Employee referrals: A network approach to hiring

Hiring great talent remains one of the biggest challenges for many organisations. But what if your best recruiters were already on your team? Employee referral programmes tap into your existing network to find high-quality candidates who are more likely to be a great fit. 

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In this article, we’ll explore why referral programmes work, highlight some standout examples and outline six steps to set up a successful programme – whether you’re starting from scratch or refining an existing approach.

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Why employee referrals work

An employee referral programme encourages current employees, alumni or even external partners to recommend candidates for open roles, usually in exchange for a reward. These referrals come with several built-in advantages:

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• Higher quality hires: (Former) employees understand your company culture and often also the real skills required, so their recommendations tend to be strong matches. Research shows that referrals lead to more productive employees who stay longer in their roles.
• Increased retention rates: Referred employees tend to stay longer and perform better, strengthening team cohesion and reducing turnover costs. In their Harvard Business Review article, Kate Gautier and Lalith Munasinghe highlight that referral quality improves significantly when employees and referred candidates have a close relationship.
• Enhanced candidate experience: Job seekers are more likely to engage with a company when approached by someone they know and trust.
• Cost-effective recruiting: While offering referral bonuses is common, referrals typically still cost less than traditional recruiting channels.

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Standout employee referral programmes

While a “standard referral program” can already get you far, we found some examples that can serve as inspiration for creating your organisation’s programme in a more creative – and potentially effective – manner:

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Reward successful hard-to-find candidate referrals

If you’re looking to meet certain DEI KPIs, Intel’s 2015 decision can inspire: To attract more women, minorities and veterans to their company, they doubled their usual referral amount for successful referrals of candidates from these groups. 

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Maximize the feeling of “doing good”

The consulting and IT company Accenture knows that referring people makes you feel good – either because you helped out a friend and/or your company. To foster this feeling further, they allow employees to donate a part of their referral bonus to charity and Accenture matches the amount.   

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Go grassroots

Your target candidates might not be looking for their new job online? A traditional poster might be the way to go. Julia discovered this example in the streets of Berlin: An orthopaedic shoemaker was urgently looking for a new employee – a simple yet effective grassroots referral tactic by a small business.
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How to set up an employee referral programme

Are you ready to build or refine your referral programme?
Here are six key steps we recommend:

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1. Define who can make referrals

Determine whether only current employees can participate or whether you want to include alumni, business partners, or even customers and the wider public. 

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2. Decide on incentives & conditions

Referral incentives don’t have to be expensive. While cash bonuses are common, there are many other ways your company can thank those who make a referral. These include:

• Extra paid time off
• An increased learning & development budget
• Charitable donations on the employee’s behalf (for example from a list of pre-vetted organisations) 
• Public recognition (e.g. company-wide announcements, praises during team meetings)
• A free team lunch
• … 

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It’s important to set clear conditions, such as requiring the referred hire to stay for at least six months before the incentive is awarded. Make sure to communicate these clearly in a written policy.

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3. Leverage your ATS (Applicant Tracking System)

Check if your Applicant Tracking System has referral tracking features or a designated referral portal to streamline the process. Many systems offer built-in tools for managing and rewarding referrals.

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4. Make referrals easy and transparent

Your referral programme will be more successful if it’s straightforward and easy to navigate. To ensure it’s effective and doesn’t create extra hassle for your employees or HR team, we recommend you:

• Set up a simple process for employees to submit referrals.
• Provide tracking so referrers know what’s happening with their recommendations.
• Clearly communicate expectations (e.g., what qualifies as a good referral, how long the process takes).

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5. Promote your programme consistently

A one-time announcement won’t cut it – you need to ensure your referral programme stays top of mind. Ideally, with each hiring need, your employees will review their mental Rolodex and consider suitable candidates. To support them in this process, it’s necessary that you regularly update them on hiring needs – you could even consider a Slackbot reminder (or similar) whenever a new job posting goes live. Use your internal communication channels and company meetings to encourage referrals on an ongoing basis.

For smaller teams, another creative way might be to physically sit together in a room for 20 or 30 minutes with everyone filtering through their LinkedIn networks, asking clarifying questions to your recruiters and sharing links to the profiles of potentially suitable network members with them afterwards.
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6. Measure and iterate

If your referral programme works well, it’ll show in the numbers. Don’t miss out on tracking key metrics to analyse programme effectiveness and have a solid basis for further adjustments. You might want to take a closer look at:

• Percentage of hires from referrals
• Time-to-hire for referred candidates vs. other sources
• Retention rates of referred employees

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Adjust the programme based on your data – whether by tweaking incentives, improving communication or enlarging the pool of potential referrers.

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Final thoughts

Employee referrals are a powerful, cost-effective way to attract high-quality talent to your organisation. By building a structured programme and fostering a culture of referrals, you can enhance hiring outcomes while strengthening company culture. Whether you opt for a traditional referral system or explore innovative approaches, the key is making it easy, rewarding and engaging for employees to participate.

Do you want to refine your hiring approach further? Feel free to contact us – we’ll be happy to support your organisation in optimising its talent strategy for lasting success.