Referral Programs - Just The Facts, Please (Part 1 of 2)

We all know that referrals make the best hires - Right? There are exceptions, of course, but generally this assumption is held to be true by most HR professionals and indeed most business professionals. Isn’t that why most companies have employee referral programs?

Several years ago I started to think about whether this widely held assumption was actually correct and if the data would confirm it. I worried that Emily Levine’s observation, “When you're surrounded by people who share the same set of assumptions as you, you start to think that's reality,”  might apply in this case.  So I decided to take a closer look and here is what was uncovered. Of the first set of facts presented below, some we discovered by our own research (and will be published in-full in Hub’s upcoming eBook) and some were found in a fascinating paper by Burke, Cowgill, Hoffman & Housman called “Toward an Understanding of Employee Referral Networks” (Dec 2013).  

The full list of facts is too long for just one blog, so I’ve broken it into two. Here are the first ten:

  1. Over 78% of business leaders rank referrals as an effective or highly effective hiring source.

  2. Only 4% of companies do not use referrals at all for hiring.

  3. Referrals are almost 6 times as effective as the next highest method of finding candidates (contingency).

  4. Over 80% of business leaders rank referrals as their first or second preferred source of new hires.

  5. We could not find one business leader that feels they spend too much on employee referrals.

  6. 73% of business leaders want more referrals but do not know how to get them.

  7. Almost 80% of referral programs use cash as an incentive.

  8. 50% of US jobs are found through informal networks.

  9. 70% of companies have programs that encourage referral based hiring.

  10. 26% of companies that have a program don’t offer a reward system to incentivize activity.

This is just the beginning. My next blog will have 11 - 20 and there are certainly more to come after that (as we discover them).