Updating Your Employee Referral Program


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ERE Webinar from 11/12/08, presented by Dr. John Sullivan.

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  • Updating Your Employee Referral Program

    1. 1. UPDATING YOUR EMPLOYEE REFERRAL PROGRAM Practical Tips That Can Dramatically Improve Your Programs Performance ERE.Net Webinar November 13, 2008 © Dr. John Sullivan www.drjohnsullivan.com
    2. 2. Dr. John Sullivan’s summary bio <ul><li>Former Chief Talent Officer of Agilent Technologies , the HP spinoff with 43,000 employees </li></ul><ul><li>Has advised over 250 major organizations in 30 different countries. His appeal is so broad, that work has been translated into 23 languages </li></ul><ul><li>Monthly column in Workforce Management Magazine </li></ul><ul><li>Columnist for the Electronic Recruiting Daily </li></ul><ul><li>Author of eight books and more than 750 articles. </li></ul><ul><li>SHRM called him “One of the industries most respected strategists” & the Best Practice Institute honored him as one of the Top 10 Leading Thinkers in HR </li></ul><ul><li>Staffing.org noted that he was “the father of HR Metrics” and Fast Company magazine called him the “Michael Jordan of hiring” </li></ul><ul><li>He has been quoted by the Wall Street Journal, Fortune, the NY Times, the Financial Times, CFO Magazine and have been interviewed by CNN and the CBS and ABC nightly news </li></ul><ul><li>Currently he is a Professor of Management at San Francisco State University and the chief consultant of the management advisory firm DJS </li></ul>
    3. 3. Dr. Sullivan’s current books Coming Soon!
    4. 5. Topics <ul><li>Benchmark firms and performance targets </li></ul><ul><li>Referrals programs in a down economy </li></ul><ul><li>Things to add to increase program performance </li></ul><ul><li>Common errors to avoid </li></ul>
    5. 6. <ul><li>Benchmark Firms </li></ul>
    6. 7. What is your referral rate? (% of all hires) <ul><li>AmTrust (78%) </li></ul><ul><li>Intel (71%) </li></ul><ul><li>SG Construction (70%) </li></ul><ul><li>Quicken Loans (68%) </li></ul><ul><li>Rackspace Hosting 66% </li></ul><ul><li>Covenant Health (64%) </li></ul><ul><li>Cisco Systems (62%) </li></ul><ul><li>FirstMerit Bank (56%) </li></ul><ul><li>Edward Jones (55%) (with no bonus) </li></ul><ul><li>The Turner Construction Corporation (56%) </li></ul><ul><li>Booz Allen (52%) </li></ul><ul><li>Northrop Grumman Space Technologies (52%) </li></ul><ul><li>Symantec (51%) </li></ul>
    7. 8. <ul><li>You must change your ERP </li></ul><ul><li>to fit with a down economy </li></ul>
    8. 9. <ul><li>Action areas during a down economy </li></ul><ul><li>You must prove your ROI / business case </li></ul><ul><li>Use OPT to shift the work (Other People’s Time) </li></ul><ul><li>Shift the motivators </li></ul><ul><li>Prioritize jobs </li></ul><ul><li>Increase quality by using proactive referrals </li></ul><ul><li>Reduce the volume of low quality referrals </li></ul>Changing your ERP during a down economy
    9. 10. During a down economy… <ul><li>What is the business case justification </li></ul><ul><li>for referrals? </li></ul>
    10. 11. <ul><li>“ Employee referral programs are #1 (at leading practice firms) in delivering the greatest volume of hires, an improved quality of hire, and improved retention at all levels.” </li></ul><ul><li>Conclusion of DJS research </li></ul>For external hiring
    11. 12. # 1 in ROI <ul><li>Employee referrals 82%* </li></ul><ul><li>Organization's Web site 71% </li></ul><ul><li>Campus recruiting 60% </li></ul><ul><li>Niche job boards 58% </li></ul><ul><li>General job boards 51% </li></ul><ul><li>Search firms 42% </li></ul><ul><li>Networking technology 36% </li></ul><ul><li>Commercial résumé databases 33% </li></ul><ul><li>Career fairs 30% </li></ul><ul><li>Newspapers 15% </li></ul><ul><li>* Satisfaction with the ROI of the source - </li></ul><ul><li>January 2006 survey of 73 large employers with a mean of 139,000 applicants </li></ul><ul><li>Source: Direct Employers/Booz Allen Hamilton </li></ul>
    12. 13. The business case for referrals <ul><li>An example of the business results an ERP can produce </li></ul>
