Your Employee Referral Program Is Likely Underperforming

Is your employee referral program working? Most likely not, according to one report.

Research by recruitment marketing agency HireClix found 71% of employers have formal referral programs in place (WorldatWork’s 2024 Bonus Programs and Practices research puts that figure at 77%). However, only 2% of companies in HireClix’s report said their referral programs were actually meeting their referral hiring goals, even when more than 80% of the surveyed companies with referral programs said they paid cash bonuses that exceeded $1,000 to employees who referred successful candidates.

As a result, employers may be missing out on top quality hires.

“An employee referral program is a secret weapon for sourcing top talent, and fast,” said Hannah Yardley, the chief people and culture officer at Achievers, an employee experience and recognition platform. “Rather than relying on job boards, potential candidates are hand-picked by the people who know your company best, and they are rewarded for it. It’s a win-win.”

Access a bonus Workspan Daily Plus+ article on this subject:

• How to Build a Stronger Employee Referral Program

When done right, Yardley said a structured employee referral program can help employers hire faster, bring in more committed new hires, create a pool of internal advocates and increase overall employee retention and engagement.

“Referral programs can help reduce the ‘noise’ of unqualified applicants, especially in an era where mass applications (sometimes aided by artificial intelligence [AI]) are typical,” added Moe Hutt, the director of strategic consulting services at HireClix. “Referrals can help ensure that candidates are a good fit for the company.”

This article addresses ways to increase the popularity, utilization and performance of employer referral programs so you can get the right candidate through the door.

Why Aren’t Referral Programs Working?

According to the HireClix report, employee referral programs fail for four primary reasons:

1. Employees don’t know what jobs are open, or don’t understand the requirements for open positions, making it difficult for them to refer suitable candidates.
2. Referrals are too difficult to submit. This experience can be exacerbated when employers overcorrect for fraud, such as adding excessive layers to prevent managers from taking referral bonuses, which then make the process more cumbersome for everyone.
3. Referrals disappear into a black hole, and employees who never receive status updates grow frustrated and disengaged.
4. The organization doesn’t acknowledge when referrals actually work.

A lagging employee referral program also could signal an unhealthy culture, said Tom McMullen, a senior client partner at consulting firm Korn Ferry.

“Current employees are more likely to recommend candidates who would likely fit the organizational culture,” he said. “If employees don’t feel proud of their workplace, they won’t refer their friends.”

Building a Solid Foundation

According to Yardley, a strong employee referral program doesn’t have to be complicated, but it does need to be structured and aligned with corporate culture and values.

“When that foundation is in place, organizations not only speed up hiring with trusted recommendations but also improve retention, since referred employees often stay longer thanks to their built-in connection to the culture,” she explained.

The experts in this article shared how employee referral programs can become successful:

• Keep it simple. McMullen said the process for submitting and tracking referrals should be easy, and there should be clear communication about eligibility, timelines and rewards.
• Be transparent. Employees and their referrals should receive updates about where their referral is in the hiring process, Hutt said, so they feel involved and valued.
• Properly incentivize. Don’t just focus on monetary bonuses — offering extra paid time off (PTO), sharing experiences, or simply wanting to help a friend or the organization could motivate referrals, Hutt said. “Increasing the monetary bonus does not necessarily improve the quality or quantity of referrals,” she said. “In fact, it can result in more unqualified candidates being referred just for the chance at a reward.”
• Act fairly. McMullen said to ensure diverse hiring practices are in place, avoid favoritism and keep the program inclusive.
• Be visible. Track participation and celebrate employees who contribute, even if their candidate isn’t ultimately hired, Yardley said, adding that recognition matters — without it, referral programs may lose momentum.
• Create efficient paths. Hutt said data should reflect faster hiring times and increased retention.

“Lastly, don’t let the positive momentum stop at hiring,” Yardley said. “Continue fostering connections and sharing recognition throughout the referred employee’s journey, reinforcing the value they bring from onboarding all the way to the exit interview.”

Editor’s Note: Additional Content

For more information and resources related to this article, see the pages below, which offer quick access to all WorldatWork content on these topics:

• Employee Compensation
• Employee Experience
• Employee Recognition
• Workforce Engagement