In the world of recruiting. Some people have seen it all. They build recruiting teams from the ground up, hired hundreds of people in the best companies in the world, developed their expertise year after year. I'm Robin Choi and I'm on a mission to collect their learnings. These are their stories. Hi everyone. Today we'll be speaking about building an employee referral program. And to talk about this, I have Nasr with me today. So very happy to have you. Nasa. It's been a while that we wanted to do that episode because we get a lot of questions about how to build an employee referral program. How do you line the incentives, what the proper set of incentives, how much you pay? So today we'll be covering all these questions and then more so very happy to have you here. And I'll let you introduce yourself and tell me why you're here today and why you think about talking about today.

Yes, absolutely. Thanks for having me, Robin. I am a co founder of Intro and Intro is an employee referral automation tool. We match the most recommended talent in your employees networks to jobs and then automate the introductions directly to your inbox. So we scale this type of referral hiring at companies like Risky, Fire Type, Form, Fair, Hello Fresh and Lily AI amongst many others. A quick background on me. I started the usual journey into recruitment via the agency. Then I moved to Abu Dhabi and I was responsible for setting up the professional staffing brands in the GCC for the Deco Group. And much of that was technical and engineering hiring companies like Kareem which was acquired by Uber and Television which was acquired by Delivery Hero. And some of that was via RPOs which were on site. And the Genesis for Intro really came from when a candidate was hired who was very good friends with some of the folks on the engineering team. And we asked ourselves, well we're hiring like crazy, why didn't you refer them? So is what made me look into employee referrals. And it's quite interesting that it's universally accepted that it's the best source of hire.

So it's the highest quality, it's often the cheapest, it's the fastest to hire, and it has the highest retention. But only 7% of application actually come from employee referral, whereas they actually make up around 30% of hires. So that's seven times more likely to be hired via an employee referral versus other sources. And the reason is simple, it's about trust. You can quickly establish a productive social dynamic which compounds over time. And Interestingly enough, that's why I think people often say recruiting is broken. It's down to information asymmetry recruiting can't tell which candidates are good and are strong and candidates don't know which companies are good for them. Often the employees not trusted representative in this part of the equality. I'll pause there. Do you have any questions?

I do have a question. So you say that 7% of people come from employee referral while they can be up to 30% of hires. These numbers or these numbers that you've seen companies that have already a strong culture of employee referrals, or is it before they implement that culture? Because 30% of higher seems pretty high to me. What do you think?

Yeah, it's actually 7% of applications and 7% of those applications result in 30% of hires, an industry standard.

Okay. So you would say that any company, about 30% of their hires come from referrals coming from the 7% of people who applied.

That's right. Okay. So the way that I look at it is that in your hiring mix, 30% of hires ought to come from employer referrals. Approximately 40% should come inbound via advertisements. So your employer value proposition. So that's around 70% coming inbound and the remaining 30% ought to be outbound. I can be direct search, etc.

And obviously that change is based on the role. So when you mentioned you worked on tech and engineering roles, did you see different splits and did you see more people coming all less people coming from referrals and outbound?

I think it varies. I don't think it depends on role. I think it really depends on company culture and company stage as well.

And so we wanted to cover different things today. One of them was how do you build that culture of employee referrals? So what do you have to say about this and what's your advice to a company that starts from scratch and want to build even before even thinking about the actual program and the incentives program? How do you build the culture?

Yeah, what I'll start with is actually that we use technology and tools for every aspect of our businesses and we meticulously track them all. So we use Salesforce to optimize our sales productivity and outreach. We are using HubSpot to track our marketing campaigns. We use an ATS or candidate pipelines. So we make sure that everything is trackable, predictable and scalable. And often with employee referrals, the best that we can do is share a job, post on LinkedIn or distribute a referral form or send a job description to someone. So I think in order to actually take this seriously, one must first assign a referral champion so that you can establish accountability. And there can be someone responsible for reporting and course correction. And then as you identified, it must start with building a referral culture, which ultimately means an inclusive culture. And that means is it a good place to work? You're not going to get any referrals if your people are not happy working there. So you should kind of audit your employee referral brand, learn what your employees like most about working for your company and what you can improve. This includes the website, this includes social, and you ought to include employee referrals in your new employee onboarding process so that you can set the expectation build the habit, especially during that honeymoon period.

