It’s Who You Know: Readying for Referrals

Employee referrals have long been seen as the holy grail of recruiting new employees. These candidates tend to be higher quality, faster to hire, and they stay longer on the job. This is probably why more than 70 percent of companies report having some kind of formal employee referral program, according to Meritage Talent Solutions’ “2014 Employee Referral Trends” report.

Many programs involve employees sharing job posts to their social networks. However, a growing number of companies are implementing third-party referral software solutions that automate much of the referral process and tie results back to their applicant tracking system.

Traditional ATS vendors, including iCIMS Inc., Kenexa Corp. and Taleo Corp., offer referral tools as part of their human resources service offerings, while vendors like Jobvite Inc., RolePoint, Zalp and Zao offer stand-alone software.

These tools perform tasks like automatically reviewing a company’s open positions and matching them against employees’ social network connections. They can also make suggestions to employees about who might be a good fit for open positions, auto-post openings to employees’ social networks based on specific settings, and provide tracking data on where referrals are coming from and who delivers the best candidates.

Such automation is a key to getting the most value from the referral process, said Ziv Eliraz, founder and CEO of Zao, an employee referral software company.

“Referrals are extremely powerful, but employees never remember to do it,” he said. “They don’t have time to search their network for possible matches, so the tool does it for them.”

Angie’s List Makes Referrals Easier

The automation of referral steps is what is most intriguing to talent management professionals like Jennifer Weinmann who is manager of learning and leadership development at Angie’s List. Until recently, she relied on employees to refer candidates for jobs, but the program was limited.

“Unless employees went to the career site, they didn’t know there were openings,” she said. To increase referral numbers and to make the process easier, Weinmann rolled out Zao in March to the company’s 1,800 employees. Within three weeks, 1,100 employees created accounts so they can receive suggestions about who in their network might be a good fit for an open position, and optionally sign up for auto-posts to their social networks.

She doesn’t have any hard data yet on the impact, but she expects the tool to increase the number of referrals and provide her with data about where the best candidates are coming from.

Such data tracking is another important benefit of referral software, said Jim DelGaldo, an iCIMS business analyst. “Using referral software, you can trace candidates from the first time they click on a job listing to the moment they get hired,” he said. That data let’s companies see which social networks and employees deliver the most or best candidates, and to track their cost per hire. “When you do the analytics you have hard data about where to spend your recruiting dollars,” he said.

Quantity vs. Quality

While these tools can make the referral process easier, some industry experts worry that they will weaken the most important feature of the employee referral — the quality of the candidates.

“The reason referrals are so valuable is that they come from someone that candidate knows and trusts,” said John Sullivan, a talent management consultant, speaker and author. “But you don’t really know everyone you are connected to on LinkedIn.”

He argues that unless these tools implement the same level of pre-assessment that an actual employee goes through when they decide whether to suggest someone for a job, the referral quality could diminish. “You want people to make referrals because they think that a person is good for the job, not just because they are in their network.”

Sullivan urges companies using these tools to track the quality of hires before and after implementation, to get a sense of whether the increased access is worth the loss of personal accountability. “Ultimately,” he said, “it’s only valuable if you are getting good performers.”

Sarah Fister Gale is a writer based in the Chicago area. Comment below or email Follow Workforce on Twitter at @workforcenews.

This story originally appeared in Talent Mangement's sister publication, Workforce.