Want to Hire Top Talent? Here's How to Build an Employee Referral Program

An employee referral program taps into the human desire to share things we like with people we care about. That’s why such programs are consistently one of the best sources for hiring. Sometimes it’s not what you know, but who you know that matters.

When you see a movie that blows your mind or eat at a restaurant that leaves you craving more, what’s one of the first things you do afterward? If you’re like most of us, you tell your friends all about it.

So, how do you build this channel for your own organization? Or, if you already have a referral program, how do you get the most out of it?

We’ll dive into the details, covering the employee referral meaning, how you can build an employee referral program, and the incredible benefits that can come as a result. You’ll even get an idea of how we run our referral program here at BambooHR, so you can see a real-life example.

What Is a Job Referral Program?

An employee referral program is a program through which employees can refer the people in their networks, such as friends or family, for open positions in their organization.

Referrals are valuable. Many programs include some kind of incentive to motivate employees to refer more and more people. The best referral programs:

Essentially, you’re entrusting your employees to attract new team members. This gives them a sense of responsibility and involvement, which can lead to a great sense of achievement.

Create a seamless hiring experience from application to offer letter.

BambooHR helps you manage and personalize every candidate's experience. Plus, our Hiring Mobile App helps busy recruiting teams collaborate together and keep top candidates engaged.

Get a Free Demo Today

9 Key Benefits of Employee Referral Programs

How to Build Your Company’s Employee Referral Program

So, how do you build a referral program that does all of those things? Here at BambooHR, we’ve been through a few iterations of our own employee referral program – and we’ve learned a lot along the way.

Below, we’ll share what steps and principles have given us the best results with our referral program.

Don’t Overemphasize Incentives

You’d be hard pressed to find an employee referral program today that doesn’t include at least a small reward for submitting referrals. It could be a cash bonus, additional paid time off, or a special t-shirt. Many organizations see a vast improvement in the number of referrals coming in when they set up a referral bonus for employees.

However, if you focus too much on the reward, you may create a perverse incentive within your program. In other words, your employees may begin submitting referrals just to earn the prize instead of actually considering who might be a good fit for the position. You may see the quantity increase at the expense of quality.

We do incentivize our referral program, but we see it as a thank you rather than a motivator. Employees receive a small bonus, but only after their referral has been hired and worked at BambooHR for a few months. Because the reward is minimal, and because we focus on making BambooHR a great place to work, our people are primarily motivated to refer others for two reasons: a desire to help their friends, and a desire to help the organization.

When employees are focused on helping their friends or helping their organization, they still produce plenty of referrals, but the referrals tend to be higher quality.

Choose the Right Software

As your organization grows, and more referrals come in, it becomes almost impossible to keep track of referrals manually. Allowing referrals to fall through the cracks of the hiring process can impact employees’ motivation to continue referring.

Automating the process of submitting referral information, tracking referrals throughout the hiring process, and communicating their status back to their respective referrers is vital to a successful employee referral program.

In fact, this is one area in which we’re still perfecting our process. While we have a place for employees to submit their referrals, one of our biggest challenges is following up afterward to let them know what happened with their referral.

As we’ve been working to improve this part of our program, here are a few takeaways that might help you select your own software:

Free Resource: The HRIS Buyer's Guide

Choosing an HRIS is a big decision. To help, BambooHR created an in-depth guide that provides a comprehensive overview of all-in-one HRIS—plus tips on how to choose the right HRIS for your organization.

Download Now

Educate Employees

An informed workforce is the foundation of a successful referral program. The best software and most strategic incentive in the world will be useless if your employees don’t know about your program or don’t know how to contribute to it.

Education around your referral program needs to cover two areas:

In other words, you first need to get employees in the loop about how to submit referrals so they feel empowered to start. Then you need to teach them how to recognize if someone is qualified or not so they can start submitting higher quality referrals.

To educate us Bambooligans, our recruiting team presents from time to time at our monthly company-wide meetings. They present a list of open positions, remind everyone how to submit referrals, and direct employees to an internal “All Things Recruiting” webpage to learn more. On this page, our recruiters provide information to help us determine if a referral is qualified or not, including a list of the top reasons a referral may not be hired.

To bolster our recruiters’ efforts further, we’re planning to start incorporating referral program training as part of our onboarding process for new hires. We want people to be excited about sharing BambooHR with their friends and family from the very beginning, rather than leaving them to learn about it through the grapevine.

First, we’ll train new hires on the software and teach them the technical part of how to submit a referral. Second, a few months after their start date, and once they’ve been able to get a feel for our culture, we’ll train them on how to determine if a referral is a good fit – not only for the position but also for the company. This way, we ensure cultural fit remains a top priority within our referral program as we capitalize on the energy and enthusiasm of newly hired employees.

Evaluate and Adjust as Necessary

As mentioned earlier, we’ve been through a few iterations of our own employee referral program. That’s right, we didn’t get it perfect the first time. Besides, situations change, and evolving the program keeps things fresh and working well.

What sort of program details may necessitate a refresh? You may want to make adjustments anytime something doesn’t work, but also whenever you experience changes in:

If the engagement level of employees is low, consider implementing novel incentives and gamification elements. Whatever you do, show appreciation for referrals by recognizing the employee’s effort.

FAQs About Employee Referral Programs

What is the Purpose of an Employee Referral Program?

The four main purposes of an employee referral program are to:

When all of these elements work in harmony, both the organization and the referred hire gain great worth from the employee referral program.

How Effective Are Referrals?

Referrals are very effective at getting good candidates not only on the interview list, but in the door of their new job.

Generally speaking:

The consensus among organizations is that referrals are a practical and profitable way to find new employees to fill open positions.

Why Do Referrals Work?

Since an employee referral is basically an endorsement of a person’s talents and character, referrals tend to work well for employers looking to hire. Sometimes hundreds of people apply for a single position, but an employee referral program helps thin the crowd and zero in on top candidates.

Other reasons employee referral programs work are because the referred candidates:

These reasons go to show how important training employees on how to give a good referral is to the program’s success.

What Makes a Good Referral?

Spotting a good referral when it’s presented brings value to an employee referral program. Here are a few signs a candidate is relevant for the position, from their own perspective as well as the company’s:

Final Thoughts

Obviously, a referral program that improves retention, engagement, time-to-hire, and more isn’t built overnight. Case in point: we’ve been developing and perfecting our own employee referral program for years (and will continue to do so for years to come).

Optimizing your referral program is a continual effort, and you may need to adjust your strategy as your workforce grows and changes. But wherever you are in your journey, we hope these referral program ideas have given you a place to start transforming your organization’s program into a powerful hiring tool.

An Award-Winning, Complete HR Platform

In BambooHR, everything works together to help you manage data and benefits, hire talent, run payroll, and help employees thrive. Best of all, it's easy and intuitive for busy HR teams!

Learn More Today