And then thereafter, once you have that established, it comes onto incentives and process.

And that referral champion that's the person in the recruiting team. Right. Or in the HR team. Or could it be an engineer or a salesperson?

It's usually someone in the recruiting team, but it can almost certainly help if you have someone special leadership that are bought in and perhaps somebody within the team who can set an example. But it's usually someone in the hiring team. In modern enterprises, this is usually talent or recruiting Ops.

All right. Okay. And what if you don't have the leadership buying? Do you have any numbers or studies to share that are very easy that you can use to easily convince the leadership?

Yeah, there's a lot of data on our website about this. Also, companies such as Greenhouse does a tremendous job with promoting this information. The concept that comes to mind is demonstrating to leadership that referral hires save money and result in better hires. And I don't think that's actually a particularly difficult challenge to persuade. It's often intuitive to people that employee referrals are the highest ROI. And you can also discuss the concept of ELTV, which is the employee lifetime value. And what this means is that once an employee on board, how long do they stay in accordance to the source of hire and how far do they travel within the organization? So usually employee referral hires stay longer and are promoted faster so that the overall impact of that referred employee or referred candidate is much higher than other sources.

Nice. I like the Eltville. Use it again. It's a good one. And the second thing that you mentioned is include employee referrals in the onboarding. So do you recommend I know some companies do this. They'll have the person sitting next to every new person joining the team and say, okay, let's log into your LinkedIn account and let's see all of your connections. And, yeah, give me an intro to that person. Get me an intro to that person, et cetera, et cetera. Is this how you recommend doing this or what do you think?

Absolutely. That could come across overwhelming. Yeah. I think was pioneered by Facebook and Google in the early days of their scaling in the early two thousands. And this was described as the recruiter shakedown.

Recruiter shakedown.

Yeah, the recruiter coming in the room on the first day and then shaking the new employee down for leads. I think you can do this in a variety of more subtle ways, but ultimately it's ensuring that you set the expectation that hiring the best is a critical priority for the company. And you could ask, for instance, more specific questions to unlock referrals, which we can discuss later at the employee referral process. But ultimately, it's asking them to contribute when they are most energetic and motivated at the point of when they've recently started. In this period, usually lasts for approximately 60 days. They often have the strongest relationships with recruiting because after all, it was the recruiting team that brought them to the company and they're more likely to actually go out on the limb and provide referrals and leads to the recruiting team at that point.

Got it. So advice, number one, get the leadership, buy in and share numbers, actual numbers, and talk about the ELTV and prove that the ELTV coming from referrals is actually higher like this one. Secondly, get one owner, get a person, be a referral champion, and have that person really track everything, measure everything and make sure that it's working. And third, it's embedded in the onboarding process as well. And using that recruiter track down technique coming from Facebook and Google. Do you have anything else about building the culture?

Yeah, I mentioned something with regards to building the strong referral brands, which is before you start, spend some time auditing and learning, what is it that your employees like most about working for the company? What is it that you can improve as well? And then check the website, check your socials, and then you can use this as material ammunition at the point of convincing and persuading candidates because you're hearing it directly from your coworkers. What is it that they like?

And the referral champion should do this, right?

Yes. I think this is a collective effort within the talent team because it will.

Be helpful on all of those sources as well, right? It's helpful for inbound or outbound as well. And actually that should be done continuously by the recruiting team better. And that recruiting. Again, referral champion and that referral champion. How much of the weekly time is spent on that program? Should it be one day per week or should it be three weeks at the beginning of the program? And to kick off what's your advice on this? I guess you've seen different things with your clients or in the industry, so some things work best than others.

