VANNOY:
Your secret weapon for hiring, how to build an effective employee referral program. So, today’s topic is one of those things that I think we spend so much time in HR about all the best practices. There’s so much legal ease to the compliance part, and sometimes we’re just, we’re, we’re, we’re, we’re missing really obvious opportunities to improve the talent of our teams to have more productive teams, better, better culture in, in an employee referral program is really probably near the top of that list. So my guest today, if you guys are regular watches of the show, you know, Mary Simmons Mary’s the vice President of HR Consulting at Asure. She is a SHRM certified professional. For the past eight years, she has been an adjunct professor at the New York Institute of Technology, and prior to Asure, she was the director of HR consulting for a 55 year old HR consulting firm in New York. Welcome back to the show, Mary.
SIMMONS:
Thanks, Mike. Great to be here.
VANNOY:
So, this might sound stupid, but let’s just, let’s just start with a definition. What is an employee referral program? As regards to hiring?
SIMMONS:
Yeah. Not, I don’t think that’s a stupid question at all, because I, I think it’s underutilized, you know, recruitment tool, right? So what the employee referral program is set up to incentivize your current employees, and, and we’ll talk about different ways to incentivize them to, to refer other qualified candidates, and the pivotal word there is qualified, right? Right. So I’ve had this at many of the organizations that I’ve worked for, and you really have to balance Mike, the reward and how you articulate what this program is. Yeah. because, you know, I, I used to work for a very large bank. We gave a really nice incentive, right? To refer people and they, you know, some of the employees were referring anybody, right? They weren’t really thinking through is this person qualified? They might not have even known the person. They were just like, Hey, I get $500 for referring somebody. I’m gonna refer anybody who, you know, walks into a, a branch, you know, even if I don’t know them. Right? So you really have to put some guardrails on this. And I think the communication of this is very important. It’s not as simple as it sounds.
VANNOY:
I agree. I’ve, I’ve seen this done well, and we’re gonna talk about all the benefits and reasons why you should do this. We are absolutely advocating that you, you set an employee referral program up. I’ve also seen this done badly where referring employees made a bunch of money and it was actually a substantial part of their income for a period of time. And it was treated as such rather than were we building the talent of an organization. So let, let’s, let’s start out with exactly kinda some of the, some of the whys beyond, Hey, war for Talent has hit Main Street, we’re all struggling to find qualified people. What is it about an employee referral program that really are some unique advantages versus all the other ways we source candidates?
SIMMONS:
Right. And that’s, that’s a great question. And, and we have had many conversations on recruitment and, and how to recruit the best talent. And very often the best talent that you own today knows other individuals that are talented, right? If they’re, yeah. You know, performing at a certain level at the level that you’d, you know, like them to perform normally, they can easily identify other individuals with, you know, the engineering skills that maybe you need, the tech skills that you need, the HR skills that you need, right? Because these are individuals that are number one, happy working for your organization, right? So when we’ve talked about recruitment in the past, we always say your employees are ambassadors of your organization. Yeah. Number one, on the marketing side, you know this. Yeah. but also on the recruitment side, right?
VANNOY:
That’s
SIMMONS:
Right. Great way to do it. Low cost. And very often, and I will tell you that I use this, you know, I have 30 people in my department. I would say that at least 20% of my staff are referrals. And it is very rare that it doesn’t work out.
VANNOY:
Yeah.
SIMMONS:
Very, very high success rate.
VANNOY:
Let, let’s go deeper on that. What, and some of this might be obvious, some of it might not be obvious. What, what are the reasons? Yeah. You think you have a higher success rate with employee referrals?
SIMMONS:
Well, I think the, one of the first things is people feel more comfortable joining an organization when they know somebody, right? So if you look at turnover rates, Mike, your turnover is, believe it or not, very high in your first couple of months. You know why? Because the organization may not be doing onboarding, right? They may not have a good mentor program, but when they have somebody that they already know, they’re gonna have somebody to go to and say, gee, I’m working with that Mike Guy and he’s not so nice. How do I, how do I work with him better? Right? People just are gonna acclimate to your organization better. So that’s, that’s one of the first reasons. And the person who, you know, referred their friend when the friend, or, you know, a colleague, right? Let’s not use that. They’re just referring friends. But, you know, a prior colleague, they have better job satisfaction, right? Cause you know, they have somebody that they know that they’ve worked with well before. Right? I wanna pause
VANNOY:
On
SIMMONS:
That. And I think one of the other reasons,
VANNOY:
I wanna wanna pause on that one and go deeper. Cause I think this is, this is such a hu to me, it’s maybe the most important consideration when I think back of all the hiring PE candidates I’ve passed on, candidates I’ve made offers to, and they declined. Honestly, the ones that stand out in my memory over the last 25 years is the occasional real superstar that declined it, right? And, and the, so maybe it’s somebody who could have absolutely made a, could, could have been a pivot point in your business, could have been a difference maker, kind of special talent, right? And I, and I think sometimes we forget that people that are that rare, that top one, 2% talent they have choices. They can go wherever they want because they’re in demand. And
SIMMONS:
Right.
