Why Referral Programs are the Best for Business in the Long Term
- One of the key benefits of referrals is that it allows employees who are already familiar with the company culture to refer those in their network who they think will be a great fit for the company and the role - this results in lower turnover rates
- Hiring people who already have relationships with existing employees can improve the culture of your company and make other employees happier
- More than half of companies with an employee referral program (55%) say it reduced hiring costs
Amidst the disruptions caused by the COVID-19 pandemic, businesses need to think of ways to get any edge they can. Whether it’s coming out with the best products or recruiting the best talent, businesses need to prioritize doing things in the best way possible.
When it comes to recruitment, referrals might by far be the best method. Though it can be deceptively simple—sometimes it just takes knowing the right people—the benefits are endless.
Here are a few reasons why referral programs are the best recruiting method for businesses in the long term.
Lower turnover rates
Employee turnover can be a huge waste of time and money for any company, considering how much it takes to look for candidates, assess the entire talent pool, and finally onboarding the one that’s deemed the best — and even then it could still be a mistake. Some studies predict that every time a business replaces a salaried employee, it costs 6 to 9 months’ salary on average.
One of the biggest reasons for employee turnover is a mismatch between the employee and the overall company culture and/or their job. One of the key benefits of referrals is that it allows employees who are already familiar with the company culture to refer those in their network who they think will be a great fit for the company and the role. Additionally, since employees refer people they know, referrals will already have personal ties to the company and will be more likely to stay for longer.
In the long term, referrals present a fantastic return on investment. Employee referral programs can reportedly decrease turnover rate by 6%, allowing businesses to save a substantial amount of money on recruitment and onboarding.
Higher job satisfaction
There are a plethora of reasons why referrals report higher job satisfaction. Aside from being better cultural fits, there’s also the simple fact that unhappy employees won’t bother to make referrals in the first place. If they aren’t happy with the company, what would make them think their friend would be?
Second, hiring referrals isn’t just good for the referrals themselves. Hiring people who already have relationships with existing employees can improve the culture of your company and make other employees happier. According to a Gallup Poll, those who had a best friend at work were 43% more likely to report having received recognition and praise for their work in the last week. Respondents also reported being more recognized for their progress, having their opinions count at work, and having the opportunity to do what they do best every day.
Keeping recruitment costs down
More than half of companies with an employee referral program (55%) say it reduced hiring costs. The savings that come with referrals can be owed to how quickly they can be hired. According to one C-level executive at a payment data merchant service provider, it usually takes 4-5 weeks to hire an employee, but referrals can onboard in as little as 2 weeks.
Referrals streamline the hiring process because referrals usually already have a good idea of what the job will entail, what your company is like, and what it’ll take for them to succeed in the role they’re applying for.
Referrals are also cheaper because your HR department won’t have to spend as many resources getting the word out there that a position is open (though posting on online job boards is mostly free, they do take time).
Though referrals do take work to pull off, the effort will be worth it. Aside from the multitude of benefits mentioned, using referrals may be the most compatible method of recruitment considering the rise of new recruitment tech. Firms like Recruitday, for instance, have released various apps meant to make it easier to make referrals, track them, and also introduce incentives to referral programs. With many referral-focused solutions available, it’s easier than ever for businesses to recalibrate their business strategies.
To sum up, referrals result in substantial savings and happier and more productive employees. It’s best to see referrals as not just one strategy in the recruitment arsenal, but as an investment that’ll always pay dividends.