Yeah, I don't have a specific number. I think it depends on what the current state of the existing referral program is today and the state of the referral. So how much work is there to do in some instances, for example, getting leadership on board would be a profoundly difficult task and will likely involve a lot more resources and mind share to get that over the line, whereas doing an audit could be much less. But considering and I'll take this into consideration, that employee referrals ought to come for 30% of your total hires, then it is important that you spend the necessary time in this space because it doesn't happen by magic as you scale.

Okay, so again, back to this 30% number. And again, by talking to a lot of clients people today, we see that a lot of companies are way below this. Some are as low as 10%, 15%, and most don't even know how much that number is frankly, would you say that some companies are more ready than others to implement these types of programs? What's a good number to have? Would you say that it's a warning if you get less than 15% or is it a warning? And because we didn't talk also about diversity, it could be a warning to have more than 50%, for instance. What do you think about those numbers? Yeah.

So with regards to whether there is a threshold which is too low, I would say yes. It is important that you have a balance and a mix of your hires. You shouldn't be relying too much, say, for instance, on direct outbound, for example, versus perhaps applications. I think that could be a reflection on a variety of things. With regards to diversity, absolutely. There should be, again, a balance and a mix and also an understanding of the funnel and who's being referred and then leaning into other sources. If you're finding that referrals are coming from a specific group and referring a homogeneous group, whatever that is. But I will say this to counteract that point. Ask specific questions to your coworkers. Ask for diverse referrals.

Got it. And then we start to touch on the actual referral program. So now that we've been able to work on the culture, we have the leadership buying, we spend time with people, and everybody understands that referral is important. And now how do you set the incentives? What have you seen work? And also another question as well is we usually see as well. I would say there's a power to rule where about ten or 20% of the employees will make about 80% of the referrals. Should it be about empowering these people? Should it be about helping everyone to make more referrals? So yeah, let's dive into the actual referral program.

Absolutely. I fully understand and support what you just said with regards to Pereto. It's an amazing support. And this kind of transcends from building a referral culture into your incentives. It's not two separate things. The most important and motivating way to incentivize referrals is to merely recognize their requiring employees for their work to make it public. Often competition and social rewards are far more effective than a nominal number increase or decrease. So what can you do here? Make a public leaderboard recognize the efforts at the Slack Channel, introduce monthly and quarterly cadences to celebrate the work being done here. They work very well. So with regards to the bonuses, personally, I'm agnostic on this issue. But if you want to use cash or a financial incentive, we've seen that the average bonus ranges from $1000 to $5,000 for a successful hire. And this can be customized based on urgency, based on domain. Usually engineering hires are higher and that reflects urgency and difficulty of hire. And one thing that we do at Intro, for example, is experiences. And we have also introduced this to some of our customers where we ask and learn about our own coworkers and what they like and then surprise them with an experience and travel experience somewhere.

So for instance, one of our back end engineers Resley. He's going to the Baku Formula One, and this was a price to him, and he loved it. And he referred somebody else who was recently buying. So it works. And I would say ask your coworkers, every company is different, okay.

And we've also heard about companies doing these types of experiences, but between the referral and the referrer, so you would say you can go there and you're taking that person with you, so you're building that experience with that person as well. Have you seen that as well? Is this spread or is this a good idea?

That's a great idea.

Okay.

That's a great idea.

But then we're touching on another difficulty as well is that referral programs can get complex. And we also see companies try to map exactly the urgency and the difficulty in any role. And so in the end, the employees are lost and they don't know how much they will have. They don't know if it's an experience, if it's money, if it's a dinner. So what do you think about mapping every case and keeping it simple and you have numbers to back either?

The way I think about it is it must be simple and easy to understand. It shouldn't feel like the company first and foremost is trying to game and make it overly complex. It's almost like how a sales representative or sales person is trying to calculate their Commission. And if you have to apply all of these different formulas, it feels like the company is trying to trick you out of what you deserve. And the same applies with regards to this program and process. So it must be easy to understand on what the incentive is. However, I would say the number one problem and what the reasons we hear referral programs failing or require constant nagging with our customers, which is really issues. It's a failure of awareness that I would say is the number one problem. It's that your co workers are not aware, it's not in front of them, and it slips their minds because they're busy and they have things to do. And then that's why I would say more of an issue rather than generating an overly complex bonus system. I haven't seen that, especially with the customers that we work with, which are usually desperate for employee referrals and sometimes increase the referral bonus to extremely high levels.