VANNOY:
They, they, you, you might say all the right things in the interview, but if you don’t know them, this isn’t just the employee referring someone to you. So you, so, so you, you, they can vouch for their character, their skills. This is that superstar evaluating you. Do I trust you, Mike, in this interview? Do I trust you marrying this interview? Are you just feeding me a line of crap trying to get the company and I’m gonna hate it when once I get there, <laugh>, that street goes both ways, right?
SIMMONS:
Oh, a hundred percent. And listen, what, what we always try to do when we’re, you know, setting up strategic recruitment for our clients is we recommend that for many of the positions higher level position, we usually have peer interviews, right? Because I wanna give a really good job preview. And they, like you said, they may not believe me as the manager. So I let them, you know, we’ll, we’ll recommend to our clients, have a peer speak with them, not necessarily interview them, but if they’re getting referred, they already have a peer that’s telling them, this is a great place to work. I like the culture, I like the boss. And it’s just gonna go so much smoother for you, you know, as the employer, because they already know about your organization, right? You’re, you’re still gonna give your same speech that you give about your organization, but they’re already up here as far as knowledge, right? Right. They already know a lot about your organization.
VANNOY:
And really talented people probably have high EQs, not just IQs. And, and they, and their bullshit meters are really good, right? <Laugh>. So they, they’re, they’re trying to sniff out, is this gonna be a fit? That, okay? Mary seems so great in the interview, she says, is an amazing company. I just got some vibe, you know, what’s it gonna be like when I really get there? Is she gonna micromanage me? Is she gonna, am I gonna be bullied? Am I gonna feel supported? In, in all those things it, the, the path is just so much smoother because the, the relationship is already is, is already kind of prebuilt coming in,
SIMMONS:
Right? And don’t forget that, you know, the generation, the largest generations, your millennials and your Gen Zs, they’re looking for a place where they can have fun. Like fun is really high on their list, right? We always think as employers that money is the number one driver of why somebody joins our organization. And the statistics will tell you that’s not true. Right? They’re joining for the culture. And if they know somebody there, the culture is already positive or more positive in their eyes. They already understand and believe the culture, like you said better. So, you know, th those pop those generations are, you know, the largest, you know, candidate pool right now that we’re looking at. So they want to join someplace where their friends are, right? So it’s, you know, the recruitment, when you’re talking about an employee referral program, and we’re just talking benefits now it’s gonna be a little bit quicker.
You know, you have a little bit higher level of, of security in this person being a good candidate, right? Because you’ve, you’ve got a reference, right? Yeah. From the person within the organization, and they have a higher interest rate because they got referred and their, their friend or their colleague, right? Let’s not, I don’t wanna think that it’s all friends, because that’ll work into our next point of dangers, <laugh>. But, but you know, everybody is just a little bit further down the funnel as far as, you know, this is gonna be a good match.
VANNOY:
Right? And I, and I think about like, every, every every employer has a different brand, employment brand, right? So maybe, maybe your company is not for the faint of heart. Cuz we have a startup culture and we grind. And either you love that or you hate that. Maybe we are a super fun right. Laid back atmosphere. Maybe we’re really buttoned up tight. I mean, people will, people will self deselect before ever coming to the interview because they’ve already found that out before they get to you. Right? And so, correct.
SIMMONS:
Yes. And you want them to
VANNOY:
<Laugh> Absolutely.
SIMMONS:
It saves time.
VANNOY:
Yeah. Time’s money better to not waste your time and God forbid you actually hired the person and then it’s not a cultural fit, even if they are awesome.
SIMMONS:
Right? Right, right, right. Okay, let’s, so, you know, I interrupted, I don’t, I don’t, go ahead. Yeah. So, sorry. I don’t wanna forget to say that, you know, besides being benefits for the employer, don’t forget there are benefits for your employees because your employees want to have colleagues that they worked with at the organization as well. It just makes them happier, you know? Yeah. So there’s benefits for you as an employer fast, you know, not expensive, right? You’re not using a re you know, an outside recruitment firm. You’re not placing an ad possibly. Right? But you definitely but the employees also have a really nice benefit. You know, they, they get a little money if you have a cash incentive. But more importantly, they have colleagues that they trust and like working with them.
VANNOY:
I think I would add a, add an another component to that, that the employees feel like they’re part of the process, right? Like if I’m an employee, I’m referring, yes, yes. I might get a little money, there might be some spiff to me. I might actually enjoy working with this colleague. That would be nice. Oh, great. I get to work with Jane again. That was so great when I used to work with her. But I feel like my opinion is valued and I am engaged in yes, the most important task of a, a company can have, which is who’s gonna join this, this team who’s on the bus, who’s off the bus, right? And I’m part of that. That feels really good to me.
SIMMONS:
Right? Absolutely. Absolutely. What,
VANNOY:
What other
SIMMONS:
Benefits you wanna, what other benefits to the dangers?
