Select Page
SaaS startup owner contemplates pricing

Your employees may be your best recruiters – how are you motivating them?

Let’s clear one thing up: If you don’t have an employee referral bonus program in place, you should. I’m especially talking to those of you seeking to hire talent in an already competitive job market (ahem, technology startups). Statistics indicate that approximately half of all employers offer some type of referral bonus, and studies show this can lead to higher quality staff.

But that’s not to say you should be shelling out a large amount of cash for your referral bonuses (a strategy that may work for some but certainly not all companies). In fact, it’s in your best interest to get a bit more creative with referrals, discerning what will actually motivate your employees. Good news for your budgetary concerns: Lump sums of cash are sort of a meh reward for many.

Pros and Cons of Big Cash Referral Bonuses

Google attracted a lot of attention when they doubled their referral bonus (from $2,000 to $4,000) and it was a flop. While a financial reward is certainly a type of motivator, it’s often more effective when used with other incentives. In fact, what ultimately worked with Google was a program they termed “aided recall,” where recruitment teams sat with employees and scrolled through their respective social networks. In addition, employees were kept aware of the status of their referral’s applications, which prompted them to remain engaged with the hiring process.

Big cash referral bonuses may attract a lot of attention to a hard-to-fill position. Successful startup ThoughtSpot made headlines when they announced a $20,000 cash reward for referring new hires. While it might sound like a lot, CEO Ajeet Singh says that the reward is less than the cut that many top headhunters might take. Banking on the idea that employees and their friends would have better access to top tech talent, ThoughtSpot successfully made three major hires within the first month of announcing the program.

But there are some cons to putting a bounty on a new hire’s head. A study released by Applied Psychology last year indicates the potential negative impacts of flashy referral programs on job candidates. The study cautions that referrer credibility and the sincerity of an employer can be negatively perceived when a potential candidate knows there’s a lot of cash at stake for their referrer.

Additionally, industry experts disagree over whether or not too many employee referrals can negatively impact diversity. It’s easy to imagine how employee referrals may lead to quick community building (a token of a solid workplace culture), where a new hire immediately has a social connection through their referrer. But as Google learned, utilizing only employee referrals can have poor consequences. The company identified a problem with diversity and expanded their recruitment program in response, leading them to move away from a heavy reliance on employee referrals.

Low-Cost Programs Can Be Equally as Effective

If you don’t have the budget for big cash rewards, there are other ways you can implement attractive employee referral programs. Some friendly workplace competition, where gift cards for a trendy lunch spot serve as incentive, can motivate employees to playfully see who can offer the most qualified lead.

Additionally, the “aided recall” approach that Google adopted has caught on. Many companies organize dynamic “social sourcing” parties, where employees may be offered lunch or happy hour beverages in exchange for sitting with recruitment parties and actively reviewing their social networks for leads. This low-cost approach is creative and often more realistic because, by supplementing the process with the recruiter, an already-busy employee can more easily pass on referrals.

No matter what creative program you decide to go with, don’t forget the power of recognition. Give a shout-out to employees that refer new hires, and you’ve just motivated other employees to participate in your recruitment program.

Considerations for Implementing a Referral Recruitment Program

Some chatter has surfaced over the effectiveness of non-financial motivators for employee referral programs. From an HR perspective, addressing the culture of a workplace may serve as a better motivator than just doling out cash. Employees that are engaged to build a sense of community and that feel passionate about their employer are your best tools for referrals, says one Forbes contributor. If you look at the reasons that many employees leave, it’s often about more than just money. Resolving workplace cultural issues creates a strong backbone for an employee referral program (and it helps with employee retention, too).

Creating a successful employee referral program means taking into consideration some defining questions. For instance, does your program extend to all roles or just the harder-to-fill positions at your company? Will you pay bonuses immediately upon hire, at the end of a trial period, or incrementally? And if these bonuses are financial, how much will you pay referring employees?

At Growthwright, part of our services includes offering the right recruitment program for our B2B technology startup clients. We offer a holistic approach to recruitment, which can include building out a powerful and attractive employee referral program for our clients as well as diversifying recruitment efforts. The real value of an employee referral program lies in how effective it is.

Learn more about Growthwright’s recruiting services.

Dorie Dunhill is the Corporate Recruiter at Growthwright.

Growthwright  © 2018