employee referrals - motivating employees so they produce more and higher quality referrals

Employee referrals

Motivating employees so they produce more and higher quality referrals

ERE.Net Webinar - July 10, 2014

© Dr John Sullivan 2www.drjohnsullivan.com

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I’ll move fast today but if you are listening to the live version of this webinar…

Please submit questions at any time

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Is your firm falling behind the latest bold

referral practices?

4 quick examples of current trends

Part I

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Mega referral reward

We are looking for developers that love autonomy, love shipping code & love big projects

Know somebody who sounds like this? You lucky, lucky devil… if we end up hiring them, we’ll thank you with a big, fat check for $30,000

No one likes uncomfortable moments with strangers... so when we contact them it can't be a surprise to them. The person you are referring must actually know you

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$20,000 referral reward

Offered a $20,000 referral reward Any “friend of the company” qualifies for the $The program covers any position in the firm Why? “People don't always listen to recruiters,

but they do listen to their friends” Hired 9 in 1 month (from a base of 32 employees)

Free trips for referrals

$15,000 bonus for employees referring a five-star engineer

Non-employees… receive an all-expense paid trip to Hawaii

The employee that refers the most during the year receives an all-expense-paid trip around the world

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Referrals poached from Amazon

$25,000 sign-on bonus to newly referred developers 2 day recruiter response to referralsGave away invitations to their open house partyChanged Wi-Fi net name to “Glympse is hiring”Targeted Amazon developers via their infamous

“Amazon pager” that contract developers carryPlaced exciting themed food trucks and culinary

staples in the parking lot next to Amazon

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Introduction

Part II

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Introduction

The current target is over 50% of all hires – Because referrals produce the highest on-the-job performers with a high retention rate

To do that, a formal referral program is required Assuming that employees will naturally make

referrals as part of their job is a disastrous assumption. Without a formal referral program… you can only expect between 3% and 7% of your hires coming from referrals

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Referral motivation practices

You need a data-driven referral program because they have a much higher response rate – rather than guessing… use data to identify the most effective motivators

Most referrals come from a small percentage of the workforce – in some organizations, 30% of the employees make all of the referrals… with the other 70% of employees being inactive

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Techniques for identifying the most effective employee

motivators

Part III

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Use a data-driven approach to ID motivators and issues

Survey a sample of…Referring employeesEmployees that do not referReferred individuals Managers

And ask them What aspects of the program were “positive” To ID any barriers or program components that

could be improved >

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Identifying motivators

Ask what motivated them to make their latest referral

Include a list of possible new rewards and motivators and ask them to indicate which new ones would excite them

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Identifying motivators

Try these two approaches alsoBenchmark other firms — work with other firms

to identify and then share the most effective and new approaches for motivating employees to refer

Trial and error — because even initially successful motivators lose their effectiveness over time, periodically change the rewards. And if necessary through trial and error, identify new ones that work. Obviously you should also drop motivators that no longer produce results

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Identifying barriers

Common referral barriers you might findA slow response to referrals is #1Recruiters sabotaging referralsNot “tagging referrals” so that they are easy to

find and to prove your quality of hireThe application process is too time-consumingNot discouraging “they found me” referralsNot giving the best an expedited hiring processNon-targeted spam emails to your employeesNot measuring the quality of each referral and

reporting it back to the employee / manager

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Utilize non-monetary rewards

Part IV

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Non-monetary practices

Motivating Without Cash Rewards

Rewards are helpful but they are not the #1 driver - only 11% of employees report that they make referrals because of the “opportunity to earn bonus income”

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The most effective motivator is…

Shifting ownership of the referral program to your employees

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Motivating employees

Why shifting ownership to employees is important Ownership means you need to pay more

attention – both employees and managers will simply pay more attention to anything that they feel that they “own” (like a rental car)

The #1 most effective motivator is “hiring for the team” – this approach produces better results… because employees realize that strong referrals directly impact their coworkers, their team’s and company performance

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Shifting the “ownership” to employeesWhy shifting ownership to employees is so critical Most employees / managers assume that

recruiters do it better – but the fact is that with the spread of social media… employees can do the same or a better job at recruiting

Employees know their own contacts – individual employees know… how to best approach one of their contacts about becoming a referral

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Other effective non-monetary motivators

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Employee recognition is powerful Realize that recognition is a powerful motivatorA personalized note from an executive thanking

an employee who has made a high impact referral Give visible recognition that motivates every day…

like a nice referral T-shirt, a pin, or a certificate to hang in their cubical.