All right, so you say keep it simple, but also don't worry about the actual program itself. Try to make it simple. No complex rule. The person should be able to compute quickly how much you will earn. But that can be complex. And then you can give rules and exceptions based on the rules, based on seniority, based on the type of job as well. So that would be your understanding, right? Yeah.

It has to reflect the business needs and especially be simple for the referral to actually happen. This is often something that we haven't discussed and often overlooked. It's what is the process of actually making the referral? If you have to use this really old piece of software or you're still emailing to an inbox or you're expected to manually upload CVS, then these things are usually quite difficult to do, especially consistently. So the processing itself, in addition to making clear that the incentives are there must also be easy, otherwise people won't do it.

Got it. And that's also another very important thing that you mentioned is that people you talk to a lot about not so much incentives, but also recognition, celebrate the work. And that's very important studies that I read once as well is that employees mostly refer people to help their friends seeking a job. So that's the number one incentive and find a good job. And then it's about helping the company, and then it's about actually receiving the rewards. So people often when they try to build employee referral programs, they think it the other way, and they start with a reward and they'll say, okay, the employee clearly wants a reward. So let's start with that. But what you're saying if I'm understanding this right, is if you had to choose one or the other, you'd actually better go for the recognition or publicly rewarding and thanking the person rather than financial rewards that nobody hears about, right?

Absolutely. By far the most motivating and cost effective way to incentivize referrals is to recognize the referring employee for their work, make it public.

Okay, cool. I like this one because also a lot of times when the companies think about building the program, they'll say, okay, we would actually be paying a hiring agency that amount of money for that hire. So we'd rather give it to our employees. And they'll say, okay, let's do this. And they pick a number, they give that financial reward, but they don't necessarily think about publicly thanking the employee. So that's very important to keep in mind. Indeed.

Yeah. And one final point on this from my end is that where I think the future is going is actually to reward behaviors rather than outcomes. So a smaller incentive for making a qualified referral, for example. And it's really about building momentum. And this is often how we are incentivised in our daily lives when we interact with digital applications, for example. And it's an effective way.

Yes. But some people will say that if you incentivize the employees to just share leads, then it's not sure. It's difficult to assess. So we see the same in sales teams, right. You booked a demo, but is this a sales qualify demo? And then you can be a bit conflict.

You can implement those measures and controls. So, for example, a smaller incentive for making a qualified referral. Well, what's the definition of a qualified referral? That's a referral that meets the criteria which we have and makes it to first stage interview, for instance, establishing that the candidate is relevant and the candidate is interested. And those two criteria is often the reasons why most employee referrals fail is because the candidate doesn't want to move right now or it's a wrong profile for that position. So if you can establish that and actually get the candidate to the interview stage, then you're taking so much load off of the recruiting team. The majority of sources and recruiters are spending most of their time identifying interested qualified candidates.

Okay. I feel like we could talk about incentives for four days and that's a very interesting topic and it merges with sales as well. So there is a lot to say, but we can move on to the next thing that you mentioned is it's not so much about incentives, actually that it is about awareness, right?

That's right. I was saying that it needs to be constantly promoted this program and that's preferably by several members of the team leadership communicating this established legitimacy around the program. And we know that the main reason why employee referrals program fails because of this lack of awareness. And we also know that the best talent is passive. So I think we must recognize that employees are not innate recruiters and we can help them with their outreach to their network and to their contacts. And that could be, for instance, providing the necessary copy. So the recruiters are experts in this area, and I think there is a requirement for the recruiting team to actually lend this expertise to help where it really matters.

How do you do this?

