The Best Investment your Company can Make to Attract Top Talent

I see so many companies waste a ton of money and time on advertisements , job boards, ATS’s , specialized databases, magazine placements, search firms and much more but they neglect the most powerful tool at the disposal of corporate HR”s arsenal: “the employee referral program". Dont' get me wrong we sometime need to use everyone of these approaches to find talent but thing long term and invest in the biggest talent ROI there is.

The venerable Dr. John Sullivan has identified some of the key metrics about the employee referral programs ROI (return on investment): The highest volume source of hire.

#1 in quality of applicants 88% of 73 major employers say…
Referrals are the # 1 best source of above average applicants.
#1 in quality of hire source.
#1 in 1st year retention source.
#1 in retention –new hires post 180-days is 32% lower than the norm.

and here are some of the key best practices for employee referral program see: Part 1 and Part 2.

I will also argue that a properly run employee referral program that has executive support is a great vehicle to build and strengthen employee buy-in to the goals of the company. When management respects employees referrals and pays out quickly, they are sending a clear message to employees. We value your recommendations and want to reward you without a lot of fanfare and process garbage.

An employee referral program does require some time investments and requires that the recruiting team be rigorous in following up on all referred candidates. You cannot give an ERP lip service, you have to work it hard or your employees will give up on it quickly. A few years ago I met to consult with one company who did not want to have an ERP program because it was afraid it’s employees would refer more people like themselves. Wow and who hired and managed these employees. Talk about a management team that should get fired!

A program does not need to be a huge expense, you can pull one together by simply putting in place an ERP policy, communicating it and then launching key campaigns for key recruitment needs. The recruiting team can then follow-up using special codes in their ATS or simply on paper for smaller campaigns. The key is to follow a vigorous and timely process (see Dr J’s links above).

I will argue that the biggest investment is a time one, and you could pull a program together for under $500. Obviously once the program works you will want to make some additional dollar investments, but by then it will be obvious that the program deserves it.

I always suggest a company runs a pilot ERP program first in an area where they have key recruitment needs so that they can show executives the value of such a program. If the recruiting team is dedicated and focused they will hit a home run and be hero’s and you can be sure a ton of executives will jump on the ERP bandwagon. And don’t let “there is no money to do this” answer stop you from getting a program off the ground. There is always one bold maverick somewhere in the company with the balls to fork up some cash to do what's right. Remember, they need great people to make them look good.

Try not to be too conventional in your approach to an ERP, take some risks. Make sure you tie your efforts into social media like Linkedin, Facebook and Twitter because that is where your employees are very active and they have created networks that tap into not only their friends but also their professional networks. If you are running a solid ERP program you have nothing to worry about as your employees will be your best advocates and represent you professionally. But beware if your program is just a sham and does not have the proper resource investment, your program will not be very popular with your employees and your efforts are likely to be disparaged on-line.

Still not convinced? Look at the various big time efforts going on in the corporate world to try and carve out the ERP social media pie. LinkedIn, Monster, Facebook and many others not only have ERP or referral networks in place but they are currently trying to figure out how to best capture this market. You can expect some significant action in the coming months and years. In my crystal ball, I see one of the social media giants pulling the trigger shortly on a huge ERP announcement. The key to its success will not only be how it ties in the recruitment/HR angle (the easy one to make) but to construct a solution that will tie in to future social benefits for the rest of the business community. Only then will they have put in place a game changer and have first mover advantage in this profitable space.

So if you want to attract better talent and have better ROI for your corporate recruiting function then cut some of your current recruiting expenses and sit down and figure out how you can put in place an effective employee referral program or how you can jump-start your current one. I guarantee recruiting at your company will never be the same again.

For more blogs go to: http://attackdefenddisrupt.wordpress.com

Comment by Valentino Martinez on September 24, 2011 at 2:11pm: @Francois,

While I agree with the value of well applied, supported and managed Employee Referral Programs (ERPs)--many tend to have an Achilles' heel.

The shortcomings I've long recognized are:

-- if diverse representation in the employee population is lacking, at all levels (from senior management on down) that population will replicate itself

-- if the majority of new hires tend to come from the same short list of universities--that result will tend to replicate itself and dominate decisions as in "our way or the highway" thinking and outcomes

--if pressure is brought to bare by "who you know" rather than quality qualifications--that result will replicate itself

And that replication will block access to the quality different schools and diverse populations can bring to the contest, company and CHALLENGES coming in a rapidly changing world.

If those shortcomings can be sorted out in an employer's Employee Referral Program--then there is value in such a strategic approach to staffing and recruitment.

Comment by Francois Guay on September 24, 2011 at 3:03pm: Valentino,

Some great strategic points. The results you get from an ERP are predominantly due to how you set up your program or recruitment drives. The ERP can be an opportunity to recruit from different universities and colleges or to recruit more diversly if that is how you communicate your specific recruitment drives. The key in an ERP is to clearly communicate what you and the business want (business grads from certain schools, engineers with social skills, not what your audience wants or what your audience knows best. It' s an opportunity to create mini-recruiters, but you must provide them with the right direction and tools.

Comment by Sandra McCartt on September 24, 2011 at 3:35pm: Employee or friend of friend referrals account for a lot if hires but I have seen some world class disaters result from making mini recruiters out of employees. Friends not hired causing resentment by the referring employee and tension for them from the friend. Employees who refer good people who get hired then employee gets fired his recruits take it more personally and react and sometimes quit. Employees who dig making some money from referrals and actually start working linked in to recruit with all kinds of weird results from not well known referrals or Hr has to tell them to cool it or refusing to pay referral fees since thevemploee really didn't know the person and got into interfering with internal recruiters.

