Try Using Employee Referrals for Filling Internal Openings

Screen Shot 2013-01-09 at 9.47.26 PMEveryone knows that employee referrals produce high-quality external hires, but what most don’t know is that employee referrals can also be used to improve internal movement and placement. This boost is often sorely needed because most corporate job posting and promotion processes are poorly designed and managed.

Smart HR managers should use Internal Employee Referral Programs (IERP) to provide high-quality employee names for internal transfers, promotions, and even openings on part-time project teams. The concept for internal referrals is the same as for external referrals, which is that great people know other great people and that most employees want to help the firm by contributing to the recruiting effort. The focus just shifts from external hires to using your employee’s internal network to finding top candidates for internal movement and promotions. An IERP has many advantages and benefits.

Benefits of Using Employee Referrals for Internal Openings

The many potential benefits of an IERP include:

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  • Most internal placement processes need bolstering — most corporate internal movement, promotion, or job-bid systems are ineffective at best. Most were designed without harnessing technology and social media. So any supplemental element (i.e. the IERP) that helps to provide new names has to make a contribution toward improving these broken processes. If your current internal movement process is effective, the IERP can serve as a supplement to the existing process.
  • More candidates for each open internal position — in most large organizations, the number of applications for a transfer or promotion opening are relatively small because these processes rely exclusively on an employee seeing and proactively applying for each individual opening. As a result of the low number of applicants, the person hired or promoted is often someone who the manager knows personally. Under the employee referral program, because each employee may know hundreds of other employees, harnessing employee networks can double or triple the number of names available for each internal opening. And as an added benefit, the names will come from a broader cross section of the employee population.
  • Internal placements are cheaper — filling an opening with a current employee is as much as 40% cheaper in salary than external hiring, because the candidates in the mix are not being “bid on” by several firms. In addition, some current employees are willing to take an internal position with little or no pay increase, because they want to broaden their skills or try something new.
  • Internal placements increase retention and development — increasing the speed in which employees move internally will not only develop your employees but it will also reduce the odds of someone leaving because of a lack of opportunity.
  • Increasing the odds of finding a hidden candidate in a less-visible position — one of the most important reasons for having an internal referral program is to find hidden candidates who are not in prominent or visible positions. Because employee networks are so broad, by having every employee search for potential internal placement candidates, you simply increase the odds that hidden and less-visible employees will make it onto candidate slates for internal openings.
  • The right focus can increase diverse placements — if you tell your employees up front that your IERP is proactively targeting diverse employees, the use of broad employee networks may end up creating a net positive diversity impact.
  • Better candidate assessment — because the individual being referred is a coworker, your employees are much more likely to thoroughly know the employee, their work, and the likelihood that they are a good fit for the position. This means that the hiring manager will have more choices and for a referred-employee candidate, they will have a second opinion on the referred employee’s qualifications and fit.
  • Some employees need a push to apply for a new position — the percentage of all employees who apply for an internal opening each year is usually in single digits. One of the primary reasons for low internal movement is that inertia, a lack of knowledge of the opening, a lack of confidence, or loyalty to their current team can keep some employees from seeking new internal positions. Another employee recommending someone may be the added push required to get a reluctant individual employee to allow their name to be considered for an opening.
  • Referrals increase the number of employees who are aware of job openings — under almost all internal placement systems, the employee must be aware of an opening before anything can happen. Unfortunately, many employees simply don’t have the time or the energy to continually monitor these openings. An internal referral program means that many of your employees may accept the role of internal recruiter, and as a result, you dramatically multiply the number of individuals who are aware of each opening. In some cases, merely having a larger number of employees aware of the openings will result in them urging more employees to apply, even if it is through the traditional movement process.
  • An effective program can increase placements across business units — even if a high-potential employee is in a visible job, they may work in a business unit that has no interaction with the rest of the firm. In conglomerates and global firms, employee movement between distant regions and independent business units can be almost nonexistent because of this lack of interaction. If the referral program places an emphasis on “across-business-unit placements,” employees will focus their referrals on these more difficult placements. Increasing the sharing of employees between business units can also help to break down barriers and to increase best-practice sharing.
  • Most companies do not have an internally focused team of recruiters — the most powerful internal movement mechanism is having trained recruiters search your firm’s employee base. However, only a handful of firms (such as Cisco, Microsoft, and Booz Allen) have internal recruiting teams. So, if you can’t afford “real recruiters,” the next best option is to have your employees serve as your internal recruiting team.

