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How employee referral programs can help startups and small businesses

Posted by Kanika Sinha

May 23, 2016

The quality of your hires affects the bottom line of your startup or small business. Yet, too many young companies neglect to take referral programs into consideration when conducting their hiring.

Employee referral programs have attracted the attention of top talent leaders worldwide. In fact, according to a Global Recruiting Trends 2016 study, 26% of businesses consider employee referral programs to be a long-lasting trend.

Why are employee referral programs gaining respect in the business world? This is most likely because referred employees tend to stick around longer, and they tend to perform at a higher rate than non-referral new hires.

If you aren’t currently using an employee referral program, it’s a good idea to start thinking about it.

New hires are pre-screened

You’ll find that your referred candidates are often of a higher quality than someone no one knows. You can also bet that a referred candidate is a better fit for your open position.

Why are these referred people so much better? This is in great part because your current employees are putting their own reputations on the line to refer the hire.

They basically prequalify the candidate for you because they want to retain their respect in your company. The candidate also usually has a good idea of the job opening and your company because they’ve been briefed beforehand.

New hires integrate better

If you have a well-designed referral program, there’s a better chance that your new employees will fit in better. They’ll know beforehand the specifics of your company’s culture and mission.

The employees who referred the new hires would’ve already screened out people who wouldn’t fit in at your company.

There is a bonus in this as well because new hires who were referred often require less onboarding time and less training. They often reach the desired productivity levels faster because they are a great fit.

Referred employees work harder

Just imagine that your top-performing sales manager recommends someone for a vacant sales position. You can bet that your sales manager would recommend someone with a similar work ethic and someone who could produce.

Top performers tend to recommend other top performers.

Plus, your new hire won’t want to let the person who referred him down, so he’ll work harder to prove his worth.

The work environment gets better

It’s always a good thing when your employees get along.

You’ll find that your workplace dynamics improve as well when your staff members get along. A referred candidate is usually one who already has friends in your company, so there’s a high potential that this new hire will get along with everyone quite well.

This in turn serves to boost employee morale.

You’ll also notice that referrals are an indicator of employee morale. For example, if your employee was unhappy, he or she wouldn’t recommend someone else for the job. So, you can use your referral rates to let you know if you’ve created a situation of good morale at your startup or small business.

Lower termination rates

Because your current employees referred your new hires, they have an extra layer of prescreening and fit assessment. This makes it less likely that you’ll need to fire them.

Final thoughts

Looking toward the future, employee referral programs can help your startup or small business.

Employees referring others is emerging as a long-lasting trend, and as such is a huge opportunity for your business to build a strong, loyal, long-lasting staff.

Some recruiters even believe that employee referrals are the number one source of high-quality hires. Consider starting your own referral program at your startup or small business.

Use your employee referral program like you do your marketing. Create a strategy as you would create a marketing strategy.

Your employees have the best shot at being your advocate and telling potential hires just what it’s like to work at your company. They can dish on the good and the bad, so the potential hire knows exactly what he or she is getting into.

Plus, with referrals from your already great and loyal staff, you can count on the great potential of the new hire.

Are you a new startup? Are you looking to get your new business off the ground and watch it rise to success? We are here for you. We can help answer your questions and guide you through the process. Outsource your finances, payroll, HR duties and more to us. Contact Escalon today to get started.


Kanika Sinha
Kanika Sinha

Kanika is an enthusiastic content writer who craves to push the boundaries and explore uncharted territories. With her exceptional writing skills and in-depth knowledge of business-to-business dynamics, she creates compelling narratives that help businesses achieve tangible ROI. When not hunched over the keyboard, you can find her sweating it out in the gym, or indulging in a marathon of adorable movies with her young son.

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