A quick search of "Employee Referral Programs" on Google will produce 81,300 results.
Everyone it seems has written an article or two (or three) about the importance, the value and the how to of ERPs (we'll address other types of referral another time). Guilty as charged.
Lots of content easily found shows companies how to tweak their programs: Incentives for…, Communication to…, Management of… , The Five Best… etc. etc. Lots of nuanced debate is almost always current at online sites discussing the best ways to improve an employer’s referrals - the quality, population diversity, size of rewards and more.
A firm’s success with referrals - typically their #1 external source of hire - is traditionally measured by the % of hires attributed to it. For most US companies referral hires range from 20% - 40% of the total by source. In a few firms, recruiting leaders measure the quality of their referrals and correlate referrals to conversion rates, early employee success, retention, and other performance measures.
There's no question that a well-designed and run ERP has great ROI and yet, with 98% of employers claiming to value this as Source #1, there is still an extraordinary gap. What's missing? The candidate. Not just any candidate. Most candidates. Your prospects who may have researched you, decided they want to apply and don’t know or don’t appreciate that they are disadvantaged by their lack of knowledge and awareness. In the end, the company is as much a loser as the candidates.
Don’t think it matters?
In 2013 TalentBoard (the non-profit driving the Candidate Experience Awards) asked ~45,000 candidates applying for jobs to nearly 100 employers if they were aware that the firm they were applying to had an ERP. Half said No. We are only surprised that number isn't higher.
Few firms have any mention of an ERP on their career site let alone any indication of how likely it is that a candidate would be hired if they were referred. (We have published estimates from several data sources that show a referral is as much as 14 times more likely to be hired versus a candidate of equal quality who has no referral.)
In 2014 TalentBoard dug a bit deeper with the 95,000 candidates who completed a detailed survey sometime after applying to one of more than 120 employers. Here are a few results to consider: (Much more can be found at The Candidate Experience where later this month you can register to get this year’s whitepaper.)
Of the five most valuable tools in their job search, candidates rated referrals sixth.
95,000 candidate were asked (and 77,000 of them answered) to choose their top five tools to learn about [the] job they applied to from a list of 20 possibilities. The five chosen the most were:
- The Company Career Site (65.5%),
- Job Agents (53.7%),
- LinkedIn Career Page(s) (24.7%)
- Online ‘Groups’ like LinkedIn, Yahoo, Google+ (24.0%) and
- Employer Reviews like those at Glassdoor and Best Places to Work (19.9%).
But that’s only the beginning of the story. When we look at just the (~12,000) candidates that had accepted an offer at the time they responded, Employee Referral Programs tie for second place (at just 26%). ERPs tied with Employer Reviews. The Company Career Site is still picked as the top job search tool by 65% of the respondents and still ranks #1.
It's only when we slice the data for the (~8,000) Candidates who told us that they became aware of the position they applied to via an employee who referred them that we see a spark. No surprise here. This group ranked ERP #1 at 59% - tied with the Company Career Site. Logical progression. But does it matter in the end? Yes.
Referrals as a source is a critical factor in predicting a better candidate experience.
Those 8,000 candidates who became aware of the employers position, whether they were hired or not (although 34.1% of them had an offer of employment when they completed the survey), gave a Candidate Net Promoter Score* for the employer they applied to of 35.
Similarly, the Candidate Net Promoter Score* for the 6,052 candidates who became aware of the position they applied to because they were contacted by a recruiter contacting (we didn't separate 3rd party from internal sourcers/recruiters because candidates are not good at differentiating the two) was 30.8. (We’ll let others debate this particular finding)
And the punch line is that the Candidate Net Promoter Score for the 61,000 who responded that they were made aware of the position they applied to through all other sources (just not ERPs or called by recruiters) was 16. By the way only 10% of this group noted ERPs among their 5 most valuable tools).
*The Candidate Net Promoter Score used here is based like the original NPS on a scale from -100 to +100. Our calculation is similar but not the same as the measure (NPS) used to assess customer loyalty (see Wikipedia for a detailed definition and history). The candidates of companies participating in the 2014 Candidate Experience Awards were asked whether they "would refer others…" and the percent responding ‘1’ was subtracted from the percent responding ‘4’ to achieve a number between -100 and +100. The company scores ranged from -20 to 59 and we show strong correlations the Candidate NPS and 6 comprehensive ratings of candidate experience. Eventually we expect the Candidate NPS to indicate the relative difficulty of a firm in hiring quality candidates in a competitive environment.
There are many factors impacting a candidate’s experience and subsequent attitude about an employer’s brand as a place to work or whether they would re-apply, refer others or even continue their relationship with you as a customer. One of these factors is your ERP and not being aware of it or knowing that a referral is more likely to lead to a job is a disservice to the candidates you seek and, potentially, a halo effect that prevents quality candidates without referrals from being fully considered. At the least employers should consider:
- Sharing details of the company ERP on their website
- Sharing the % of hires you attributed to your ERP in the last two years.
- Asking prospects who apply whether they "would refer others…"
- Assessing what practices, if any, are different for referrals than for those who apply without.