VANNOY:
Talk about <laugh>. Yeah. What any other benefits we should talk about before, because there are real dangers and we’ll go there. Go
SIMMONS:
Ahead. Yeah. Yeah. I can’t think of any, I think we, I think we covered them. You know, it definitely is cultural also, right? So if you have your employees who like your culture and fit your culture, referring other people, colleagues or friends, then you’re probably going to have a very strong cultural fit. And that is, as we, we always say, right? We always come back to culture and we know how important that is. I think that that is going to keep your culture moving in the right direction, right? Because you can have the perfect candidate. So on paper, they’ve got this certification and this education and this experience, but if they don’t fit your culture, that is going to be more detrimental to your organization than, you know, positive. It’s not gonna move you in the right direction. So I think that normally when we see the referrals and in, you know, my 30 years experience in hr, the referrals usually are a good cultural fit. So that, that’s definitely another, another benefit
VANNOY:
Speak to, to cost. Now, obviously this depends on how rich your referral program is, but
SIMMONS:
Correct. I mean,
VANNOY:
If, if you have an amazing employment brand, you don’t have to spend anything. You’ve got people lined up at your door there, there’s infant number of people lined up to work at, you know, Google, SpaceX, no matter how hard those environments can actually be, and you know, you’ll, you’ll people will take the three hour commute because they wanna be a Googler, right?
SIMMONS:
But Right,
VANNOY:
Right. It’s not, most companies, most companies, there’s a cost associated. What, what, what kind of, what kind of potential savings are we talking about just in hard dollars from a referral program versus all the other traditional methods?
SIMMONS:
Well, most of the recruiters right now, right? They’re in high demand. So if you are using an outside recruiter, they’re minimally charging you 20% of that employee’s salary, right? So a hundred thousand dollars employee, that’s gonna cost the company $20,000. It’s a lot of money, right? Lot of money. The employee referral program, usually for upper management like that, that referral can be anywhere between, I’m gonna say a hundred dollars. And I’ve seen it up to, you know, a couple thousand dollars to refer somebody in middle or upper management, right? So it’s a, it’s a big cost savings. But the other cost savings you have to talk about is time, right? Because even if you’re using an outside ref recruiter, they’re gonna send you five candidates, you’re gonna set up the interview, they’re gonna go, you know, so there’s definitely less time involved, and we all know that time is money.
So I think you’re saving time and in most cases, you’re saving money. Now, if you compared it to an ad, you know, you can place inexpensive ads. Certainly you can place an ad on Indeed for free using their free version. But I think the time involved when you place that, right? So even the Googles of the world that have people lining up at their door, it, it’s not necessarily good, right? Because all those thousands of people lining up at their door, I can guarantee you are not the most qualified. They’re probably getting their most qualified from referrals, right? So besides the cost of not using an ad, not using a recruitment firm, it’s the time involved, Mike. And, and that’s what you’re saving.
VANNOY:
Okay? So let’s recap the benefits for the employer. There’s a potential cost savings. There clearly can be a time savings. Cause I mean, a fallow position is you’re not getting productivity or maybe you’re, you’re missing out on revenue opportunities. There, there’s all kinds of bad things happen with an empty position, right? So, right, there’s time savings, right? There’s cost savings. You presumably get higher quality candidates that are not just candidates who have the skills to perform the job, but they are a cultural fit. Correct. The benefit to the employee is they feel part of the process. This is a way for them to kind of bump up their, their income potential in a way that it, it adheres them to, to your company and, and, and creates a stickier employee. And, and I think more importantly, they just feel part of the process.
They feel part of your overall talent acquisition strategy in, in they work with people that they like and trust. The benefit to exactly the candidates is this is a kind of a built-in vetting process that own the very best people, the ones we want the most. They have the most choices, and it doesn’t do any good to try to fake ’em out because they’re, they’re good for a reason and their BS meters are, are, are really, really good. And what a wonderful way for them to vet you as a boss, to vet the company, to vet the opportunity. So tons, tons of benefits for all parties involved. Did I miss anything before we go to kind of some of the red flags and gotchas?
SIMMONS:
I don’t think so. I think you got it. Okay.
VANNOY:
Good job. So, <laugh>, thanks mayor. Okay, now done badly. There’s lots of things that can go wrong here. Let let, let’s start talking about that.
SIMMONS:
Yeah. So, and I’m sorry I was jumping to the dangers, but you know, me, I’m crazy about compliance, right? So you’re the compliance one. Yeah. I spend a lot of time. Yeah. Yeah. You know, I can’t help myself. So I spend a lot of time when I’m, when I’m walking through one of these programs and setting it up on a strategic level with, you know, the employers that we support, you know, helping them understand some of the dangers. So number one, you know, I’m always talking about d e i diversity, equity, and inclusion, and a program like this may not always but may de decrease the diversity of the organization, right? So simply stated, you know, you, you as a white man are more likely to refer another white male, right? Instead of somebody who is maybe more diverse. And I’ll also, you know, raise the stakes here to, you know, using diversity a little bit wider in that if you are referring people, you may be referring everybody from your college or university or your area, right?
