10 HR Practices That Reduce the Effectiveness of Employee Referral Programs

By Dr. John Sullivan

The very best employee referral programs (ERPs) produce simply amazing results. But unfortunately many corporate programs were designed years before we had so much data covering what makes the programs effective.

This data reveals that there are many factors that can directly reduce the effectiveness of these programs. Some of those factors include:

Not maintaining operational responsiveness—Without dedicated attention, it is easy for programs with exceptional service standards to slip, resulting in delayed responses to inquiries, slower referral response times, and even complete nonresponsiveness.  Because response time is the number one success factor for ERPs, it’s critical that service standards be restored.

Delaying reward or bonus payment—The second most commonly found negative feature is withholding payment of the bonus for 90 to 180 days post-hiring.  In order to realize how silly this requirement is, you need to ask yourself a few simple questions: Do sales people have to give back their sales bonuses if the customer stops buying after 90 days? Do you delay payments to staffing agencies or executive search firms?  Well of course not.

So why should you treat your employees more harshly than you do your vendors? Rewards work only if they are immediate and there is no “risk” of not getting them.  Nothing discourages participation more than delaying the reward based on something beyond the employee’s control.

Paying half of the fee upfront is not an acceptable alternative. And you can’t put responsibilities on employees for matters that they have little or no control over.  For example, it’s not the employee’s responsibility to hire a candidate, only to refer them.  Hiring managers do the final assessment and they determine if the person is the right fit.  And if the person does quit prematurely, it’s the manager you should blame not the employee making the referral because they have no control over how the individual is treated and whether the promises that were made are actually kept.

Excluding senior managers and HR people from participation—Many programs exclude Senior Management and HR.  The idea behind a referral program is to get as many people as possible scanning the streets and talking up your firm.  To exclude anyone, especially highly visible individuals like Senior Managers and HR professionals is not advised.

Excluding them makes them feel like their second-class citizens and they will not refer at the same rate if they are excluded specifically from the program and the reward. If you’re worried about these individuals referring people that are qualified just to get the money, then these individuals should be fired on the spot.  The best programs allow hiring managers or anyone where there appears to be a conflict of interest to “opt out” of the bonus or, to give it to charity.

Allowing “I found you” referrals—The idea behind quality referrals is that you seek out individuals and assess their work and their fit with the company over a period of time.  However, as many as 60% of all referrals are not actually referrals but instead are situations where an individual proactively approached one of your employees (because they knew where they worked) and asked them to put their name in as a referral.

In this “I found you” situation, there is no in-depth assessment of the individual and in fact the referral is made more as a “favor” because someone asked.  The best programs require the employee making the referral to provide enough information about the individual to ensure that they know them.  Program rules should specifically prohibit “I found you” referrals.

Reliance on job announcement spam—Unfortunately it has become common practice to spam employees with irrelevant job announcements and generic program communications, both of which overworked employees quickly learn to recognize and set aside.

 Repetitive message formats—Years of experience have demonstrated that using the same message format over and over will eventually result in employees tuning out the noise, just as you tune out the billboard that rarely changes on your commute to work!

Repetitive rewards—Program rewards and prizes are intended to excite, but once they become commonplace or “stale” they cease to be effective.

Relying on the original business case—Business priorities change, unfortunately, few HR organizations update their business case for key programs such as the ERP to reflect the changing environment. Without ongoing program positioning it’s easy for programs to lose their executive champions and for participants to forget all the ways the program benefits them and makes the organization stronger.

Ignoring new tools and technologies—Programs designed even recently might not have taken advantage of newly developed referral tools, approaches, and technologies. In recent years, a lot of development in process and technology has occurred to support vacancy prioritization, electronic referral marketing/communications, social network extension, external stakeholder participation, and automated program administration.

In the next article, Dr. Sullivan will provide even more HR practices that reduce the effectiveness of ERPs.

Join Dr. Sullivan as he presents, “Amped-Up Employee Referral Programs: How to Transform Your Employees into Your Most Effective Talent Scouts,” on Wednesday, November 30, 2016. You’ll how to create the best and most effective employee referral program, click here to register today!