Well, first and foremost, with regards to copy, this could be helping with measuring the outreach from the employees on what is converting and helping write the copy to the referred candidates to make sure that we're constantly trying to improve that metric. Other things that you can do are to employ tactics such as the mines palace or memory palace. You're not familiar with this. This is a way to unlock hidden referrals and this has been adopted by Google. This is usually distributed by the investment firm Sequoia to their portfolio companies to get more referrals from their team via something described as aided recall exercises. And this comes from the spool of marketing whereby you can ask specific questions and recalling talent at different phases of the employee's career. So a basic example could be you worked at Uber and Amsterdam, who is the best node developer on that team? So this goes beyond, way beyond. Okay. Can you give some referrals, the actual specific questions and instances where they can actually take their minds back? And this Memory Palace article and document I can share with you and you can put it into the notes. It gives the resources to the recruiter to take the co workers through a journey of University, their first job, and then throughout their career history, asking specific questions where you can unlock more candidates rather than just asking general questions.

And then in addition to that, if you'd like to spend more time doing this, this can be done over a sourcing jam where folks can go through their LinkedIn networks. Recruiters can make this quite a happy and motivated environment. With music, with pizza. This can be done remotely or on site. You can share boolean strings of the roles that you're looking for, and then ask your coworkers to actually go through the networks and give you either leads or referrals. The lead would be that I think these people are good, but I'm not prepared to reach out to them. And you should mention my name, whereas the referral is I can reach out to this person. If you're interested, I will refer this person and you can then associate a small reward. It could be a gift card for the local restaurant, for example. It doesn't have to be a lot, but create a sense of competition, create teams, and then have them go at it and see what you can get at the end of it.

All right. I'd be happy to have a look at this article. And I guess that's also something that you can do in that recurring shakedown meeting during inboarding, right?

Yes.

Okay. And we're getting close to the end of the discussion, but there is a lot of things to cover as well. One topic that's very dear to me is obviously, how do you track the ROI? How do you optimize, how do you track what are the metrics? How do you keep track of all of these? What type of system of records you use? So, yeah, talk a bit more about the numbers, and then we'll have to call you today and maybe have a second one.

Yeah, I'd love to. I would say just before we get into metrics, I'll say one thing, which is providing a great candidate experience is absolutely critical. This is top priority. If the referred candidates are not designed to be priority, then there will be an issue. So certainly implement SLAs service level agreements where you can get feedback from the candidate on the experience and to make sure that you promptly follow up communication is key. Okay.

That would apply to the entire recruiting process, not only referrals or does it?

Yeah, it should apply to the whole recruiting process, but with a specific priority of referrals so that you can ensure that momentum is kept. And you're not frustrating your co workers if they have gone out their way and it could undermine or at least perceive to be undermining their efforts, you're not valuing their efforts and their professional relationships. So that's why I say it should be taken as a priority over other sources, because you have more than one person in this equation. And looking back to the raw objective numbers here, these candidates are likely to join cost less in terms of cost per hire and perform better. So there is a reason for doing it as well. In addition to that employee relationship and the sake of the referral program as a whole.

Yeah. Makes sense. And about numbers KPIs success, what do you see? What do you recommend tracking? Yeah.

So you've got to prove your ROI, you've got to track metrics. You've got to calculate conversion rates each step of the referral funnel at the highest level. What is the total size of the sourcing for and how many referrals have you requested? How many has your coworkers actually said that they would refer? How many have they actually referred? What is the response rates? How many of those candidates that responded made it to phone screen? How many of those that made it to phone screen made it to on site and how many of those received an offer? How many have accepted the offer? How many have joined? You can look at each of those steps and try to optimize it.

Got it? I wouldn't say the same. Probably about the importance to keep track of all of this and I expect that's probably something that you cover in your product as well, right?

Absolutely.

Cool. So we'll definitely take intro then. Thanks a lot for your time and let's absolutely stay in touch because we missed a lot of things out of this episode, but hopefully it will be very dense and very interesting to anyone wanting to build that referral program for themselves.

Thank you.

It was a pleasure. Hi there. This is Robert. Most of our listeners come from word of mouth, so thanks a lot for yours support and if you enjoy the players, please keep on sharing it with your team and friends. Stay tuned for the next episode and if you can't wait, follow me on LinkedIn for more content and recruiting talk to you next week.