It's no secret that employee referrals are the leading source of superior candidates. Despite that fact, referrals make up less than 10% of the applications employers receive! Read on to learn our top five reasons why employee referrals make the best hires, all based on data.
1. Referrals Improve Candidate Quality and Diversity
A well-crafted referral program will make it clear that the company only wants candidates that your employees feel are genuinely suited for a vacant role. With referrals, the issue isn't about quantity, but it is about quality. In fact, most employers report that referred employees outperform other employees on most aspects of company fit.
Studies by Dr. John Sullivan emphasize that referrals have been listed as the #1 "most productive" source for diversity hires, well ahead of major job boards, company affinity groups, and diversity career fairs. Having diverse employees only leads to having a more diverse network that can play a key part in enhancing your company's unique culture.
2. Referrals Significantly Improve Employee Retention Rates
According to research, After one year, retention of referred employees is 46% compared to 33% from career sites and 22% from job boards. The research also emphasizes the low termination rates that have been recorded from different referral programs. Their data proves that referral hires have as much as a 350% reduced chance of having to be fired.
In addition, there is higher retention because your employees will need to learn more about the practices that make your firm stand out in order to encourage potential referral prospects to apply to the company. The widespread learning about the company's strengths may also serve to build a stronger sense of loyalty for the current employees. This strengthens the corporate culture and drops the turnover rates significantly.
3. Referrals Reduce Hiring Costs and Have a Higher ROI
Research reports that employee referral programs can save companies $3,000 or more per hire! But that's not it! Research also shows that employees who are hired through referral programs produce 25% more profit for their companies than new hires hired via other sources.
It is no secret that a strong and efficient referral program requires certain investments. But are these investments worth it?
A company's investments come in different forms, these include development costs, marketing costs, employee referral bonuses, and highly recommended employee referral softwares like Boon. Even though this may seem intimidating, data shows that every investment is worth it!
Employee referral programs are generally rated as having the highest return on investment (ROI) of all other recruiting strategies, and when compared with other recruiting methods, such as job boards and career sites, employee referral programs come out as the most cost-efficient overall.
If you haven't considered investing in your current referral program, you now have an incentive to do so!
4. Referrals Drastically Reduce Your Time to Hire
We have all heard the saying "Time is Money" and there is no more appropriate scenario for this phrase than an employer trying to find the right candidate to hire. According to many sources, referred candidates are 55% faster to hire, compared with employees sourced through other career sites.
In addition, LinkedIn's research also presents data that shows how employee referral programs significantly reduce time to hire. They explain how traditional hiring methods such as posting job ads, combing career sites and retaining an outside recruiter can take up to 55 days from start to finish, while on average, it takes a company 29 days to hire a candidate who was referred by an employee. Referral hiring doesn't just save you money, but it also saves you time!
5. Increases Employees Satisfaction and Engagement
Almost 70% of companies offer between $1,000 and $5,000 in cash incentives for staff members who are able to refer qualified candidates. However, surveys show that most employees do not refer candidates just for the monetary gains, but because of the value that it will bring to that individual, as well as for the company they work for.
According to this source, another great benefit of employee referral programs is that they enhance employee engagement. Both the employees who recommended candidates and those candidates who are hired through referrals feel more engaged at work. By including your existing employees in your recruiting process, you are giving them an opportunity to choose the people they would like to work with. The fact that the company then rewards them for their recommendation sends them the message that their input is valued and appreciated. Just remember that an employee that feels valued is more likely to feel engaged at work. This brings nothing but growth and success for your company.