Tino's comment is what a lot of us call the "begat syndrome". I had a client who got a lot of internal referrals. They got ready to fire an employee. The manager said he couldn't fire him because they went to the same church. They started checking and discovered that they had 20 or more people who went to the same church. They had inadvertently changed their internal culture as well as discovering that the smaller numbers of employs who did not go to that church were not comfortable because albeit quietly they were being made to feel like lesser life forms because they were not religious. Something that could not be asked about initially and was a nightmare to correct after it happened

ERP can be a tricky wicket to deal with. A double edged sword.

Comment by Valentino Martinez on September 24, 2011 at 9:29pm: @Francois,

I need to clarify my last bullet point made in my initial comment by restating it as: "--if pressure on hiring managers to hire certain candidates is based on "whom a candidate knows" over and above a candidate’s strong job qualifications and potential--that result will replicate itself." It’s a subtle way of saying that “replicate” is not necessarily a good thing. Sandra’s sobering comments don’t need expansion for the unwary (you can always count on Sandra to cut to the key plus and minus factors in recruitment). Her concluding point of: "ERP can be a tricky wicket to deal with. A double edged sword."--, is actually putting it lightly when you consider the “cutting edge” side of the equation relative to who gets cut.

Sandra and I are among many who have been around long enough to see how companies, thanks, in part, to their ERPs, whether official or unofficial*, can mature into very impressive operating and vibrant places to work. Or they can become ever more closed thinking and operating business cultures that circle the wagons when push comes to shove for change from outside and even from inside forces.

Sandra’s take bears repeating, “ERP can be a tricky wicket to deal with”, indeed.

*The good ol' boy network is another more accurate representation of an unofficial ERP, of sorts, but more from the decision making level of employee—managers and senior managers.

Comment by Sandra McCartt on September 24, 2011 at 10:27pm: Good point Tino about the Good ole Boy Network and it's not always just the decision making level albeit they set the tone. I have one client where the entire top tier and second tier of management are and have always been white, male, republicans. The company started a bilzkreig ERP program to save a ton of money on recruiting fees during a high growth period. The more savy employees looked at who and what the executive team was so knew the best way to make those referrals to get that bonus. Voila there arose a long string of white male republican candidates. HR director called me and said , "holy hell almost every candidate our employees are referring are white male republicans." The reason we started this was to broaden our diversity. Now what do i do. Call them all in and tell them no more white, male, republicans. Can't do that, why do you think this is happening.

That would be a no brainer. The employees looked around at the top tier, the second tier and figured out real quickly that the hiring managers were more likely to hire exactly what they had hired in the past. Human nature is a wonderous thing to behold. We are all more prone to hire people like us. They saved some recruiting fees but they found out that their culture was even more deeply white, male , republicans. I suggested that they try to find some black, asian and hispanic male republicans to start moving away from that deal. But then i'm a smart ass and the truth is that an ERP program gone bad is a lot harder to fix than it is to call a headhunter and tell them you need a diversty candidate. Hard to say that to the employees without stirring up a whole bunch of gradoo.

Comment by Francois Guay on September 25, 2011 at 7:33am: Sandra and Tino,

While I get your point and agree with the potential and reality of this happening, this can happen in an organization with an ERP or not. Managers do have a tendency to hire in their image, good or bad.

But an ERP is an opportunity to create direction, ie: establish a diversity recruitment drive, a specific drive to hire more from a particular college or university, et.. A great way to do this is to have special incentives tied to certain corporate and recruitment goals within the ERP program. The drives can be turned on and off based on specific recruitment drives.

Comment by Amy Ala Miller on September 26, 2011 at 1:36pm: My company has a pretty good referral bonus program. A lot of our referrals make good employees too. Here's what I would like to add, though -

1. You MUST follow the guidelines on our company intranet. No dropping by the recruiter's desk to drop off your friend's resume.

2. You may NOT ask when I'm going to call your buddy. Your buddy can let you know after I called.

3. If I don't call your referral there's a reason (i.e., he's not qualified) You may not ask why.

4. You are not allowed to complain if your buddy doesn't get a phone call / interview / job offer.

5. Again, you are NOT allowed to come to my desk to harrass me about your buddy. Ever.

6. You don't get to decide if your friend is qualified for a certain position. Between myself and the hiring manager, we can make that decision. If you disagree, refer to #5.

7. You can't call me about your buddy's status. That is between him and me, he can fill you in should he choose to.

8. No e-mails either. I won't respond.

Comment by Francois Guay on September 26, 2011 at 1:47pm: Amy great list...that should be followed. I do favor though an online update employees can access to find out what is happening to their referrals then they have no need to call the recruiter, HR or manager to find out what happened. This update is important so that employees know every referral is being taken seriously...even though we sometimes do not pursue.

A good approach some companies have taken is to reward on a yearly basis (performance appraisal time) employees who make solid referrals that become solid long term hires. Employees who make bad referrals or bad hires are also reviewed at this time (it's a great way to right balance an ERP).

Comment by Amy Ala Miller on September 26, 2011 at 2:02pm: Francois, agreed. And in certain cases I'll share some insight if I can... especially for rockstar referrals. All too often though I see employees taking the spaghetti approach to referrals. Throw all their friends at the recruiting wall and see if any stick. :)

Comment