A once-a-year luncheon with the CEO for employees who have made successful referrals is also an attention-getter

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Offer prize drawings – a cheaper (because everyone doesn’t win) alternative to offering cash for every referral is to hold a quarterly prize drawing where every employee who has made a successful referral is eligible. Unusual vacation trips or car leases make great prizes because they get everyone’s attention

Assign “targeted prospects” to connected employees – assigning the conversion of a target into an employee referral can motivate employees because everyone is counting on them

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Offer job-related rewardsConsider offering a choice from among the followingA product sample A reserved parking spot 1st choice of vacation dates, equipment, or shift Consider placing the employee’s picture in the

lobby or work with advertising to allow top referring individuals an opportunity to appear in company product advertising

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Offer monetary rewards

Part V

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Determine the right amount to provide as a reward

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What is the right amount to offer?

Experiment with reward amounts There is no magic payment amount, so use a data-

driven approachPeriodically adjust your bonus amounts because

offering the same rewards without refreshing them reduces their impact

Experiment and then track what works and what doesn’t… this allows you to periodically adjust rewards based on the current response rate

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How much to pay?

Start with low amounts – start low and work your way up in reward amounts rather than starting high (it’s hard to cut reward amounts without employees noticing)

There are limits – often after you reach $1,500, additional bonus amounts have a low ROI unless you offer outrageous amounts

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How much to pay?

Match your competitors – with social media connections, your employees will compare your firm’s referral rewards to the amounts that your competitors offer. Don’t match their amounts exactly… but you do have to be in the ballpark

Vary rewards with the unemployment rate – as the unemployment rate increases, you need less money across the board in order to get good referrals. The reverse is also true

Sign-on bonuses for the new hire – these can also be powerful motivators to close the deal

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How much to pay?

Offer a “hard-to-hire” or “kick-up” bonus supplement – the harder the job is to fill, the higher should be the reward. Offer a higher “kick-up” bonus or contest prize for a brief period of time to see if it makes a difference. In some cases, the hiring manager is willing to pay this bonus

Pay more for key jobs – referral amounts usually reflect the salary for the job. Obviously high-impact jobs should get a higher reward amount

Stunning bonuses can get everyone’s attention -extreme rewards of $30,000 have been offered

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Additional pay related best practices

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Additional pay related practices

Offer a charity donation option Some are concerned about the appearance of

making referrals for self-enrichment

Offer the option of donating part or all of the reward to charity

The charity option is especially effective when there is a potential conflict of interest or when senior executives are making the referral

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Consider a “prize patrol” approach to celebrate referrals — consider making a public display and celebration out of the process of rewarding an individual referral prize. This public display excites and it may cause competitive individuals to increase their referral efforts

“Gross up” your bonuses — grossed-up bonuses (where the employee’s tax on the reward is prepaid) can be stunning because they allow employees to see, receive, and keep all of the reward

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Supplement the reward based on new hire performance – consider offering a supplemental reward for referring those who turn out to be top performers (based on their above average performance appraisal score at 6 or 12 months after hiring). Also consider increasing bonuses for diversity hires, for longer-than-expected retention, or if the hire happens to be a key employee from your top competitor

Also consider diversity supplements

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Reward for names only Waiting for an updated resume is a major

barrier because top employees don’t have the time to capture an updated resume from a hot prospect

Consider offering a small reward (up to $100) for simply providing the names of obviously qualified candidates

In some cases, top employees are willing to provide “names only” referrals without expecting any bonus

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Reward employees for referring prospects who are good enough to be interviewed You can excite employees who “come close” by

offering a small reward to employees (up to $140) for each referral candidate who is “good enough” to be invited in for an interview or who make it to the finalist list (even though they are not hired)

Consider offering small rewards to your referred applicants - reward the referrals who are interviewed to thank them for their time

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Offer small rewards for “first-time” referralsEncourage first-time referrals by offering a small

reward for employees who participate in the referral program for the first time, whether their referral is hired or not

Potential small rewards might include a $25 gift, movie tickets, a product sample or a Starbucks card

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Offer rewards to non-employees – expand your referral pool by offering to pay non-employees for referrals (i.e. contract employees, temps, vendors, corporate alumni, or retirees). If you do that, remember that you must report those payments to the IRS

Offer rewards that excite the family – a packet of free movie tickets for the family

