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Employee Referral Programs Are a No-Brainer

When you’re facing a major challenge, it’s sometimes really tough to identify a solution. I know this is true in life, but it’s also true in business. Nearly every client we speak with tells us that recruiting and hiring is their major challenge right now.

In a recent post, I talk about hiring readiness and how companies can get themselves there. But let’s be honest, it’s a really odd landscape out there. Don’t let the obvious and easy options elude you. Hiring the right talent is one of (if not THE MOST) important thing you’re going to do for your business.

One of my first questions for clients that share their recruiting woes, is “Do you have an employee referral program?” I am shocked by the number of companies that do not, (and maybe have never even considered it). In my opinion, it’s one of the most effective and easiest ways to build a high-performing team. Why? We’re going to explore, but first “What is an employee referral program?”

According to, an employee referral program is:

a recruiting strategy in which employers encourage current employees, through rewards, to refer qualified candidates for jobs in their organizations. “

So, you put the word out there that if a current employee refers in a new employee (and that person gets hired) there will be a monetary or other perk or reward for that referral. It’s just that simple.

A Referral From a Top Performer is Gold

Like-minded people find each other. Whether through our friendships, our networking efforts or the notable experiences we have in everyday life, there’s a pretty easily observed way that people with similar intelligence, attitudes and values gravitate toward one another. 

So, when you have a highly regarded employee on your team due to a high level of skill and competence, you can assume they know a person or two (and probably many more) that are in that same league; maybe through college programs, previous roles or professional associations. TAP INTO THEIR NETWORKS!

Employee Referral Programs Will Save You Money

Many companies, particularly those in start-up mode, do not have a large hiring budget. Sidenote: This isn’t a great strategy, because as we’ve already discussed, hiring the right talent is the single most important thing you can do for your organization, but I digress…

I recently stumbled upon this blog post about the cost of hiring in 2019. It includes some pretty compelling figures, including one study that reported that companies are spending around $16,000 per year on a single placement. 

Employee referral programs can honestly be whatever you want them to be, or can afford. If you’re a small business and you can afford to offer your employees $500 for a referral, then great! It’s a win/win. They get a new team member that they’ve personally vetted and some extra cash. You get a new rock star employee. Boom.

You may have to find your sweet spot. If $500 isn’t the right number, work to find what that “right number” is. Or throw in some extra paid time off. Or a window office! Be creative. 

It’s a Culture Booster

Once again, you’re at a place where you need to grow without spending tens of thousands of dollars, and you want to grow smartly and successfully. Culture is key. But also the most elusive part of the hiring process. How do you really know what someone is going to be like under pressure? Or on an off day? Their referral is a good indication. If that employee maintains a high level of trust, cooperation and professionalism, they are almost never going to refer in a basket case. They probably don’t even like basket cases.

So, you have a sort of automatic character reference. Remember when I said that a referral from a top performer is gold? I was not kidding. This is so incredibly valuable – for your business, for your team, for your culture and for the bottom line.

So if you haven’t already, call a meeting with your leadership team and start discussing how to build your own referral program. I foresee good things in your future if you do.