Referrals have worked wonders for many companies. Your staff is actually your best resource for finding new employees and can save you thousands of dollars in recruiting or other fees. The best way to encourage employee referrals is through a formal Referral Program which might include bonuses, cash awards, gifts, trips, etc.

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What type of award?
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Monetary awards are believed to be the most effective and are usually paid after the new hire completes a certain number of days. This should be based on turnover in the particular industry or position.

Many companies have bonus offers for employee referrals that provide little results because the program is not communicated to their employees effectively. Ask for referrals up front, and keep asking.

Some professionals have a high salary or a substantial bonus plan. For these employees, money might not be the most attracting thing. Make sure to adapt the referral packages depending on your employee’s age, gender etc..You might consider vacation or time off instead of money.

While compensation is a great reason for referrals, remember, people refer others typically for one of 3 reasons and the least important of the 3 is cash. Number 1, they have a friend or colleague that they want to help. Number 2, they love their company and want to find the best talent to help make it successful. Number 3, they get some type of reward or compensation for making referrals.

Recognition can also be very successful. A very successful program may have nothing to so with cash if promoted correctly, for example one I have heard about didn't give a dime for referrals but instead granted a little icon that was placed next to the persons corporate email address and was based on their number of referrals. It became extremely competitive and was all about bragging rights. It cost the company basically nothing and can work for years.

The other downfall to assuming "cash is king" is the quality of the referrals you may receive. Typically when you throw out a big dollar bonus program you will get a spike in referrals, many of which are of dubious quality. Yet if you don't follow up with those people and treat them all in a consistent professional manner then you risk alienating the people that make referrals without the cash in mind. Some people actually feel strange about getting a cash bonus for helping out a friend as well.

I'm not saying you shouldn't offer cash bonuses but they are far from a panacea, cool gifts (possibly with the company logo) or contests often work better if you have budget to spend. When you just hand out cash and it gets bigger and bigger in amount you can also put yourself in awkward situations because inevitably a higher level referral is worth more than a lower level so then you are forced to choose between a tiered bonus system or inequity. It also makes it awkward if you have to discontinue the bonuses for whatever reason, people could hold on to referrals until the bonuses come back or they could feel slighted because they made a referral that was hired a few weeks before the program was instituted.

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Promoting the Plan
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Once you've got a plan in place, you need to make sure you're promoting the idea. Develop a written plan to promote your program on a regular basis and mention the current positions by greatest need at that time. You may also consider increasing the award depending on age of the opening or importance to the company. Ask for referrals on your company intranet, blast emails, paycheck stuffers, posting a notice in the kitchen/cafeteria, or employee lounge.etc. The point is that you keep asking. Additionally, collateral material should be created for handouts to new employees.

All Managers should be charged with the responsibility of communicating the plan and current needs on a monthly basis and high level executives should be charged with getting monthly feedback from the managers. Care should be taken that efforts are not limited to the employees direct department.

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Communication
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Make sure your staff understands your program with a brief explanation of how it works each time its promoted.

One of the most important things is promptly communicating back to employees about the resumes A quick response will encourage the employee to make referrals in the future. Once they try the process and are turned off, it will be very unlikely they will try again.

It can also hurt morale if an employee believes they are entitled to a bonus that they don't get.

Keep your company's decision making process transparent and keep your managers working, coaching and giving feedback. Combine that with a basic, transparent incentive program and the referrals will come.

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Managing Your Program
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It is also critical to make sure there is someone in the organization that "owns" referrals. If they simply go into a pile and someone is assigned to handle them as a second priority, you will lose good referrals and likely discourage employees from referring more candidates. Assign the work in whole or part as job duties to manage and process the referrals and advocate them throughout the organization. This becomes more important as a company grows in size.

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Is a Referral Program Worth Your Time?
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A healthy work environment and a motivated workforce is key if you want your employees to help attract people. When your employees are motivated and speak positively about their job, people in your employees' network will ask to be referred. On the other hand, it is going to be tough for an employee to try to bring someone in if the person does not believe in the company and is unmotivated.

Employees need to relate to the company that they are working for and need to feel proud about their current association. Most important, they should feel that company is fair in all respects, whether its with their customer, employees or other stake holders. They need to believe that they are being compensated fairly and treated right. If you are the HR manager and dont believe this or sense a majority of employees dont believe this, start your referral program later and start improving on areas that will change these perceptions.

Focus on the following:

1. Promotion & Communication: Frequent and transparent communication of the referral program.. Events or Mailers or Posters to make sure that every employee is aware of the program and is constantly reminded.

2. Award Benefits: Referral benefits need not be in terms of cash or money only. Awards can be gifts, package tours, dinner programs, etc.. Always make sure the employee receives recognition for their contribution. Create a 'feel good' factor.

3. Program Management & Process Timelines: Make sure the process of handling the entire program is very transparent and timelines are being followed at each level with the highest priority. Process transparency are key for trust and involvement from your employees. Make sure someone is designated to handle each piece of the process.

4. Management Participation: Executives and Managers are key for any referral program. Without them playing their part, the program will fail.

Lastly, but should come before any program is implemented is...

5. Work Culture: Employees should feel proud to be part of the company. Satisfied employees will refer persons they know and unsatisfied employees will not.

Paul Kliebert