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Avoid these practices

Do Not do these pay related thingsDon’t pay equal bonuses – prioritize jobs and pay

higher bonuses for key jobsExclude jobs that are easily filled – use

traditional recruiting channels for these jobsDon’t delay payments – delaying payment of the

reward is a huge mistake. Pay immediately and don’t make receiving the reward contingent on anything, unless you want to purposely kill motivation

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Motivate your managers to

encourage referrals

Part VI

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Motivating managers

Quantify the $ impact of referrals - since many managers are money driven, you must quantify (in $) the positive impact that quality referrals will have on reaching their individual business results, personal goals and bonuses

Provide managers with employee referral data – if you expect managers to know where help is needed… you must provide them with data that identifies the volume, the quality and the referral success rate for each employee

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Administrative practices that increase motivation

Reward managers for meeting their team quota – assign referral goals for managers and then measure, recognize and reward managers for reaching the referral goals assigned to their team

Hold competitions – periodically hold friendly competitions within and between business units to excite competitive managers and employees

Use it as a criteria – include it in a manager’s performance appraisal, bonus and promotion criteria

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Administrative practices that

increase motivation and participation

Part VII

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Consider these administrative actionsMake referrals part of an employee’s

performance appraisal – add referrals to the performance appraisal process, so that employees take their referral role seriously

Re-visit “silver medalists” – referrals that came in #2 during past searches

A sandwich board in high-traffic areas – a simple sandwich board or sign notifying employees of an immediate opening is all you need

Proactive referrals are best – most are extremely busy… so in order to get quality referrals… you must proactively approach them

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Consider these administrative actions

Ask new hires during onboarding — simply adding a component to the onboarding process where you ask each new hire for referrals has proven to be an effective tool. The employees don’t normally expect a reward

Encourage boomerang referrals - rehire the bestInclude college referrals – college students are

even better connected than the general population… so allow interns and recent college hires to refer top college students

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Allow for mobile phone submissions Employees have gone mobile - because the

mobile platform is now so dominant… your process must allow employees to complete a referral directly from their mobile phone

Prospects have also gone mobile – for the same reason… if your process requires referees to apply… they must be able to do it from their mobile phone. Obviously the system must “tag” referrals… so they can be identified as referrals

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Expand referral eligibility in these 2 areasDon’t exclude managers and HR – because they

know and frequently meet top talent (if there is a conflict of interest, allow them to forgo rewards)

Include non-employee referrals – because part-timers, seasonal workers, contractors, consultants and even vendors know and care about your firm

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Encouraging employees to make the highest quality

referrals

Part VIII

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Clear expectations can increase quality referrals

Set expectations before an employee refers 1.We are exclusively seeking superior individuals

that will make our firm significantly better2.Because we only want the very best… we expect

no more than 3 referrals per employee a month3.Throughout the referral process… we expect you

to put the firm’s best interests first 4.Except in extraordinary cases, we do not want

referrals from relatives or individuals that approached you and asked to be referred

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Increasing referral quality

Require the following 6 pieces of information1. The job title or req # you are referring them for2. Show you know and have assessed their work3. Assess, rate and then tell us about their skills and

knowledge… and how they are superior4. Assess, rate and then tell us about their cultural

fit… so they do not dilute our culture5. Assure us that you have sold them to the point

where they will accept an interview, if asked6. Honestly rate them with an overall A+, A, or B+

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Providing tips, advice and examples

To get quality referrals, you must educate your employees with a toolkitRealize that most don’t know how to make

contacts and build relationships (online and at professional events)

Provide templates and sample profiles and blogsProvide a list of the best Internet/social media

sitesProvide a company “sell sheet”Offer FAQ’s with answers >

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Great referrals require employee education

Source: Whirlpool

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Why do employees reduce their referrals

over time?

And how to increase them after an

employee’s initial list of contacts is used up

Part IX

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Improving employee contacts

Increasing employee contacts over the long-termEncourage and reward employees for increasing

the # of contacts and connections on social mediaEncourage employees attending conferences to

capture names & to build relationshipsEncourage them to capture names during reading,

research and benchmarking activitiesEncourage your employees to limit referrals to

the best three of their contacts each month… so that their contacts are not immediately used up

Any final questions ?

[email protected] 56

Did I succeed in giving you a handful of useful motivation ideas?

employee referrals - motivating employees so they produce more and higher quality referrals

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