Bonus referral programs: Do they work?

By Gerry Crispin, ITworld.com |  Career

The bane of most employee referral programs was the labor they necessitated.
Tracking each and every referral and referrer was time-consuming. Renewing interest in
a program every few months became a logistics and communications nightmare. Little time
was devoted to evaluating results to determine whether the bonuses awarded to employees
not only produced better candidates, but cost less than other recruiting strategies.
Most corporate programs languished during the '80s. Very few corporations' employee
referrals yielded a 25 percent (or higher) new-hire rate.

Now, the Internet allows easy automation of tracking and communication requirements.
The labor factor has practically disappeared; we can now track a recommendation from
outside the company just as easily as one from within. In the rush to reinvent the
employee-referral concept, corporations have begun automating the collection of
referrals from vendors, customers, clients, former employees, and total strangers
visiting a Website. Employers appear willing to pay essentially the same incentive, no
matter where it comes from, and the incentives have increased. Offers of $5,000-10,000
are not that unusual, and a $500-$1,000 bonus is now considered paltry by many.

A dozen dot-coms have sprung up this year that offer turnkey solutions, each with a
different twist. Such companies as Angami, CareerRewards, jobTAG, refer.com, and
Referrals.com have been in the news and acquired converts.

Consider the following as you revamp your referral programs to take advantage of the
newest trends in automation:

Some referrals are not as good as others

"A" players tend to refer "A" players. Your employees know your company's culture. Is
someone is an outsider to your company, their referral may be off target and simply
lead to another referral in a long chain of connections. Mining this chain of referrals
is what often differentiates third-party staffing pros from corporate recruiters. The
pros will tell you that it is a labor-intensive activity that requires communication at
each step.

The size of the reward is both good and bad

A large reward for a successful referral gets attention. The chance to receive a much
larger reward is even more enticing. But as the reward increases, an employee's
priorities shift from helping the company to helping himself. Studies show that the
employee is less likely to refer people he knows, and more likely to refer any Tom,
Dick, or Harry in his Rolodex. Look for a balance: If your employees can make a living
making referrals, then maybe they should.

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