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Determining the most effective rewards to motivate employee referrals

By Dr. John Sullivan

Well-designed corporate referral programs can produce amazing results. Unfortunately, those results are often reduced by failing to maximize the number and type of motivators that drive employees to make high-quality referrals. In some organizations, 30 percent of employees make all of the referrals, with the other 70 percent of employees being inactive. I have found that data-driven referral programs have a much higher response rate because instead of assuming that program administrators know how to motivate, they instead use data to identify the most effective motivators.

If you are a recruiting leader and you want to increase the quality of referrals and push the volume to near 50 percent of all hires, this article highlights the best practices in the area of employee rewards and motivation.

Motivating employees to make quality referrals

If you want to get the most impact out of your corporate referral program, you need to shift to a more intelligent and data-driven approach. Some of the motivational and reward approaches that I recommend are listed below. I’ve broken them into six distinct groups.

A formal referral program is required

Assuming that employees will naturally make referrals as part of their job is a disastrous assumption. If you don’t have a formal referral program with defined motivators and effective processes, you can normally only expect between 3 percent and7 percent of your hires coming from referrals each year.

A data-based approach for identifying the right motivators is required

Rather than guessing as to which motivators are the most effective, use a data-based approach to find out for sure.

  • Survey referring employees — start by surveying a sample of employees who make referrals, and every employee who makes a referral who is actually hired. Simply ask them what aspects of the program were positive and which could be improved. Also ask them specifically what motivated them to make their latest referral and include a list of other possible rewards and motivators. Ask them to indicate which new ones would excite them.
  • Survey non-referring employees — survey a sample of employees who are not active in the program and ask them to identify any barriers to participation. Also include a list of possible rewards and motivators and ask them to highlight the ones that would most likely increase their participation.
  • Benchmark other firms — work with other firms to identify and then share the most effective and new approaches for motivating employees to refer.
  • Trial and error — because even initially successful motivators lose their effectiveness over time, periodically change the rewards. And if necessary, through trial and error, identify new ones that work. Obviously you should also drop motivators that no longer produce results.

Motivating without cash rewards

Rewards are helpful but are not essential in driving referrals. Offering a reward certainly helps to get the attention of your employees, but only 11 percent of employees report that they make referrals because of the “opportunity to earn bonus income.” Experience has shown that firms with extremely well-designed programs can reach over 50 percent and even up to 70 percent of all hires from referrals without paying any cash rewards. Some non-monetary approaches to consider include:

  • “Refer for the team” should be the primary motivator. Instill in your employees that the primary reason that they should refer people is because “the team wins when it has the best players.” Helping the team or the organization is a superior motivator (even if you also offer monetary rewards), because it turns referrals into an opportunity to provide their teammates and themselves with the very best coworkers. Everyone wants to work alongside the very best, and having a superior team also increases the likelihood of business success and the subsequent performance bonuses. On average, only 30 percent of employees make referrals for the good of the team and the organization, but ideally the number should be closer to 90 percent. “Referrals for the good of the team” work much better when you educate employees about their superior capability (as opposed to recruiters) for making contacts, building relationships and assessing potential candidates.
  • Recognition is powerful. The recognition of individuals who make successful referrals can be a powerful tool. For example, a personalized note or call from an executive thanking the employee who has made a high-impact referral is a cheap but powerful approach. Employees can be given nice referral T-shirts, pins or plaques/certificates to hang in their cubicles. A once-a-year luncheon with the CEO for employees who have made successful referrals is also an attention-getter.
  • Offer prize drawings. A cheaper but almost as effective alternative to offering cash rewards for every referral is to hold a quarterly prize drawing where every employee who has made a successful referral during the period is eligible. Unusual vacation trips or car leases make great prizes because they have proven to get everyone’s attention.
  • Non-cash rewards. If you can’t afford or don’t want to offer large prizes or pay cash rewards, also consider providing a product sample or a handful of free movie tickets for the whole family. Other no-cost prize options include a reserved parking spot or first choice of vacation, equipment or shift schedules. Also consider placing the employee’s picture in the lobby or work with advertising to allow individuals who successfully refer an opportunity to appear in regular company product advertising.
  • Make referrals part of performance appraisal. Add making successful referrals to the performance appraisal process, so that employees and managers both know that you take the referral role seriously. Also include making successful referrals as part of the promotion criteria.
  • A sandwich board in high-traffic areas. Sometimes a simple sandwich board or sign notifying employees of an immediate opening is all you need to remind your employees to provide you with a name.
  • Ask new hires during on-boarding. Simply adding a component to the onboarding process, where you ask each new hire for referrals, has proven to be an effective tool. The employees don’t normally expect a reward.
  • Offer them a choice. Rather than offering the same reward to everyone, it is sometimes better to give employees a personal choice by allowing them to select their reward from a list of available choices.

Watch for part two of this article next week: Dr. Sullivan writes about how to choose effective monetary rewards.

This article originally appeared on ere.net and is used here with permission.


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