So to make an organization great, you want diversity, you want diversity in the way that the people look where they were brought up, how they were educated, that makes your organization great. You don’t want everybody with the same ideas. You need diversity, you need creativity, right? Yeah. And different ideas. And that’s sprung from diversity. So that is a real danger with an employee referral program. And you know, I make sure that when we do this and we, we start these programs with our employers, that we’re really taking some good statistics, right? And, and every organization should do this, whatever your recruitment strategy is, right? I’m placing this many ads, I’m using outside recruiters and I’m doing an employee referral program, right? Let’s just say those are your three main ways that you are bringing candidates in. You need to say, how many candidates did I get from each of these?
How many did I interview? How many offers? How many offers were accepted? Right? Big difference there, Mike. Yeah. And then, right. Who was hired, right? And then you back into the costs and figure out, well, hey, it looks like I can stop placing ads because I’m getting them from, from my two other streams. So all, you know, this is a great program. So when I talk about these dangers, I don’t want anybody to go, that’s too many dangers, Mary. I’m not gonna do it. I don’t want anybody to think that Mike, but I, you get, you have to go in with your eyes open. Yeah. And you have to you know, you have to have some statistics around this people because you have to know, you know, who’s coming in. And you have to, you know, look at the cost, right? If I’m spending too much money giving people, you know, $5,000, you know, wall Street’s very famous for this. Those, those, you know, I think somebody who referred my husband who works on Wall Street, I think he got like a $20,000 check mm-hmm. <Affirmative> that, you know, so you got weigh the, the cost with the benefit, right? Yeah. Yeah. So that is definitely the lack of diversity in my eyes on the compliance side, is one of the biggest dangers. And, and there’s others, right?
VANNOY:
And I wanna spend more time on that one if we can. So Sure, sure. You and I always have these conversations. I think, I think we’re a, a Venn diagram, your compliance. I’m performance and we overlap probably 80%. We, we each have our leanings. I just think about productivity, cuz I don’t want, you know, when you said I’m more likely to refer a white male, that’s just statistically true. It’s not cuz I’m racist, it’s not cuz I’m homophobic. It’s not because I’m correct, correct. Right. paternalistic, any of that. It’s just coincidentally, I’m a, I’m a guy who grew up in a small Midwest town, and guess what my town looks like? I mean, so therefore that’s my relationships and my relationships. That’s
SIMMONS:
Your universe.
VANNOY:
That’s my universe, right? And you Yeah. You, you live in, so I’m in Midwest, you’re in, in New York, your universe looks very different than mine, right? So Yeah.
SIMMONS:
Significantly <laugh>,
VANNOY:
Right? Right. So I, I think, I think there’s a, there’s a compliance component, but I, to me, the, the, the Trump card here is, is performance. If everybody, if everybody forget what they look like in, in all the stereotypical components of diversity, but just diversity of thought, if everybody approaches all problems the same way, you just end up with gigantic blind spots. Right? And, and your, and your ability to do problem solving. As, as a, as a company, as a, as an entire unit, you, you don’t know where your weaknesses are because you all think about the thing things the exact same way,
SIMMONS:
Right? I, I would say that your company’s gonna flatline a hundred percent, right? Because everybody’s just Yeah, yeah. Good idea. Yeah. Yeah. Let’s just keep doing that. Yeah, yeah, yeah, yeah. You’re never going to reach your business goals. You’re not going to grow the way that I’m sure all of our listeners wanna grow. You have to have diversity of thought and diversity in your workforce is the way
VANNOY:
To do that. And we’ll push, and you and I will, we’ll push hard on this, right? Because this isn’t just yeah. Maybe you are hitting your goals, maybe your goals are too low, right? The, the, the, the, the, we’ll do another webinar on this topic, but the, the fact is organizations are more productive when they have diversity of thought. It just, it, it just is that simple. Okay. A hundred percent.
SIMMONS:
Let’s
VANNOY:
Move on from diversity, from from the diversity component. What, what are some other Yeah. Gotchas in an employee referral program.
SIMMONS:
Yeah. So one thing that I wanna make sure everybody understands is that you have to have these employee referrals go through the same vetting process, the same interviewing process as anybody else that you’re, that you’re interviewing. Number one, compliance, right? Number one, if, if Mike refers, and let’s just use our example, you referred a white male, right? And I, he go, he goes through one interview. I’m like, I love Mike. So anybody that Mike says is good, he’s gonna go through one interview, get an offer, and I’m gonna hire him. But my normal process is for that particular position that, that that Mike’s referral applied for, they go through three interviews, right? And the next person that comes in for, you know, that position happens to be somebody a person of color. They go through three interviews and they don’t end up getting the job.