    13. 14. Business impacts of shifting hiring sources Source: 2003, Major US Healthcare chain, source comparison study Program results Referrals Source A Cost $2,796 $1,877 - $919 Offer Acceptance Rate 95.4% 81.2% + 14.5% Voluntary Turn < 1 yr 9.3% 22.1% + 2.3X Voluntary Turn > 1 yr 3.2% 12.5% + 3.9X Termination rate < 1 yr 1.2% 4.4% + 3.6X Performance results 14.36% Baseline
    14. 15. <ul><li>The net gain from the </li></ul><ul><li>performance increase alone </li></ul><ul><li>A + 14.36% improvement in the average revenue per employee is $70,800 per each new hire. For 60 hires , the added revenue is $4.3 million </li></ul><ul><li>Because the better performing new hires will stay longer , the savings would continue over multiple years </li></ul>
    15. 16. During a down economy… <ul><li>Shift some of the recruiting work to employees and managers </li></ul>
    16. 17. Shift the work to others <ul><li>“ Do more with less” using “OPT” </li></ul><ul><li>Target 50% referrals, so employees do some of the sourcing and selling </li></ul><ul><li>Get employees to build up their social network profiles to attract candidates </li></ul><ul><li>PDA / name dump parties for names </li></ul><ul><li>Blogs by employees to attract </li></ul><ul><li>Events (Bring back 3 names) > </li></ul>
    17. 18. Shift the work to others <ul><li>“ Do more with less” using “OPT” </li></ul><ul><li>Encourage employee generated videos (Deloitte) </li></ul><ul><li>CEO calls to candidates </li></ul>
    18. 19. Shift the work to others <ul><li>Create a “Friends program” </li></ul><ul><li>Where employees in the same job can answer questions, provide stories and better examples than any recruiter can </li></ul><ul><li>Ask for volunteers </li></ul><ul><li>Pre-screen out all but the best </li></ul><ul><li>Provide them with the referral credit </li></ul>
    19. 20. During a down economy… <ul><li>Shift the motivators away from dollar rewards </li></ul><ul><li>Don’t “make it about the money” </li></ul>
    20. 21. Motivate by focusing on “helping the team” <ul><li>Convince employees it’s in their best interest to make referrals by… </li></ul><ul><li>Using the “Help the team&quot; approach that emphasizes the employee’s benefit from working alongside great people </li></ul><ul><li>Showing them “who” suffers with a long vacancy or a bad hire (Remind them what it is like to work alongside “Homer”) </li></ul><ul><li>Correlating high referral rates with business goal attainment and high individual bonus rates </li></ul>
    21. 22. Change the rewards <ul><li>Emphasize drawings or raffles </li></ul><ul><li>Make the prize something that is “talked about” </li></ul><ul><li>- Trip around the world </li></ul><ul><li>- Trip to the South Pole </li></ul><ul><li>- College tuition </li></ul><ul><li>- Reserved parking spot next to the CEO </li></ul><ul><li>- One on one lunch with the CEO </li></ul><ul><li>- First choice of vacation or shift schedules </li></ul>
    22. 23. A parking lot full of BMW’s will impress
    23. 24. Change the rewards <ul><li>Provide a cheap gift for those that don’t win </li></ul><ul><li>A $25 gift card or a Starbucks card as a thank you </li></ul><ul><li>Give a coffee card only for first-time participants </li></ul><ul><li>A handful of free movie tickets for the whole family </li></ul><ul><li>A small reward for finding “names ” or “leads,” even if it is not an immediate referral </li></ul>
    24. 25. Change the rewards <ul><li>Pins and plaques </li></ul><ul><li>Recognize them with a plaque, award pin, T-shirt , cubical item etc. </li></ul><ul><li>You can also place their name on a plaque or a picture in the lobby </li></ul>
    25. 26. Change the rewards <ul><li>Hold a once or twice a year dinner with the CEO to celebrate all those that have made successful referrals </li></ul><ul><li>Let them appear in company advertising - Work with the advertising department to allow individuals that successfully refer an opportunity to appear in regular company product advertising </li></ul>
    26. 27. Change the rewards <ul><li>Don’t forget the personal touch </li></ul><ul><li>A handwritten note – a personalized note or call from a senior executive thanking the referrer that made a high impact referral (Amazon) </li></ul>
    27. 28. The Army gives a “referral promotion” to PFC before boot camp Promotion for a single referral before your start!
