Boost the Power of Word-of-Mouth

08/20/08

What’s one of the best and least expensive methods of filling jobs? According to HR pros, it’s word-of-mouth recruiting.

That’s the recruiting that occurs naturally when one of your employees talks up the merits of the company to a friend or acquaintance who then says, “That sounds like a great place to work. I’d like to work there, too. Who should I talk to?”

Executive recruiter Ken Tanner, of Tanner & Associates in Atlanta, summarizes the value of word-of-mouth recruiting: “Good people tend to refer good people. Also, your employees know what the job is about and what it takes to do it well. They will tend to refer people who are a good match. And since your employees care about their reputation, they will refer only people that they will vouch for and be willing to work with.”

Word-of-mouth recruiting can result in a superior workforce. But, like any other form of recruiting these days, it’s harder than it used to be thanks to a shrinking labor pool. So how can you juice up the power of word-of-mouth? Referral bonuses.

Pay your workers, in other words, to bring in qualified candidates for open jobs.

Show Them the MoneyThere’s no one-size-fits-all way to structure referral bonuses. A lot depends on the nature of your workforce, your needs, and how much money you can invest in the program. Here’s a look at a few of the components:

What kind of bonus. Referral bonuses are usually paid in cash, but they can also be paid in extra perks or time off.

How much. Some companies offer a flat bonus of, say, $300 paid at the time a referred recruit is hired. That figure might motivate a $17,500-a-year manufacturing worker to bring in a worker at the same level. But will $300 move your $85,000-a-year engineer to bring in a fellow engineer? Maybe, but $1,000 is probably more like it.

Don’t be cheap. Just remember how much it costs to use a recruiter, place multiple classified ads, or wine and dine a hotshot. In any of these situations, paying a generous referral bonus for a good hire is a bargain.

When it’s paid. Not all companies pay the bonus immediately. Some wait until the recruit proves him or herself after three or six months. Others string the payments out even longer. One company pays $500 on signing the new recruit, then $1,000 in each of three consecutive six-month periods. The thinking here is that the employee/recruiter will take an interest in helping the new hire succeed, given the financial interest he or she has in that success.

Who participates. A referral bonus need not be a company-wide program. You can target administrative workers, Web programmers, hourly laborers, or wherever your needs are greatest. But don’t cut potential recruiters out of the program thoughtlessly. Your shipping clerk may have a sister who spends twenty-five hours a day at her computer extending the frontiers of ecommerce, a skill you may need desperately.

Keep It Internal
Referral bonus programs are usually offered to employees only. External programs paying non-employees to refer candidates pose difficult challenges. According to Ed Kaplan of Personnel Dynamics in Highland Park, Illinois, it’s not worth the effort of turning non-employee acquaintances into headhunters for your company. The potential for ill will (when you reject a referred candidate) is too great. Besides, he says, “There haven’t been any studies that I know of that say it’s an effective means of getting people.”

Keep the Workforce Diverse
Ken Tanner warns of a potential danger with internal referrals. “People tend to refer their friends—people, in other words, just like themselves. If referrals are your only source of people, you will have a company made up of employees with identical strengths and weaknesses.”

Worse, you may get a company full of people who have the same characteristics in terms of age, color, or religion. That puts you in danger of running afoul of Equal Employment Opportunity laws. “Like begets like,” says Ed Kaplan simply. “If you don’t have a diverse workforce, it is doubtful that offering referral bonuses is the way to get one.” Keeping diversity in mind when hiring is key to avoiding unintentional discrimination.

In sum, when you structure your referral bonus program to suit your workforce, you’ll reap the benefits — effective team players with the skills you need to succeed in a competitive business world.