What do you think’s gonna happen or what may happen? Yeah. I’m opening myself up to a discrimination claim and I should, so, and, and not just on a compliance side, do I want you to keep your same process, but of course, compliance is always my number one concern to protect, you know, the clients that we support. Yeah. But more importantly, you can’t, Mike might not know certain things about the candidate. I have had many employee referrals in my years of HR that I didn’t end up hiring. Right. And I go back to the person and say, did you know they, you know, let’s just say it’s an engineering position and you have to have a four year degree. And I go back to the person who referred ’em and I go, you know, they never, they don’t have a four year degree, right? A lot of times you’ll see on a resume, university of Delaware, if it doesn’t say, you know, bachelor’s of Science in at University of Delaware, that person might have just gone to a couple of classes. You just don’t know. Right. Until you put them through your regular vetting process, ask them the same questions, right. That you ask every other candidate for that position. If you do a credit check, if you, whatever you do to vet the vetting process stays the same. Right? Right. So, right. So that is really important.
VANNOY:
And, and I just, I’ve seen businesses fall into this trap where I know there was no ill intent. There was not intent discrimination. There is not intended. No, of course. Tell you not. There’s not. But if the person, if the aggrieved party feels there was, and they, and they pursue this, you will be put in a position that you have to defend your actions. Right? And so, if the, if the person of color was had a different interview process, an evaluation process, then the person you hired who coincidentally is not a person of color, it’s a man who looks like the 80% of the rest of your workforce, the optics are bad from the jump, and now all of a sudden you are on the defense having to prove why no, you didn’t do anything wrong here. So much better. Exactly. Do everything the same. Be treat everybody equal, have the exact same process and document the hell out of all of it, right?
SIMMONS:
Right. For compliance and also, you know, all the other reasons that you go through those items. And I will say that New York City and a couple of other states like Colorado you know, just past a pay transparency act, those individuals that were referred, they also need to get what is the salary of, of the position, what’s the salary range of the position, right? So, so don’t forget employers, you have to follow whatever your state Right. Mandates for hiring. Right? So don’t think, oh, well, I’m sure Mike told, you know, Joe, what the, what the position pays. No, no, no. Right. If you have, right. If it’s in New York City, Colorado, or any of the other states that have pay transparency laws or other hiring, you know, laws, you, you need to stick to those even though it’s a referral. Right? So don’t get lulled into it’s Mike’s friend. I’m gonna get through this process really quick. Don’t take any shortcuts for sure.
VANNOY:
I, I think there’s another benefit to just treating everybody the same. I mean, I think about like, coaches of high performing teams. You Yeah. Like sports, when you treat the superstar different, that impacts the rest of the team. When, when, when you as the leader hold the same high bar for everyone that has a positive impact on everyone else. And so no matter how great that superstar might be, they’re, they’re not gonna outperform the sum of all parts, right? Yeah. And so you have to think about how’s, how are you treating if you’re given this superstar a pass? Like, oh, they had an easy way in. Right? They didn’t have to go through all this. I had to go through, through background checks. This person, person didn’t. Hmm. Right. They’re, they’re just something I think really good about managing high levels of performance. Yeah. Great people and great performers who expect the best from their employer and from themselves. They expect to be held to a high standard. So they don’t expect to, to have an easy path path either. So,
SIMMONS:
No, no, certainly not. What,
VANNOY:
What, what else, what, what are some other o of the other gotchas here for employers?
SIMMONS:
Yeah. So, you know, first of all let’s talk about referring a friend, right? So number one, you know, those individuals may be romantically involved and that may lead to other issues somewhere down down the road, right? Are they romantically involved and then they break up and one person claims sexual harassment, right? So, so that might be one of the issues. Another issue may be when we write handbooks, you know, a lot of employers will have policies about not hiring family members. So what is your policy on that? You know, do you have no nepotism? And, and by the way, Mike, we have a lot of family run organizations that we support. Sure. And a lot of times they’ll say, yeah, we’re not, we’re not hiring, we’re not letting people refer their family members. And I’m like you own it.
Your wife, your know, works here, your son, your daughter, your nephew, your cousin. I’m like, let’s, let’s talk about this a little bit cuz you already have a little, you know, nepotism going on. But so that’s the other thing. You know, what’s your policy on handling family members? And look, it has come to pass that, you know, I have had employers hire a referral and then we either don’t hire the person and the current employee gets, you know, angry with us. Like, why didn’t you, and let’s face it, Mike, that’s confidential. I can’t tell them that I did a background check or a, or a credit check. If that’s something the organization does and they didn’t pass it right, I can’t give that information. Or maybe they really didn’t do well on the interviews. Right. That’s not all I can say is we didn’t choose the candidate. Right. And that, this is what I’m telling you know, my employers, when, when we, you know, talk about these programs and then further, further down the road, if we hire the friend, the relative or even a colleague, and that person needs to be terminated, the person who works, you know, our employee who referred them, you know, may get angry with us and we may lose two employees instead of just one.
VANNOY:
Right? Right.
SIMMONS:
So there’s def I’ve, I’ve seen it happen.
