Why Now Is the Best Time to Go for Referral Recruiting and Which Referral Program to Chose?

Traditional hiring methods may be costly and don’t always yield loyal, high-performing specialists. That’s why tech giants, like Google or HubSpot, and permanent recruitment services providers bet on referral recruiting, which has reached its peak for good reason.

What Makes Referral Hiring So Popular?

At its core, referral hiring is built on trust — an existing team member recommends a referral candidate they believe is a good fit for the company, both culturally and professionally. Referral hires fit well culturally, enjoy their jobs, and stay longer, cutting turnover costs and disruptions.

There are also some other reasons why referral recruiting can offer a higher return on investment compared to other talent acquisition techniques. 

Hiring a Referral Candidate Vs. Alternatives

Job Boards. While job boards like LinkedIn and Indeed cast a wide net, they often attract a mix of qualified and unqualified candidates. Screening many resumes takes time and money. Referrals bring skilled candidates who aren’t job hunting but are open to offers.

Campus Recruitment. Engaging with recent graduates can bring fresh perspectives but often requires significant time and resources without guaranteed results. At the same time, companies usually guide teams to refer candidates with specific qualifications and experience levels, ensuring a better match for the role.

Instead of spending heavily on job advertisements, companies can get more control over their budgets with the predictable cost structure of referral bonuses.

What’s also great, referral hiring is not always about paying for recommendations. Let’s explore the different types of referral programs relevant to tech companies.

5 Types of Employee Referral Programs

The most widespread case is when existing specialists receive a financial incentive for successfully referring a candidate who gets hired and stays for a set period. For example, tech giant Google offers substantial referral bonuses, scaling based on the role’s difficulty to fill.

Why it works. In times of crisis, these programs attract high-quality candidates while keeping costs predictable compared to traditional recruitment channels. 

In a tiered rewards program, rewards increase as the referred candidate progresses through the hiring process. For instance, an employee might receive $100 for a referred candidate’s interview and $1,000 upon hiring.

Why it works. Tiered rewards keep employees involved in the hiring process. This approach works well for tech companies needing to quickly fill several roles.

Instead of cash, some companies offer non-monetary rewards like vacations, gadgets, or professional development opportunities. For example, Zappos provides experiential rewards such as tickets to events or team-building retreats.

Why it works. Experience-based rewards appeal to specialists’ interests, showcasing loyalty and a positive work culture. This is particularly useful during downturns when cash bonuses may not be feasible.

Some companies donate to a charity chosen by a team member whose referral candidate is hired. 

Why it works. Charitable donations reinforce a company’s commitment to social good, making it more appealing to candidates who value social responsibility.

Gamified referral programs award points for referrals, which existing specialists can redeem for rewards. HubSpot, for instance, uses a leaderboard to track referrals and recognize top contributors.

Why it works. Gamification elements (progress bars, badges, and points) tap into human competitive instincts, driving greater participation and enthusiasm. 

So, Which of the Referral Programs To Choose?

For smaller teams working on niche tech projects, a tiered reward system can keep engagement high without overwhelming budgets. Larger companies with diverse departments might benefit from combining monetary rewards with experience-based incentives, catering to varied motivations. 

If you can offer various reward types, do it — allow your team to choose their own rewards from a catalog of options. Some team members may be motivated by monetary rewards, while others might value growth opportunities or support for charitable causes. 

Remember that if the initial referral recruiting KPIs, such as hire quality or participation rates, don’t meet expectations, you can always tweak or even switch the program type. We’ll break down those KPIs right now.

How to Tell if Your Referral Program Is Working Well

You can track 5 key KPIs to measure the success of your employee referral program. 

1. Hire Quality. Check if your referral hires outperform those sourced through other channels.
2. Time to Hire. Compare the time it takes to fill a position with and without referrals. Candidates referred by existing team players are often pre-vetted, speeding up the recruitment process.
3. Cost per Hire. See if your hiring campaigns have become more cost-effective since you’ve established an employee referral program.
4. Retention Rates. Assess the lifecycle of referral hires.
5. Participation Rates. Track how many team members participate in the program. If participation is not high, conduct anonymous surveys to learn if your team understands the benefits and if they are satisfied with the rewards.

The earlier you adopt the referral program, the more useful stats you can gather. 

The Final Tip: Be Creative to Meet Your Referral KPIs

While the exact number is unknown, it’s safe to say that more than 80% of companies establish or enhance employee referral programs each year. So, to get the most out of your program, it’s necessary to make it more and more attractive. 

You can recognize successful referrals during team meetings and feature stories from successful referrals and their referrers on social media. You can personalize Thank-You Notes and design intuitive online portals for easy referral submissions and tracking. You can integrate AI into your referral portal to improve candidate matching.

After all, you can collaborate with recruitment agencies that have established referral programs. This helps when you lack expertise in developing and promoting a referral program, but want to negotiate more favorable terms due to the increased volume of referrals.