WatchAn employee referral program is now widely accepted as an important and effective recruiting tool with the capacity to produce better quality hires at much lower costs. However, very few organizations have managed to truly gauge and appreciate the fact that employee referrals can also produce benefits beyond recruiting by reducing attrition and improving productivity. In fact, within recruiting itself, the exact quantum of benefits produced by employee referral programs is hard to find, simply because there has been so little effort put in to measure and evaluate the contribution of an employee referral program to the organization. 

Referrals from employees can be used to fill any kind and number of positions, from entry-level positions right up to the CxO openings of an organization. But whether referrals actually produce the desired results — making it worthwhile to invest time and effort in the program — depends to a great extent on how effectively the program is measured to assess the quality of referrals. Organizations often assume that a referral program is performing well simply because they are able to source key candidates from the program; they do not bother to go into the details of which aspects of the program are doing well and which aspects of the program actually pose stumbling blocks with the potential to wreck the program in future. 

No employee initiative can retain the same usefulness and effectiveness over a long of period of time. With changes in technology and the external environment, organizations themselves undergo change; their talent needs to change, too. A referral program that does not carry out a periodic assessment of itself is likely to outlive its usefulness very fast. 

Evaluating your referral program regularly against a predetermined set of metrics is imperative to ensure continued success. The metrics for measuring your referral program are based to a large extent on the goals set out for your referral program. Some common metrics used to evaluate an employee referral program include:

  • measuring performance of referral hires on the job as compared to non-referral hires;
  • measuring ROI of referral program;
  • measuring referral program usage;
  • measuring employee satisfaction with the referral program;
  • measuring turnaround of employee referrals;
  • measuring diversity hiring through referral program;
  • cost per hire metrics;
  • time taken to hire through referrals compared to other recruitment sources;
  • percentage of all hiring through referrals;
  • percentage of key jobs filled through referrals;
  • “on-the-job” performance of referral hires (measure and compare the ERP’s performance ratings to other sources of candidates);
  • retention (turnover rate) of referral hires;
  • percentage of all hires who come from referrals (variant: percentage of key jobs filled by referrals);
  • manager/referee/referrer satisfaction with the referral program;
  • process time by step (delay from referral point to interview date, which results in fewer top performer hires);
  • and employee participation rate in the referral program.

Employee program usage metrics provide useful data on the number of employees participating in the program against the total employee population. As the referral program hinges solely on employee participation, this data is useful in determining how well the program is received among the employee population. A low usage metric indicates that only a small group of employees are actually participating in the program, which could account for the limited number of referral applicants or even for referrals of a similar nature. Companies often find that employees of one function are participating in a program whereas other functions are not, resulting in referrals with similar and related skill sets while other skill sets are completely left out. Tracking usage metrics lets companies identify such problems and take corrective action to encourage other teams and functions to participate as well.

Similarly, measuring employee/manager/referral candidate satisfaction with the referral program helps to ascertain the expectations each stakeholder has for the program and what can be done to address them. 

Each metrics provides useful insights into the referral program and what can be done to make it a more effective and productive tool. But tracking metrics is just one part of the evaluation process: external benchmarking to understand where your referral program stands relative to others in key metrics is equally important if you want to make the best use of your referral program. 

The Employee Referral Index, an initiative driven by ZALP, enables organizations to evaluate their referral process by benchmarking it against that of industry leaders and other high-performing referral programs of successful organizations. Organizations also receive a personalized ranking report that helps them better understand and analyze the performance of their current referral program.

Assessing the referral program against these parameters can help you understand whether or not your referral program contains all the elements necessary for a world-class program. Ideally, a referral program should grow over a period of time to make finding and hiring talent a natural, employee-driven process, benefiting both the organization and its employees.

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