VANNOY:
I’ve seen that too. And, and, and that’s, that’s like the worst possible outcome. Now you’ve lost, now you’ve lost two high performers, right?
SIMMONS:
Right. Ex Well if you let go of one of them, they weren’t a high performer, so that’s okay. <Laugh>. Well, yeah. But you lost your other employee and you know, it’s, you know, anytime we, you know, somebody leaves us and it’s a good performer, it’s, it’s not good, right? It’s not a positive thing. So, you know, we have to go into it with I open, I will tell you that I know some organizations give the referral dollars right away, I believe. And when I’m, you know, coaching our clients, I think that, you know, three months is the right amount of time that the new employee should be with the organization for three months before the employer referral is paid out. Yeah. you know, to make sure that, you know, they work out, et cetera. Cuz the person could quit, you know, it might not be that we terminate them, they could quit, they could move, they could win lotto, I don’t know. Yeah. but really it, that employee referral, you know, put some nice, you know, guardrails on and explain it thoroughly to, to your employees.
VANNOY:
Mary, let’s talk about some of the risks about, you know, this whole referring a friend. I I, I’ve seen it in companies that I’ve worked at, I’ve seen other businesses where the referring employee genuinely thought, oh, I thought you just needed names. I thought you were having a hard time filling this. And they weren’t trying to take advantage, but they, but, but they also weren’t vouching for this person. They just hap friend of a friend and heard they were looking for a job and say, oh, we’re hiring. It’s, and it’s nothing more than that versus Right. An actual vetting process. Vouching for can, can you speak to how to, how would you set up a program to ensure that you’re getting truly qualified candidates, not just a warm body and a name.
SIMMONS:
So you are right. A lot of my manufacturers, you know, those, those positions are pretty hard to hire. And the employee referral program has always been really successful for us. But when you’re hiring, you know, for a minimum wage job, a lot of times the individuals, you know, may just be saying, oh, Joe, Joe doesn’t have a job. I gotta help him. I’m gonna refer him. Right? Or like you said, they’re just referring somebody to get the, the a hundred bucks or the 50 bucks or, or whatever the reward is, right. For referring the program. And that’s why I just wanna reiterate that that referral has come to you quicker and easier than if you placed an ad or used a recruiter. So don’t, you know, lose your diligence about vetting them in the same exact way. You really have to treat that candidate.
The same as you’re treating everybody else, go through the same amount of interviews, the same questions, you know, if you do the background check, like we said, the credit check, you can’t treat them you know, differently as far as your process. And that’s a way to do it. And I think we also wanna communicate it, right? So when I worked at this big bank, whose name will be I won’t mention here what was happening is we had some employees who, who would put, you know, people would come in and say, can I have an application? They’re like, yeah, I’m gonna put my name down on your application that I referred. You remember my name Mary Simmons? Yeah. And then they’d come in for the interview and I’d say, oh, Mike, I see, you know, Mary Simmons. And Mike would go, who? No. Oh. Oh, that was just the person who gave me the application. We’re like, yeah, yeah. Oopsy. You know, that’s, you know, that’s not nice, but, you know, shame on us. This is a policy that will be in your employee handbook, whatever your employee referral program is. We help employers put it in the handbook. And you know, I tell them, this is something you need to explain at orientation. This is one of the policies in the handbook you should explain thoroughly. So it is, it’s done correctly.
VANNOY:
Yeah. You know what I, all things that aren’t managed entropy, kind of <laugh> just things, things go away. Processes need to be managed. So even if you construct and design maybe, maybe somebody listening partners with your team and we put together this amazing employee referral program and it’s communicated to the employees, generates a lot of a activity and highly qualified candidates outta the gate. But if you don’t manage it and continually communicate that one or two or three years later, it’s not even the same people perhaps in the jobs that are referring. They didn’t hear the initial launch. Right. So correct you, when you, when you post the job, you should be talking, communicating with your employee saying, Hey, just so you know, for those of you’ve been around for a while, for those of you who we have an employee referral program, this is the purpose of the program, this is how it works. These are our goals, this is what we’re trying to achieve. This is what our expectation is of you in the process. You still have to explain all this just cuz you have it. Even if you have it written down, that doesn’t mean your employees understand it. Right.
SIMMONS:
Right, right. Of course.
VANNOY:
What other, what other things can go wrong in an employee referral program there?
SIMMONS:
I would say that, you know, those, those are the main things, right? Lack of diversity, you know, the, your employee referring the person may not have really thought through, is this a qualified person? It just might be their neighbor. Right? Yeah. That they don’t really know at all. Or, or somebody, you know, a friend of a friend of a friend that they don’t know at all and they’re just referring them maybe for the incentive. I think the other thing is when the employee refers somebody and you know, their friend, they’re romantically involved, that can raise some issues. And you know, the other thing is if we don’t choose them, the employee, you know, it, it does damage. I can tell you right now yeah, it does definitely, you know, s often, you know, damage the relationship between the organization and that employee cuz they’re like, well, why isn’t my referral good enough? I know you hired somebody else. You know? Right.
