Why referral hiring is the new recruitment buzzword

Why referral hiring is the new recruitment buzzword

Referral recruitment encompasses a wide range of activities that use employee referral programs, online job boards, and social media to research, engage, and ultimately hire people. Referral recruiting can take many forms: asking contacts in your network to pass on information about open jobs, employees speaking positively about the company to their social networks, and using social networks to find and connect with qualified candidates.

Recruiters and companies are increasingly utilizing employee referrals to find the best qualified candidates. It’s all about who you know, as current employees may hold the key to the perfect candidate! When looking at all online sources–internal and external–individual company career sites (which are considered internal) are the number one recruitment source for interviews and hires.

While career sites and job boards collect the highest quantity of applications, employee referrals garner the highest number of qualified hires by far. Internal sources, such as employee referrals, inside hires, walk-ins and a company’s career site, produce almost twice the number of hires as external ones, which include job search engines, job boards, print advertising, and job fairs.

Some key points to note:

  • Nearly 3 in 10 employers have caught a fake reference on a job application
  • Statistics show 1 out of every 5 referrals get hired
  • Methods such as gamification grow employee engagement in the referral process; 55% are interested in working for a company that uses gamification to increase productivity
  • Referrals are the highest quality hire

Most companies try and foster internal mobility as part of their employee retention and alignment strategy. So, it’s not uncommon for employees to see and have the opportunity to apply or submit referrals for positions before they ever get released to the public.

Employee referral programs work, because employees are able to filter candidates to ensure that they fit the position and the company’s culture. Employees also want to protect their reputation at the firm by not referring unqualified candidates. Since rewards are only paid out if a candidate is successful, there is a guaranteed return on investment on such programs.

Jobvite provides some telling statistics on the referral hiring trend:

  1. Employee referrals have the highest applicant to hire conversion rate – only 7% apply but this accounts for 40% of all hires.
  2. Applicants hired from a referral begin their position quicker than applicants found via job boards and career sites (after 29 days compared with 39 days via job boards and 55 via career sites).
  3. Referral hires have greater job satisfaction and stay longer at companies – 46% stay over one year, 45% over two years, and 47% over three years.
  4. 67% of employers and recruiters said the recruiting process was shorter, and 51% said it was less to expensive to recruit via referrals.

Referral hiring also results in shorter hiring cycles, lower hiring costs, and higher employee retention. Dr. John Sullivan, professor of management at San Francisco State University and a well-known HR thought leader, recommends companies get close to half of all new hires from employee referrals. According to Dr. Sullivan, employee retention after one year is 46% for employee referrals compared with 33% from career sites, and 22% from job boards.

Are there any minuses to an employee referral program? Programs that fail tend do so because expectations were not properly set. Feelings could be hurt if a close friend or colleague who was referred doesn’t get hired. And sometimes, the rules in the referral program are so complicated that employees don’t participate because they simply don’t understand how or why they should. In addition, we already shared how ‘networking’ with acquaintances in general has led to people finding more jobs compared to their friends.

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