrals made up 28 percent of the company’s hires — a pretty good amount.

But this year, with so many more hires to make, Ernst & Young is counting on referrals to be the source of half of its hiring needs, a huge number that most organizations can only dream of.

Why referrals work so well

Dan Black, Ernst & Young’s recruiting leader for the Americas, is clear about why employee referrals are such a strong source of hire:

Referral candidates perform better and stay longer. In fact, external research has shown that referred workers are up to 30 percent less likely to quit and have substantially better performance on high-impact metrics. Other studies indicate that even so-called “weak” connections are likely to lead to placement and better job outcomes.

And Ernst & Young is willing to put big money behind their referral program, paying out more than $8.1 million in referral bonuses during the 2016 fiscal year. That’s a pretty big number, but it shows that the organization really cares about getting the right people on board and is willing to pay what it needs to in order to get that done.

However, referral programs aren’t perfect. Liz Ryan wrote about this in Forbes last year, and she made this point:

An employee referral program is a flame-y idea. When I say “flame-y,” I mean that a successful employee referral program has a lot to do with trust and good feeling. There are mechanical aspects to the program, of course, but they are less important than the less measurable but more high-impact factors in your program’s success.

Simply stated, if the employees don’t feel good about the place, they’re not going to subject to their friends to the environment. What kind of friend does that?

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One way you can game your recruiting system

My take: You always make better hires when you can learn a lot more about the potential employees, and hiring referrals is the very best way to do that.

Referrals are always a great way to get new employees. As my friend Gerry Crispin, who annually publishes the Career XRoads Source of Hire report, said back in 2013:

Referrals are one way U.S. candidates can game the system no matter what other source they rely on to find and apply for jobs. In the US, a referred candidate must be considered by a recruiter and Applicant Tracking Systems and other technologies help to both highlight and prioritize candidates who enter this way.

Candidates are learning this from career coaches. Networking is now much easier due to LinkedIn, Facebook, Twitter, etc. Anyone can easily find a connection who went to same school, same industry etc. so social changes it again.

If you aren’t leveraging employee referrals to the fullest, you are probably short-changing your recruiting efforts. Referrals simply can’t be beat for delivering high quality candidates that can improve the overall quality of your workforce.

If you aren’t getting at least 25-35 percent of your hires this way, you are simply hurting your organization and ensuring your recruiting will be a lot more costly and time-consuming in the months and years to come.

How to get more passive referrals

Did you know that employers can use automated reference checking to save recruiter time AND to increase candidate pools for other roles? Harver Reference takes just 2 minutes of recruiter effort and converts 50% of references into passive candidates. It’s like an advanced form of employee referrals.

Harver Team

Harver Team

Posted on:
July 25, 2023

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