It’s long been a practice of recruiters to reach out to placed employees and ask for candidate referrals. The main reasons for this method are simple. First, the candidates are already known by internal employees who can vouch for their credentials and skills. Second, referred candidates may already have worked with the employees in the past, making them a great fit for team building. Last, it’s convenient and less costly than sourcing for months to find the right hire.

New research highlights the importance of employee referrals 

So, it’s not surprising that a recent report published by Lever, the San Francisco-based talent management technology firm, shows that referred candidates are ten times as likely to be hired as external applicants. The report also highlights that the odds of being hired are 1 in 16 for direct referred candidates as opposed to those who apply via a company website or via job postings at 1 in 152.

The Lever research also revealed that:

• Organizational size correlates with hiring rates. A company with less than 100 employees typically hires around one out of every 94 candidates. Companies that have 1000 or more employees hire one in 129 candidates.
• 45% of all candidates are underqualified. When recruiters proactively seek out talent, they only find around 22% do not have the right qualifications, compared to the 52% that apply for jobs on their own.
• The average time to hire is 34 days. From the time that the candidate applies to the time they are offered a job, it takes more than a month. Larger companies take longer, up to 41 days.
• Most candidates go through 4 interviews. And they spend 3 hours and 44 minutes on average in these interviews. Companies are most cautious when interviewing technical candidates, taking 5 and a half hours.

Leela Srinivasan, chief marketing officer for Lever, told HR Dive that companies are vetting candidates on different dimensions, looking for those who are closely aligned with the corporate culture and capable of handling the challenges of their intended positions. Hiring from direct referrals is a more collaborative effort, because these are people who already have a track record of performance that can be proven.

There is more to the story here. Companies are still facing serious shortages in some skillsets, therefore recruiters are looking from within to solve this problem. According to Kes Thygesen who contributes to Recruiter.com, around one-third of companies cannot find the right people to get the job done. He mentions that the 2015 CareerXroads Source of Hire report found that around 37% of companies hired through internal transfers and promotions.

What’s a company to do when looking at existing teams?

Thygesen provides three possible solutions:

• Conduct assessments to evaluate the actual skills of current employees.
• Provide access to professional development programs to support internal succession planning.
• Tap into peer recommendations and input during candidate hiring processes.

It’s this growing movement of recruiters working with internal employees on a more proactive level to identify great candidates that’s exciting. Employees have a pretty good idea of what kinds of people make a good fit, and they will recommend those who have the right skills because it makes their team stronger. When recruiters involve employees in this decision-making process, everyone wins.

How can companies encourage direct employee referrals?

In order to take advantage of the newer, more effective way of hiring from referrals, there must be a structured employee referral program in place. Kiran Dhillon, who blogs for Lever, provides some great tips for an outstanding employee referral program.

Have brief meetings with new hires. Take advantage of the relationship with a new employee by asking them for coffee and finding out if they have anyone they’d like to recommend for employment.

Communicate priority jobs. During corporate meetings, make sure that all employees are made aware of priority job openings that they can help fill.

Share employee success stories. Internal teams will be inspired to hear about new people who have been hired on as a result of referrals.

Set an appointment. Recruiters should schedule a regular time each day to follow up on any potential referrals coming from internal teams, so no one gets lost in the process.

Make it a competition. Provide incentives for departments to refer the most and best candidates with a little friendly competition. Recognize the departments that excel.

Recognize and reward individuals. When employees refer a colleague who gets hired and does well, they should be rewarded with a referral bonus and recognition.

Hand out the t-shirts. Employees walking around wearing your company t-shirt are walking billboards for your corporate brand. This can help attract even more great candidates.

Make referrals simple. Use technology to make it easy for employees to refer a friend to come work for your company. Resumes can be shared via email or uploaded to the company hiring system for immediate consideration.