The idea sounds nice and easy: employees refer new employees. A loyalty-building strategy which also recruits new employees. The managers of the consulting firm Deloitte Czech Republic have had such a program in place for years. Initially, however, this was with limited success.
The process was quite complicated in its structure and only provided rewards for employees if the new hires passed their probationary period. It was only when Deloitte digitized the process in the fall of 2020, and significantly simplified the process, that the number of high-quality candidates increased—as did employee enthusiasm. The defining feature was that all Talent Scouts’ activities are now rewarded, regardless of whether the referred candidate is hired or not. Currently, Deloitte Czech Republic has over 1,000 active users (compounded by 60% of current employees + former employees). These have already referred 315 candidates, of whom over 60 have been hired.
Digital employee referral programs are considered to be one of the most successful recruiting strategies in many countries. However, the success of individual companies is very different. We surveyed companies in Germany, Switzerland and Austria that use digital employee referral programs to identify the success factors. The chosen method was quantitative analyses of usage behavior, as well as qualitative studies involving employees.
Over 35,000 user profiles of employees from companies across all industries were analyzed for their usage behavior. We segmented the users on the basis of frequency of use and their recruitment impact; for example, how often a referral led to an application or a hire. We also looked at the points of contact: social networks and email.
We then conducted a field study of two companies through 29 semi-structured video interviews. The statements made in the in-depth interviews, which lasted over seven hours, show what companies should consider in order to recruit successfully.
Four Referral Personas
Our research uncovered four types of users, each of which could be attributed a clear behavioral pattern. These users were motivated by different factors, and had differing impacts on recruitment.
A group of 4% of all of all users exhibited behavior that can be classified as highly proactive. Power users are regular participants of a referral program. On average, their every seventh referral leads to a successful hire. They praise “the simplicity of the program and the principle of the approach.” For them, rewards are important motivators, especially when they are “paid out immediately” and “are designed to be simple.” Power users use business networks such as Linkedin and Xing, or establish direct contact via WhatsApp and email in order to find the right candidates for job openings.
These are employees who rarely engage with the program, but have an above average success rate when they do. They make up about 6% of the total group and are enthusiastic about the idea of the program. These users need not search far and wide, as they are able to reach candidates in a targeted manner. So much so, that that on average every second referral leads to a hire. This means that instead of business networking platforms, they opt for more private and direct channels (Facebook, Twitter, WhatsApp, and email). Strikers are specific: they “identify and exclude candidates that do not fit the bill” and only refer those that are “an exact fit for a position.” They describe themselves as very loyal.
A large group of the employees surveyed (around 32%) use the program with a high level of activity, especially within social networks. These users make use of their large circle of acquaintances to reach many potential candidates, without specifically checking for suitability. “My network consists of contacts who can become employees. I don’t see any reasons not to use this potential for my employer,” said one of the interviewees. In terms of all the groups surveyed, more than 80% of all relevant shares on social networks are initiated by this subgroup. The multipliers thus make a major contribution to the visibility of the company within social networking platforms. At the same time, multipliers achieve a rather low success rate, since on average only one in 292 referrals leads to success. As a rule, multipliers do not directly contact via WhatsApp or email, but share jobs publicly on business networks such as Linkedin and Xing.
Approximately 58% are cautious users: employees who rarely use the program and have a rather low success rate. They are more likely to make targeted contact via private networks or directly, so that a pre-selection takes place. If they consider the chances of being hired to be low, they do not refer anyone. Cautious users only rarely make referrals, and if they do, the quality of the referral is higher than that of of the multipliers’. Rewards and direct feedback from the company are emphasized as motivation for them. Equally, concern is expressed that “a bad applicant who I have referred will reflect badly on me.”
Targeted Improvement of Referral Personas
All four user types cite employer loyalty as a reason to participate. This more intrinsic motivation is perceived as more important than monetary rewards. Based on our classification of user types and their typical behavior, we recommend four measures to encourage employee participation.
User-friendly, simple processes lead to higher usage.
The easier the program is to navigate and the more transparent the processes are, the more frequently and intensively it is used. This is particularly the case for addressing the “cautious” and “strikers” user types in particular, for which improvements such as simpler and more transparent language are advised. This can be implemented by giving all active users the option of filtering by organizational areas or locations, in order to limit the amount of information.
Feedback quality and speed lead to higher satisfaction.
Users expect feedback on their referrals. Praise for their participation and commitment or an explicit thank you from the supervisor – in the case of a successful referral – goes a long way in motivating long-term engagement. The feedback should be provided in a timely manner so that employees can make a direct association with their referral activities. Additionally, providing updates about the position’s vacancy status is important, since referrers expect to be able to provide at least some level of information if a candidate asks them. Of course personal data must be kept confidential, but basic knowledge of the process should be made known.
The amount and distribution of rewards are only two motivating factors among many.
Those who want to award rewards should take into account the different persona behavior and make cash payments accordingly. This can for example be with the aim of encouraging Multiplicators to be more targeted, and Cautious Users to refer more frequently. A staggered payment of rewards (e.g., for participation, incoming and successful applications) is recommended. Although rewards are important motivators – especially for Power Users – they compete with the intrinsic commitment of the workforce. For employees, digital referral programs offer a simple way to simultaneously show commitment to their employer and offer opportunities for professional development to their own network.
Program launch must be well communicated.
If companies want to ensure a smooth employee referral program introduction, they must clearly explain the program in detail. This is the company’s opportunity to make a good first impression of the recruitment strategy, and positively impact the subsequent frequency of use and user behavior. Through effective communication, supervisors can dispel reservations and make it clear how valuable the support of employees is in making the program a success.