VANNOY:
I’m gonna, I’ll make a pitch to a previous show that you and I did on behavioral interviewing. And the only way you can do effective Yeah. Behavioral interviewing is you first have to identify the competencies in which you’re mining for in this interview. Right. right. To me, to me this keeps going in my brain as you and I are talking here, it’s like, one of the things you have to communicate to your employee, the employees that are referring is these are the competencies we’re looking for. Cuz you know, if you just say, Hey, I’m hiring a, a, a, a new supervisor of X, Y, Z and don’t explain what that job actually is, what the competencies required to perform that job and what you’re looking for, how will they know they, it’s, it’s gonna be the version of what they think that job is, that they, they might be referring what they think is a great candidate and you might decline that candidate cuz they didn’t have the competencies you were looking for and now you got this mismatch. So it everything. No, not everything. So many things in hr including a, a great employee referral program to do it. Right. It goes so far upstream job descriptions, handbooks, written competencies, hundred percent for these jobs because all those are the foundations of being able to even have a good employer referral program.
SIMMONS:
A hundred percent. A hundred percent.
VANNOY:
It. I don’t know if there’s anything else on the, on the, on the gotchas. I I I think we covered it. Yeah. This, this should be a way to, to acquire talent tap into new pools of talent. This shouldn’t be just a way to, to, for, for employees to, to get paid in in Right. And not achieve the goals. Do you have examples of what a good program or even a bad program looks like that you’d wanna share? Mary? I
SIMMONS:
I think that there’s definitely some organizations that do a really good job. The, there’s a property insurance company, they’re called Pure. And between 40 to 60% of their employees have been so sourced through referrals, right. And the reason they’re so successful is because in the candidates, you know, first couple of weeks, they’re already asking for employee referrals. So they’re really, you know, that’s part of their onboarding process, right? Finish the orientation onboarding, Hey Mike, you know, we just hired you. Ha do you have any referrals for us? And, and you know, that goes back to what you said, right? That employee now feels like, oh wow, I just joined the organization. They’re already asking for a referral, you know, they wanna please the employer. So they probably are pretty, pretty fast to, to make that referral. So that can be definitely very positive.
Salesforce, right? Which we utilize here at ashore, you know, they, they tend to have pretty good cultural you know, initiatives. And one of the things that they do is have a recruitment happy hour, right? So they say to the employees, Hey guys, invite your friends who you think would be good for the organization. They can get to know us, we can get to know them on in an informal, you know, setting. And then if they think they’re interested, you know, they can apply for jobs and, and you know, who’s gonna turn down a happy hour, right? Right. So, you know, they, they tend to be successful. There’s another company, a global mobile advertising and discovery platform in mobi. And engineers are traditionally very hard to find. I will tell you Yeah. In my, you know, span of being an HR person, that’s probably my toughest position to interview.
And it wasn’t any different for this organization. So, you know, to get, you know, top talent they parked a Vespa right at the entrance of the offices and said, for every successful referral the employee could choose between a brand new VE Vespa or a paid vacation, I’d wanna work there just because of that. Right? So, so don’t forget, we gotta go back to, you know attracting people. You know, I, if I got referred and knew the person that referred me gotta Vespa for referring me that that’s another reason for me to join that organization. I mean, that’s, yeah. Let’s, that’s an extraordinary
VANNOY:
That, that, that’s such a cool thing to do because I mean, to me, I’m a marketer so that, that, that’s marketing, right? And so I, I couldn’t pay this person an X dollar amount at the three month mark, and it’s the same value and, but, but it’s transactional. The Vespa they’re gonna talk about, or the vacation is lifetime memories that they just created associated That’s right. With your employment brand, right? So it doesn’t have to be money. Sometimes you can get earned more goodwill, more memories and create more word of mouth because you’re signaling to the candidate. It’s like, oh, wow. Look, look at the kind of culture they have. Right?
SIMMONS:
Right. And, and listen, Mike, I am realistic and I know that a lot of, you know, the employers listening are like, yeah, Mary, well I can’t afford that new, that’s the bike for every referral. So, so understand, we’re not suggesting that, right? So you can have your incentive and usually the incentive increases for the, you know level of the employee, right? So entry level, you know, think banking, right? A teller, you know, might be a hundred dollars referral, a teller manager might be 200, a branch manager, maybe 500. A loan officer may be a thousand, right? So something like that. Now, if you’re a smaller or organization, right? So let’s, let’s talk about, you know, we happen to have right now a lot of pizza places, which makes me very happy cuz I love pizza. That, that we’re supporting, right? And, and they’re small and they’re thinking, yeah, mayor, I still can’t do that, right?
So give a free, give a paid day off. If you can’t give the whole week vacation, vacation give, you know, an extra, an extra day off or two days off, believe you me, people want to refer people, right? For all the reasons we said. Yeah. make the reward in line with, you know, your, the size of your organization, you know, your cashflow situation and your population, right? A younger person might, you know, in a lot of ways, take an extra day off instead of a hundred dollars, right? Right. The, the day off is worth more to them, right? So think before you set up the program, right? So before we go into more examples of really great referral programs, let’s talk about setting up an effective program, right? So think about what’s the incentive that you’re gonna give the employee? Is it cash?