    28. 29. Change the rewards <ul><li>If you do decide to use cash </li></ul><ul><li>The average bonus amount generally varies between $1,100 and $1,500 </li></ul><ul><li>Several research efforts have shown that bonus amounts above $1,500 have little impact on increasing referral rates or referral quality in companies that practice the &quot;help build the team&quot; philosophy </li></ul>
    29. 30. During a down economy… <ul><li>Prioritize jobs </li></ul><ul><li>Because you can’t do it all well </li></ul>
    30. 31. Prioritize positions <ul><li>Do not make all job openings eligible </li></ul><ul><li>Because volume kills quality </li></ul><ul><li>And some jobs fill better using other sources (CFO) </li></ul>
    31. 32. Prioritize positions <ul><li>Focus on high priority positions </li></ul><ul><li>Mission critical jobs </li></ul><ul><li>Hard to fill jobs </li></ul><ul><li>Jobs with a high previous referral success rate </li></ul><ul><li>“ Sudden” vacancies in key positions </li></ul><ul><li>High volume jobs (more EE participation/ PR) </li></ul>
    32. 33. Prioritize business units <ul><li>Focus on key business units </li></ul><ul><li>Focus on high performing and high-growth SBU’s </li></ul><ul><li>Focus on SBU’s with high referral success rates </li></ul>
    33. 34. <ul><li>Be careful </li></ul><ul><li>Some referrals stink </li></ul>
    34. 35. <ul><li>Proactive referrals are where, rather than “advertising” to all employees for referrals, you instead… </li></ul><ul><li>Proactively seek out targeted employees and ask them directly for referrals </li></ul>
    35. 36. Proactively approaching targeted employees <ul><li>Proactive means to approach… </li></ul><ul><li>Top performers - approach employees that are in the top tier of forced ranking or performance appraisal scores </li></ul><ul><li>Award winners - capture the names of internal and external award winners </li></ul><ul><li>The well-connected – approach employees that are well connected in their profession / industry > </li></ul>
    36. 37. Proactively target these employees <ul><li>Proactively approach </li></ul><ul><li>Employees with a successful referral history Approach employees that in the past, have made successful referrals </li></ul><ul><li>Employees formerly from “target firms” – </li></ul><ul><li>Push referral “needs” to employees that came from “target firms” (ActiveNet) </li></ul>
    37. 38. Proactive follow-up meetings <ul><li>Consider a “follow up” meeting </li></ul><ul><li>After a great referral, it’s smart to schedule a follow up meeting with the person… </li></ul><ul><li>- To thank them (And their manager) </li></ul><ul><li>- To learn about the approach that they used </li></ul><ul><li>- To ask them for more top names (Amazon) </li></ul>
    38. 39. <ul><li>Examples of 3 proactive referral tools </li></ul>
    39. 40. 3 Effective “proactive” referral tools <ul><li>1. Reference referrals </li></ul><ul><li>Identify top performing hires from last year </li></ul><ul><li>Call the references that said accurate things </li></ul><ul><li>Thank them </li></ul><ul><li>Ask them “do you anyone else as good?” </li></ul><ul><li>Ask them to be a future reference source </li></ul>
    40. 41. 3 Effective “proactive” tools <ul><li>2. Give me 5 – Proactively approach top people </li></ul><ul><li>Best manager you ever had </li></ul><ul><li>Best team leader </li></ul><ul><li>Best idea person or innovator </li></ul><ul><li>Best out of the box thinker </li></ul><ul><li>Best person that &quot;ran into&quot; burning buildings </li></ul><ul><li>Best problem solver </li></ul><ul><li>Best sales person that beats you </li></ul><ul><li>Best student in college that was so smart </li></ul><ul><li>Best mentor </li></ul><ul><li>Best technical skilled person </li></ul><ul><li>Best international talent </li></ul><ul><li>Best customer service person </li></ul><ul><li>Best replacement for &quot;you&quot; when you’re promoted </li></ul>
    41. 42. 3 Effective “proactive” tools <ul><li>3. Blue light special for critical openings </li></ul><ul><li>When you have a sudden critical need </li></ul><ul><li>Put a “blue light” sandwich board in the lobby </li></ul><ul><li>Also, send a “I need your help” flash e-mail to people in the same job family </li></ul><ul><li>Ask the relevant manager to mention it as part of their regularly scheduled meeting agenda </li></ul>
    42. 43. During a down economy… <ul><li>How you can reduce the volume of referrals that occur as a result of the high unemployment rate </li></ul><ul><li>(and low quality) </li></ul>
    43. 44. Set these expectations… to reduce volume <ul><li>5 Expectations of referring employees (not rules) </li></ul><ul><li>We are looking for referrals that will make our firm significantly better </li></ul><ul><li>Participation is a privilege … so we expect you to put the firm and your team first and to act as a mature adult throughout the referral process </li></ul><ul><li>Normally… we expect no more than 3 a month (Because we want the very best) </li></ul><ul><li>We expect you to know their work from personal experience </li></ul><ul><li>Normally, we do not want family or social friends (Unless they are clearly superior) </li></ul>
