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The Next Generation Of Employee Referral Programs Will Focus On Improving Quality Of Hire

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Quantifying the business impact of ERP hires

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The Next Generation Of Employee Referral Programs Will Focus On Improving Quality Of Hire

  1. 1. The Next Generation Of Employee Referral Programs Will Focus On Improving Quality Of Hire © Dr John Sullivan 1www.drjohnsullivan.com
  2. 2. 2 Definitions and quantifying the business impacts of ERP hires
  3. 3. 3 Definition Define quality of hire from referrals  The % of improvement in the “on the job performance” (i.e. output and retention) of new hires from referrals  Compared with the average performance level of new hires from all other sources Note: you must somehow “tag” employee referral applications… in order to later determine whether ERP hires were better on-the-job performers
  4. 4. 4 Outside sources already verify ERP’s new hire quality Source effectiveness 1. Employee referrals 2. Large job boards 3. Niche job boards 4. Temp to perm 5. Recruiters 6. Trade media 7. Staffing services 8. College recruiting 9. Career fairs 10. Co-op education 11. Mass media 12. Military Source: staffing.org Source effectiveness (out of 5) 1. Employee referrals 3.44 2. Social networking sites 2.98 3. Corporate career pages 2.75 4. Internal job boards 2.52 Source: Aberdeen Group Employee referrals are #1 and they are 25% more effective… than corporate career pages
  5. 5. 5 Top performers utilize referrals ERP’s work best when you’re recruiting a top performer  “Over 93% of the top performers in their field do not find their job from a job posting”…  “Instead, they are referred by someone they know, such as a friend or networking contact” Source: Forbes 8/03/2014 BTW, top performers produce the best referrals
  6. 6. 6 Q of H Measurement You can measure the performance improvement of referrals versus other hiring sources… using 4 basic methods: 1. Comparing the actual job performance output/ retention numbers (sales, customer service, production etc.) 2. Compare the % of improvement in performance appraisal scores 3. Compare the hiring manager’s rating of the new hire’s performance on a 1-5 scale 4. Compare the % of new hires that the manager would rehire after 6 months on the job
  7. 7. 7 The business impacts By working with the CFO… you can prove the business impacts of better Q of H from referrals? Start with jobs where the output is already quantified  The new sales people hired from referrals sold an average of $869,000 their first year,  While sales people hired from all other sources averaged only $790,000 their 1st year…  The added $79,000 is a 10% performance improvement  And $79,000 per hire over 15 hires = $1.2 million every year they are retained
  8. 8. 8 The business impact Next, quantifying the business impact for jobs where there is no quantified output measure  Let’s assume Coke calculated the % differential in performance appraisal scores of new referral hires over hires from all sources  They found that the ERP performance was 10% higher than hires from other sources  The yearly average revenue per employee at Coke is $261,000 (found on MarketWatch.com)  $261,000 X 10%... means that the value added by each referral hire is $26,000 for every yr. they stay
  9. 9. 9 What performance should you expect from “the next generation” of ERP?
  10. 10. 10 ERP “next generation” performance scoreboard 1. At least 10% better on the job performance 2. Volume of all hires exceeds 50% 3. The highest retention rate 4. The shortest time to fill 5. > 30% of top performing employees participate 6. < 10% low-quality junk referrals 7. They can be the lowest cost per hire source
  11. 11. 11 Action steps for improving ERP quality of hire
  12. 12. 12 ERP Q of H performance improvement steps #1 – The ERP must shift to a data-driven approach… where data reveals…  Which employees provide the best referrals  The best sources for identifying referrals  The best job performance prediction factors  The most effective rewards  The best way to communicate  The most effective ERP rules and policies  Common errors and problems
  13. 13. 13 Action item #2 Change the motivator to “referring for the good of the team”  Emphasizing the reward payout makes employees focus on the money… (Only 11% of employees make referrals because of the “opportunity to earn bonus income”)  Convince employees that it’s every team member’s responsibility to be a 24/7 talent scout  Help employees realize that “with better players”, the team will win more often  Convince every teammate that they deserve to work alongside and learn from the very best coworkers (no slackers)
  14. 14. 14 #3 - Improve applicant quality by requiring this information 1. The job title or req # you are referring them for 2. Verify they have not “found you” and there is no personal relationship 3. Show you have seen and assessed their work 4. Assess, rate and then tell us about their skills and knowledge… and how they are superior 5. Assess, rate and then tell us about their cultural fit… so they do not dilute our culture 6. Assure us that you have sold them to the point where they will accept an interview, if asked 7. Honestly rate them with an overall A+, A, or B+
  15. 15. 15 ERP Q of H performance improvement steps More steps for improving ERP hire quality Provide a story inventory Provide a referral toolkit to educate your employees on how to refer (DaVita and Whirlpool) Referral cards are effective for customer service Offer a once a year CEO ERP recognition dinner Use the mobile platform for applying /communications
  16. 16. 16 The sources that produce the highest quality referral hires
  17. 17. 17 #1 – The best approach is being “proactive” “Give me 5” “retrieval cue” approach (Google & DaVita) Proactively approach top performers and ask them to identify the top 5 people in their field… using these “brain stimulator” categories The best performer you ever worked with The most innovative The best team player The best manager The best working under pressure  Then ask the employee to contact these 5 individuals and try to convince them to apply
  18. 18. 18 #2 - ERP Q of H performance improvement steps Boomerang referrals Utilize your corporate alumni group to… identify top-performing alumni that work in high need areas and assign an employee to them (DaVita 16%)
  19. 19. 19 #3 - ERP Q of H performance improvement steps Reach out to job references for referrals  Identify top performing hires from last year  Call their references that said accurate things  Thank them  Ask them “Do you know anyone else as good?”  Consider hiring the reference  Ask them to be a future reference source
  20. 20. 20 #4 – ERP Q of H performance improvement steps Expand referral eligibility to well-connected individuals that know and like your firm Corporate alumni Retirees Vendors Spouses Strategic partners Customers
  21. 21. 21 ERP Q of H performance improvement steps Additional great sources for quality  Ask new hires during onboarding  College student referrals  Assigned referrals  Referrals from those with a track record of successful referrals
  22. 22. 22 ERP Q of H performance improvement steps Errors that reduce quality of hire Discourage employees from submitting “they found you” referrals Don’t “spam” all employees with referral requests that cause fatigue Not giving individual employees feedback about the quality of their referrals Don’t withhold payment… ever Scraping contact lists won’t work simply because the names have not been pre-assessed or presold
  23. 23. 23 Benchmark firms that you can learn from Google Facebook ThoughtSpot Deloitte Ernst & Young Edward Jones Accenture DaVita Aricent Children’s Hospital Jobvite Accolo CACI International Acumen Solutions
  24. 24. Remember the ERP open question session Wednesday at 2:30 PM JohnS@sfsu.edu 24 Did I provide you with a handful of actionable items? www.drjohnsullivan.com

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