Is it a Starbucks gift card? Is it just, thank you. Okay? and you know, how is it communicated, right? So we’re gonna help you create a policy that goes in your handbook and you need to communicate it. So don’t just hide it in the handbook, right? You need to maybe print it out, pull it, put it on the bulletin board, you know, my marketing person’s on the call with me. So I’m sure you could think of a million exciting ways. We, we used to do what I’ve done for employers in the past is we put the flyer up on the employee bulletin board with all the mandated, you know, posters and you know how you can rip off, you know, a piece of the poster. It used to be like a a hundred dollars fake a hundred dollars bill and on the back, right?
It would have, you know, referral information, right? The other thing we used to do is get business cards for our employees and it would say Mary Simmons bank teller at x, y, Z bank. And on the back it would say, please apply at the following. Right? And we would just, you know, for people that they maybe didn’t vet, we were giving, you know, rewards for that as well as somebody that they did know, right? So yeah, here I want you to be an ambassador and I’m gonna give you a little reward for this. I’m gonna say a Starbucks gift card and for the people that you really vet I’m going to, you know, somebody that you know more about, I’m gonna give you that, that a hundred dollars, let’s say. But when you do this program, make it easy for your employees, right? Where do they, where do their referrals have to apply? How do they apply? How does the employee get their reward, right? And this has to be communicated all the time. We want it in an employee handbook, but it can’t be buried there. We have to keep talking about it and Right. You definitely wanna bring it out in in your orientation when you’re going through the handbook, for sure.
VANNOY:
Yeah. Yeah. I think you nailed it, Mary. Is there, is there anything else that we, that we haven’t covered here that we, we need to share with the audience?
SIMMONS:
I think that you also wanna make sure that the communication back to the employee who referred the person happens. Yeah. Yes. I hired Mike. No, I didn’t hire me Mike. He wasn’t a good fit. Remember, you don’t give candidates, nor would you give an employee a reason you didn’t hire somebody because that may leave you open to discrimination as well, right? So if I say I didn’t hire Mike because I didn’t like his communication skills, and then I find out that Mike has a disability and it affects the way he talks, I just meant nay have opened myself up, right? So be, if you know, careful about that feedback.
VANNOY:
That’s a really good point. I didn’t even think about that. Cuz even if you articulated the reasons Yeah. Succinctly and perfectly the chance that the employee, the referring employee is gonna communicate that to the person who just got rejected equally, perfectly and succinctly is zero, right? So they’re just, I think the point is probably there just isn’t a reason to, right?
SIMMONS:
No. Well, you, you really can’t <laugh> and you’re also not telling your candidates specifically, I didn’t hire you. You know, you, you gotta use broad strokes so you don’t open yourself up for liability. Yeah.
VANNOY:
Yeah. I knew you’d end this on a compliant note,
SIMMONS:
<Laugh>. Sorry I can’t help myself.
VANNOY:
No, it’s all, it’s all good. It’s all good. The building, high performing teams and staying compliant, those are two sides of the same coin. This is all, this is, this is talent management in, in today’s world and in a, in an era where this, this war for talent, this isn’t some buzzword that’s going away. This has been in the making for decades. We’ve, we’ve know, we know the US birth rates, we know the ages of pe people in the workforce. We know retirement rates, we know GDP rates and how much productivity per, per person this war for count has been in the making for a long time, right? And sometimes I think the, an election cycle or a war or a recession, whatever, we think it’s those things, but the macro trend, this has always been there. So building something as simple as great competencies, job descriptions, employee handbook, and then using things like an employee referral program are, are, I think are just kind of blocking and tackling from this point forward to, to building great teams and staying compliant while doing so. Anything you wanna say in Covid here? Mayor, I love,
SIMMONS:
I love the sports analogies, number one, Mike, but the other, I’m gonna end with a really good another really good example. So what Intel does is because they want to stay on top of their diversity hiring and know how important it is referral, the referral bonus is doubled when employees refer women and minorities. Hmm. So, you know, if you’re nervous that, that your referral program is not gonna help diversity, you may wanna have a program similar to, to Intel. Yeah. So I’ll end with that. Good example. And we’re always here to help employers create these programs.
VANNOY:
Yeah. So there’ll be a survey that pops up at the end, end of this for anybody who wants help in any of these areas. And I think hopefully it’s coming crystal clear, this isn’t just advice on an employee referral program. That’s, that is what this is about. But the only way you can do it right, is to have all the upstream foundational HR stuff in place. This is exactly what Mary does for teams at a fraction of the cost, by the way, of what teams could small and midsized companies could ever do in house. So as always, Mary, thanks for your time. I learn from you every time and for everyone else joining today, thanks so much for joining and we will talk to you next week.