Do Referral Fee's Work?

I'm in the view they do. I've been offering a pretty generous fee of $2000 if someone is referred that I can help land and about 1/3 of my 2008 placements came via such referrals. My average placement is $20k, so I'm offering about 1/10 of the fee. I also get referrals where the fee isn't offered- the $2k referral is usually more pro-active in nature via linkedin and email marketing.

Yes, folks refer candidates as they like and respect my work- but I'm more then willing to offer the fee as I believe it's an added bonus especially as a lot of contingent firm recruiters can't offer the fee as they're working for someone else.

What do others think? Robert Greene www.greenesearch.com

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Permalink Reply by Matthew Kazmierczak on February 25, 2009 at 8:23pm

Love the referral fee if someone knows that they are getting paid they will go out of there way to refer candidates. It has to be significant 2k is def worth someones time. We have a progressive system first referral is 1k and if they make it to the 6th is $7500 a pop. At that point this person would have made us 200k so it is definately worth paying.

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Permalink Reply by Slouch on February 25, 2009 at 9:14pm

we offered $2500 that would be paid when and if the candidate referred accepted and stayed at the company for the length of the guarantee period which was usually 60 or 90 days. I always tried for 30 but usually failed at that. It worked well.

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Permalink Reply by Todd Lempicke on February 26, 2009 at 2:02pm

We used to use referral fees a lot for hard to get engineers and IT people but never over $500. Have not needed to do this for many years though. I believe people understand networking better these days and are more open to serving up their friends and colleagues, in a pay-it-forward kind of way.

We also used to pay $500 for company directories but Linked-In has eliminated that expense.

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Permalink Reply by Eric Beauford on February 26, 2009 at 2:02pm

Great post Robert, especially in these times. Have always been a big believer in the referral fee...if you have time I would love an opportunity to walk you through our new social network based site that is related to generating more referrals and get your feedback...thanks.

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Permalink Reply by Ken Olney on February 26, 2009 at 2:12pm

I totally " disagree " with paying a source ... for candidates or job referrals . That's Personnel Agency mentality . In all the years I've been in the Recruitment & Consulting business I've never paid someone for a referral . Recently , I treated a friend / candidate / former client to dinner .... partly because he recommended someone to me for a position that I was working on . The work that we do as Search Consultants / Executive Recruiters is hard , time consuming & frustrating ( at times ) . Individuals & companies ( clients ) need to respect us for what we do & how we do it ; not because we " pay someone for names " . Whether it's a new client or someone I've worked with on numerous searches ... I treat every assignment / job order as a " new " one ... & ... I start fresh . Yes ... I have referral sources who recommend / refer names ( & openings ) to me ... but ... they do so because they know the effort I put in to find good people for good career opportunities . Anybody can pay anyone to do the work for them .. but .. how rewarding is that . If you put the time & energy in to be a successful , ethical & respected Recruitment Consultant , you shouldn't have to pay anyone for anything .

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Permalink Reply by Larry Marsden on February 26, 2009 at 2:15pm

Absolutely Robert. You not only get a placement but you get a friend for life in the person you pay a fee. But do be selective and use only as a last resort. Your prior placements as well as your clients should be in a relationship with you and you with them. Relationships pay off, and both are willing to help a friend. Don't compromise your ethics or principles to make a placement. Use the finders fee judiciously!
Larry

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Permalink Reply by Adnan Malik on February 26, 2009 at 2:27pm

Majority of our jobs on CareerGrub (http://www.careergrub.com) have referral rewards ranging from $1700 to $5900 and they do end up getting more attention than the other jobs. Jobs posted by partner recruiters also have referral fees of about $500 and consistently show higher activity (clicks and applicants) than other similar jobs.

You can post jobs for free (with or without a referral fee) on CareerGrub, please drop us a line at partners@careergrub.com. for more info.

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Permalink Reply by Robert Greene on February 26, 2009 at 2:30pm

I believe I "think" more like an employee rather then a job "Agency" (I hate that term). I know if a recruiter offered a referral fee, I'd go out of my way to refer someone if I liked the recruiter.

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Permalink Reply by Eric Beauford on February 26, 2009 at 2:41pm

If a recruiter builds up "referral sources" over time, how equitable is it to continually tap these networks in order to receive referrals due to a "good relationship", that may enable a recruiter to go off and make a 20-30% fee? I know that would start to bother me....but that's just me.

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Permalink Reply by Slouch on February 26, 2009 at 2:52pm

I think that referrals are the lifeblood of the business. I remember the vast majority of the candidate my company placed were referrals. My database was over 60,000 candidates my firm identified, spoke to, recruited etc - we had no subscriptions to job boards. We needed referrals and it's how we made money. Since my view was never that the person I was calling was going to be the person I placed, my intention was to always get a referral and sometimes, the person on the line referred himself and it was a good start. When I realized during the call with the candidate that they were not going to refer anyone to me and that was after I would want clarification whether or not the lack of a referral was coming from them legitimately not knowing anyone or just not wanting to tell me, I would let them know that I have a referral bonus policy and that I am more than happy to pay out a fee of $2500 bucks if they think of someone they feel would be good for the job I had described to them. Sometimes they would remember within a day or so and call me back. Companies pay recruiters referral fees all the time to find the right candidates. They just paid much more for a referral than I was willing to pay. That is why the economics of making placements work so well.

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Permalink Reply by Lou Cofini on March 4, 2009 at 10:44pm

My concern has always been where do you draw the line on who and when to offer to pay a referral fee. Once a candidate or HM, who you have a real good relationship with finds out you selectively have been paying for referrals it can really damage your relationship and have a negative impact on your business from a trust and consistently perspective. Think of all the people, who might have referred candidates to you in the past coming back to you and asking for something or feeling they were cheated. Send them gifts or take them out for dinner or invite them to a event is more my style. I enjoy helping people and in return I hope that I've established enough credibility and trust that they would want to return the favor.