Action Steps for Developing an Internal Employee Referral Program

Obviously the first step to sit down with those individuals who are in charge of the internal movement processes to help them understand how referrals can improve their results and eventually to get their buy in. Five key program decisions to be made include:

  • Should the program be autonomous? — the first key decision is whether the internal referral program should operate separately from the external referral program (I recommend that they run together and share marketing and position postings). Obviously if the IERP is to operate under the umbrella of the existing external employee referral program, that referral program manager needs to be involved early on).
  • Should there be a reward? — the next decision is where there be a referral bonus for each successful internal placement (Although recognition should always be part of the package, it may be enough of a motivator. As a result, provide something inexpensive like a $50 coffee card, the same amount in movie ticket,s or if you can afford it, a free iPad mini).
  • Who should be eligible to make a referral? — the third decision is whether any employees be excluded from making referrals in the program (only the hiring manager for the job should be excluded. And if there is any potential conflict, the individual should opt out of the reward or donate it to charity).
  • Avoiding friendship referrals — a decision must be made on how best to discourage employees from only referring their friends as a favor. Emphasize to employees that the program expects only high-quality referrals and not “friends referring friends” (As a result, require each employee to describe their relationship with the referral, as well as including a testament to the quality of the referee’s work and the level of their skills).
  • Handling duplicates — a final decision is what to do when two employees refer the same individual for a position (accept only the first referral received and each referral should be tied to a specific opening, so that the referral automatically expires after that opening is filled. A second option is to split the reward).

Final Thoughts

Referral programs have worked well in  most every situation where they have been used. They have a long history of success with customer referrals and for external hires (Incidentally, they also work extremely well for college and intern hiring). The logical next step is to apply them to internal openings. The benefits are significant and the risks are low, so give it a try.

Dr. John Sullivan, professor, author, corporate speaker, and advisor, is an internationally known HR thought-leader from the Silicon Valley who specializes in providing bold and high-business-impact talent management solutions.

He’s a prolific author with over 900 articles and 10 books covering all areas of talent management. He has written over a dozen white papers, conducted over 50 webinars, dozens of workshops, and he has been featured in over 35 videos. He is an engaging corporate speaker who has excited audiences at over 300 corporations/ organizations in 30 countries on all six continents. His ideas have appeared in every major business source including the Wall Street Journal, Fortune, BusinessWeek, Fast Company, CFO, Inc., NY Times, SmartMoney, USA Today, HBR, and the Financial Times. In addition, he writes for the WSJ Experts column. He has been interviewed on CNN and the CBS and ABC nightly news, NPR, as well many local TV and radio outlets. Fast Company called him the "Michael Jordan of Hiring," called him “the father of HR metrics,” and SHRM called him “One of the industry's most respected strategists." He was selected among HR’s “Top 10 Leading Thinkers” and he was ranked No. 8 among the top 25 online influencers in talent management. He served as the Chief Talent Officer of Agilent Technologies, the HP spinoff with 43,000 employees, and he was the CEO of the Business Development Center, a minority business consulting firm in Bakersfield, California. He is currently a Professor of Management at San Francisco State (1982 – present). His articles can be found all over the Internet and on his popular website and on He lives in Pacifica, California.



8 Comments on “Try Using Employee Referrals for Filling Internal Openings

  1. Thanks for sharing this ides, John! This was the first time I’ve heard of tailoring an ERP program to internal applicants, and it’s definitely an interesting concept. While smaller organizations may be able to communicate job openings effectively due to the lesser number of employees, larger organizations can certainly benefit from a more proactive internal recruiting approach. Great thoughts that I’ll keep in my back pocket until the right time. Thanks, again! Ben

  2. Thanks, Dr. Sullivan. A couple things:
    1) If internal and contract recruiters aren’t given “credit” toward the filling of their reqs with ERPs (external or internal) we will regard them at best as neutral and at worst as opponents to our best interests, as typically we regard 3PRs and retention specialists.

    2) I have heard of a recent start up with a product that automates, expands, and tracks the ERP process, both for current openings and for the automated creation and development of candidate pipelines. Is anybody familiar with a company like this?



  3. Keith, yes – Zao can certainly be used for internal referrals as well. Dr Sullivan mentions small rewards for IERP’s – while we support that, a better solution we have is adding a gamification layer to an IERP. Gamification is a great way to reward employees for referrals with acknowledgement for efforts, with or without attaching a reward to it. Sometimes public recognition (in terms of a thank you, praise, points or badges) can go a much longer way for a referring employee than a movie ticket, not to mention the fact that you helped a colleague get a promotion.

  4. When it comes to good referral programs, inside or outside, I think best practice is to ask people for names…not just wait for them.

    So for John’s idea, I’d ask my co-workers, “If you were going to start your own company, what 5 of your co-workers would you bring with you and why?” There’s your name gen.

    ~ Sean Rehder

  5. Hiring with referral programs is faster, as the screening and interviewing phases seems to take less time. We have made some comparative on the average time to hire (Applicant vs Referred), and referred seems to take some days or even weeks less to hire than the normal applicants.

    Here is an infographic of a company using employee referral :

    Here is a bit of advertisement:
    Zartis ( ) can help you creating your employee referral program, we also recommend network connections for your job openings when your employees log into the referral section, so they don’t have to think names, we suggest them.

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