    44. 45. Require this information… to reduce volume <ul><li>Five bits of information that we need from you </li></ul><ul><li>Tell us the job # you are referring them for </li></ul><ul><li>Assess & then tell us about their skills/ knowledge and where they are needed </li></ul><ul><li>You must assess them and then report their cultural fit… so we do not dilute our culture </li></ul>
    45. 46. Require this information… to reduce volume <ul><li>Five bits of information that we need from you </li></ul><ul><li>4. Did you seek this top individual out? (We expect you to seek individuals out) </li></ul><ul><li>We are not interested in “they ask you” referrals, when someone approaches you & specifically asks to be referred. </li></ul><ul><li>5. Now rate the referral on a A+, A, B+ or B scale </li></ul>
    46. 47. <ul><li>Program elements to add to your referral program </li></ul>
    47. 48. List of “things to add” to improve performance <ul><li>Be responsive </li></ul><ul><li>Develop a story inventory </li></ul><ul><li>Employment branding </li></ul><ul><li>Employee education on how to improve referrals </li></ul><ul><li>Expand eligibilit y </li></ul><ul><li>Getting manager’s attention </li></ul><ul><li>Referral cards </li></ul><ul><li>Diversity </li></ul><ul><li>College grad referrals </li></ul>
    48. 49. Add responsiveness <ul><li>Respond to every referral (make it appear personalized) </li></ul><ul><li>Thank both within 24 hours (72 hr rule) </li></ul><ul><li>Tell them what they should expect next (timing and steps) </li></ul><ul><li>Make an interview decision within 5 days </li></ul><ul><li>Notify both when there is a rejection </li></ul>
    49. 50. Add a story inventory <ul><li>Catalog powerful stories to aid EE referrals </li></ul><ul><li>Do a Google search </li></ul><ul><li>Check press clippings & press releases </li></ul><ul><li>Check best place & functional award applications </li></ul><ul><li>Check HR benefits brochures </li></ul><ul><li>Ask employees “why they stay” </li></ul><ul><li>Ask new hires “why they said yes” </li></ul><ul><li>Use “We do that lists” culled from best place articles </li></ul><ul><li>Ask “superknowers” </li></ul><ul><li>Create stories (B of A, MGM) </li></ul>
    50. 51. Consider a story book <ul><li>Zappos publishes a book full of 300+ employee written stories about what it’s like to work there (Available on Amazon) </li></ul>
    51. 52. Add educating your employees <ul><li>Educate them on how to find great referrals </li></ul><ul><li>How to find them on-line (forums & networks) </li></ul><ul><li>At conferences (Take a smart person to lunch) </li></ul><ul><li>Capture names during interviews </li></ul><ul><li>Offer training on how to convince them </li></ul><ul><li>What we have to offer side-by-side comparison </li></ul><ul><li>Teach them “the right day” to ask > </li></ul>
    52. 53. Educate employees on the “right day” to ask <ul><li>Day of merger </li></ul><ul><li>Boss/ mentor/ best friend / CEO left </li></ul><ul><li>Lost a promotion </li></ul><ul><li>After their yearly bonus </li></ul><ul><li>After their performance appraisal </li></ul><ul><li>When their project is ending </li></ul><ul><li>Last kid graduates </li></ul>
    53. 54. Add expanded eligibility <ul><li>Expand who can refer </li></ul><ul><li>Allow managers and HR to participate BUT provide an “opt out” or charity option </li></ul><ul><li>Former employees, alumni & retirees </li></ul><ul><li>Customers (Retail, Hollister) </li></ul><ul><li>Spouses (Addie and $2,000) </li></ul><ul><li>Consultants, suppliers, vendors </li></ul><ul><li>Strategic partners </li></ul><ul><li>Stock holders and the BOD </li></ul>
    54. 55. Add getting a managers attention <ul><li>Reward managers for referrals and great talent management </li></ul><ul><li>Set targets - Sometimes just raising the goals and expectations… can cause an increase in referrals </li></ul><ul><li>Post charts or “thermometers” much like how &quot;United Way&quot; programs publicize their progress </li></ul>
    55. 56. Add referral cards <ul><li>Use “attention getting” referral cards </li></ul><ul><li>Limit referral cards – only give cards to employees that can accurately spot talent. And even then, limit them to 10 cards a month </li></ul><ul><li>Include phrases that excite and make them want to take action </li></ul><ul><li>A memorable shape/ design – make it unlike a bus card… so they will know it’s something else </li></ul><ul><li>Give them a unique contact point – don’t direct them in a web site with all other applicants </li></ul>
    56. 57. A WOW referral card – An illustration Apple loves innovators… and you WOW’ed me!
