In a recent article, John Sullivan highlighted examples of three ultra-bold recruiting practices, commenting that they are quickly becoming mainstream and that those that don’t adapt will be left behind in the ongoing talent war. Another commentator suggested that these ultra-bold recruiting practices were only practical for an elite tier of hiring companies, who have sufficiently large budgets and resources.
I believe the reality is somewhere in the middle, a few of the examples highlighted by Sullivan would be hard for less resource rich companies to undertake but not all of them. In particular I see great opportunity for companies to financially incentivise their employee referral programs.
Employee referral programs are recognised as being the highest contributing source of total new hires, whilst producing the best suited candidates and overall retention rates. This is true for all organisations irrelevant of industry, location or size, however companies such as Hubspot andThoughtspot are realising that results from traditional referral programs are no longer producing the talent needed to continue business growth. They are therefore championing new financially incentivised referral schemes, that to some may seem aggressive or radical.
Cash bonuses are by far the biggest motivator in getting employees to participate in employee referral programs; When asked what they would change about their organizations’ employee referral programs, the number one response employees gave was, “Increase the value of the incentive.” Aberdeen Group, Talent Acquisition 2013: Adapt Your Strategy or Fail
These aggressive employee referral programs are mainly focused around high value ($15,000 to $30,000) financial rewards given to employees to incentivise them to refer highly skilled talent.
This concept appears radical because most employers are used to operating in an environment where it is possible to attract talent with traditional referral programs that are generally non-reward based or have low financial incentives, generally between $500 and $1500.
These same companies will however have nearly all paid an external supplier to source talent, where the average agency fee can range anywhere from $15,000 for skilled workers to $50,000 for highly specialised resources. In addition this fee is generally invoiced as soon as the candidate commences work and has a lower retention rate than employee referrals.
As the demand for talent continues to grow, isn’t it logical rather than aggressive to offer the same financial incentives to a hiring source that has been proven to deliver better suited candidates?
If insanity is defined as “doing the same thing over and over again but expecting different results,” talent acquisition may fit the bill. Aberdeen Group, Talent Acquisition 2013: Adapt Your Strategy or Fail
To be clear I am not suggesting offering high level referral fees for every live position or as a replacement for traditional referral programs. Instead I am recommending implementing an incentivised referral scheme to be used in the same instances that you would normally engage with a third party recruitment supplier.
For companies who already operate in skill short sectors that include resources & mining, pharmaceuticals and technology, where spend on internal recruitment teams and / or external agencies is already considerable, then diverting some of this to an alternative sourcing medium should be more of a short logical hop than a leap.
For organisations operating outside of these core talent short industries, implementing a financial incentive program may be the difference between attracting average talent and the top ten percent.
Financial incentives are often viewed as a quick fix solution, and in some instances this may be acceptable. The reality is that few companies use financial incentives as their sole attraction strategy, instead including them within a broader talent acquisition strategy that also includes alternative referral schemes.
The most significant challenges that recruitment teams face when managing financial referral incentives are being able to cope directly with an increased volume of referrals whilst ensuring the referral network continues to focus on high quality prospects. As with all referral schemes the high level solution is to ensure the referral network is given clear direction and timely, honest feedback.
There are lots of great articles written about successful employee referral programs, these handpicked ideas are most relevant to running a successful financial referral program.
The purpose of this article is to challenge the belief that it is logical to pay high value financial incentives to external talent suppliers but not to internal employees.
Hopefully we have succeeded in helping you to question this and we can look forward to hearing about many more successful financial referral initiatives.
15 Ultra Bold Recruiting Practices, Are You Falling Behind Your Com... – John Sullivan, ERE
The Value of Hiring through Referrals - Stephen Burks, Bo Cowgill, Mitchell Hoffman, Michael Housman
Talent Acquisition 2013: Adapt Your Strategy or Fail – Aberdeen Group
Six Way to Make Your Employee Referrals Really Work - Sajjad Masud,TLNT
Sources of Hire 2013 - CareerXRoads
Employee Referrals Your Go to Strategy for 2014 – John Sullivan, ERE