Employees referrals are still the preferred method for hiring top talent. Referrals are typically higher quality and are more likely to acclimate quickly to the organization’s culture. Additionally, hiring referrals is cheaper since less time is spent sourcing and screening. Onboarding is shortened as well since they already have a buddy in the company.
Referrals are also a key contributor to passive recruiting. With low unemployment rates and an increase in available jobs, recruiters can use all the help they can get to find qualified candidates. The benefit of passive recruiting is that the candidates are most likely not interviewing with other organizations.
The main question here though is whether or not the referrals and the employee referral program is working. There are a few HR metrics that can help you figure it out.
Referral to Hire Rate
This measures how many referrals are actually hired into the company during a specific period of time. To calculate, take the total number of referrals and divide it by the number of those referrals that were hired into open positions. Multiply the decimal by 100 and the remaining number is the percentage of referrals that become new hires.
Referral to hire rate will give an indication as to whether or not the referrals are a fit within the organization. If the percentage is low, a deeper dive is needed to determine why referrals are not becoming new hires. Is it due to a lengthy recruitment process that lacks communication? Maybe there’s an issue with hiring managers not being able to interview properly.
Tenure of Referrals
Tenure of Referrals measures how long a referral stays with the company. This is pretty simple to calculate. Just calculate the length of time between when the referral starts and when she separates from the company.
Referrals typically have longer tenure than external hires If the metric is below or above benchmark data, HR should find out what is working or not with the referral program. Maybe the employer brand does not match up with the organization’s culture.
Average Time to Fill: Referrals vs Non-referrals
This HR metric measures how long it takes for an open position to be filled. To calculate, total the number of days from when each position is open to when a referral accepts an offer. Then, find the average of all the totals. Once the average is found, compare it against the average time to fill for positions not filled by referrals.
Referrals should have a shorter time to fill as there is no sourcing involved. Additionally, the interview process is typically shortened as well. If the time to fill is longer, than there may be a break down somewhere within the referral process. Try looking at these metrics together to find the story in the data. There may be correlations between higher referral to hire rates and higher time to fill averages.
Don’t forget the analytics
The best employee referrals come from successful employee referral programs. The only way to know if a program is successful or not is to establish metrics and track the data. Then once the metrics are established and the data is produced, don’t forget to analyze. Data is useless without analytics to find the how and why behind what the metrics are saying. An HR dashboard makes it a lot easier to achieve that. Check out a free demo of our HR dashboard and skip straight to the analytics.