    57. 58. As you unfold it… you see I don’t impress easily… but we might just have a black turtleneck that fits you! Call me tomorrow! 408.738.1922 Steve Would you like to be part of the team that invented the i pod and i phone
    58. 59. And on the back you see Because there are so few really talented people in the world… I just wanted you to know Someday… you will work at Apple If you got one… do you think you would call? Would you tell anyone else?
    59. 60. A referral card – An illustration That was Super Service!
    60. 61. A referral card – An illustration You would be a At Starbucks Call 403 334 9832
    61. 62. Add a focus on diversity referrals <ul><li>Tips for improving diversity referrals </li></ul><ul><li>Make diversity a primary goal </li></ul><ul><li>Use “affinity groups” to spread the word </li></ul><ul><li>Talk to current and former diverse employees to identify what your firm has to offer </li></ul><ul><li>Consider a higher reward for diversity referrals </li></ul><ul><li>Use business events where diversity can be “seen” </li></ul><ul><li>Put together a diversity recruiting advisory board </li></ul>
    62. 63. Add referrals for college grads <ul><li>Endeca gives a flat screen TV as a referral bonus for college students referring a friend that gets hired </li></ul><ul><li>Intuit offered a $50 award to students who referred someone that was hired, they hired over half of those who were referred </li></ul>
    63. 64. Add employment branding <ul><li>A great employer brand increases referral success </li></ul><ul><li>Awards for “best place to work” </li></ul><ul><li>Functional awards (Virtual close) </li></ul><ul><li>Being quoted </li></ul><ul><li>Writing and giving speeches </li></ul><ul><li>Benchmark studies </li></ul><ul><li>Academic case studies </li></ul><ul><li>WOW web page </li></ul><ul><li>Internal branding for consistency (Libby Sartain) </li></ul>
    64. 65. Other things to add <ul><li>A global component </li></ul><ul><li>An internal redeployment component </li></ul><ul><li>Utilize your employees social network contacts </li></ul><ul><li>Identify “why” there are low referral rates with some managers and business units </li></ul><ul><li>PDA party / name dump </li></ul><ul><li>Boomerang referrals </li></ul>
    65. 66. <ul><li>Program elements to avoid in your ERP </li></ul>
    66. 67. Avoid these program “errors” <ul><li>Delaying the reward /bonus payment </li></ul><ul><li>Referral spamming by employees </li></ul><ul><li>Failing to continuously re-energize the ERP </li></ul><ul><li>No ATS marking of ERP apps for metrics </li></ul><ul><li>Equal rewards for all jobs </li></ul><ul><li>No feedback on weak or bad referrals </li></ul><ul><li>Individual recruiters can &quot;ignore&quot; referrals </li></ul><ul><li>Not tracking referral rates by manager </li></ul><ul><li>Giving big dollar bonuses </li></ul><ul><li>Too many rules </li></ul>
    67. 68. Avoid these program “errors” <ul><li>Not weighting EE referrals based on the referrer’s track record </li></ul><ul><li>ERP applications are not given priority treatment in the recruiting process </li></ul><ul><li>ERP program manager turnover and poor documentation </li></ul>
    68. 69. An illustration of how far referrals have come <ul><li>An animated viral video released on YouTube & Google Video is from Yellojobs.com </li></ul>
    69. 70. <ul><li>Did I make you think? </li></ul><ul><li>Any questions? </li></ul><ul><li>www.drjohnsullivan.com </li></ul>