This month’s return on investment installment is all about employee referral reward program possibilities and return on investment. There are three ways that referral reward programs can impact your bottom line and these three reasons are why referral programs can deliver such a high ROI.
Minimize the Time to Hire
Carroll Lachnit, author of the article, “Employee Referral Saves Time, Saves Money Delivers Quality,” reports that potential employees who are referred will have a decreased time in hiring. Lachnit attributes this shortened hiring time to the fact that other employees are marketing the company to the people they refer which leaves interviewers with time to evaluate a candidate’s background and qualifications. Lachnit adds, “Employees also tend to recommend people who they know are ready to make a job change, which also speeds the hiring process.”
Reduce Hiring Costs
Lachnit also cites a Employment Management Associations’ cost per hire survey, originally published inWorkforce Magazine, which reveals the cost to hire an employee who was not referred is $2884 on average. Depending on the job market’s competitiveness, this cost per hire for employees who are not referred can be even greater. On the other hand, according to a SHRM survey, the average referral reward is worth $900. When comparing the costs of traditional recruitment to a formal referral reward program, you can reduce your hiring costs by almost one third.
Increase Employee Retention
According to The Rainmaker Group, “Turning over one employee can cost around 1/2 of a low skilled hourly workers annual wages plus benefits, while losing a member of C-Level upper management can cost 3 to 5 times his or her annual wages and benefits.” By enticing referrals from current employees, Lachnit advises you are more likely to have higher quality applicants and cites an Ohio State University study that shows, “employees hired through referrals have a retention rate that's 25 percent higher than that of employees hired through other methods.”
People are more connected than ever thanks to social networking websites such as Twitter, Facebook and LinkedIn. A referral reward program can help motivate each of your employees to become recruiters for your company and reach out using social networking to help you find your new employees.
Check back on September 13 for the next post in our return on investment series.
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