We Asked 145 Companies About Their Referral Programs. Here’s What We Learned

If you’ve ever had to fight an internal battle to get an employee referral bonus approved, this post is for you.

Referrals and networking are the undisputed best sources of hires, but it’s notoriously hard to get budget to work on a strategy for them.

Don’t take my word for it; believe this set of comprehensive articles or these other studies from Stanford, Berkeley, or even the Federal Reserve. Or SHRM.

Ok great, so referrals are important, and I’ve read all the blog posts about “Five tactics to get more referrals” — but most of them lack aggregate data that can help you measure how you’re doing against the competition – other companies that are hiring the same talent as you.

We surveyed 145 companies and asked them how they’re doing. You can get the full report here, but I’ll save you some time and share the highlights below 🙂

The Average Company Hires 29 Percent of Their Hires Through Referrals

What’s interesting about this is that the companies that perform above average (i.e one standard deviation above) hire about 45 percent through referrals. So contrary to popular opinion of “happy thirds,” it’s more like “average thirds.” If you want to be better than average, you might want to aim higher. 

Article Continues Below

Offering Rewards Is Provably Better Than Not

Some companies have a very philosophical internal policy about not offering any kind of reward for referral-based hires. Reasons like “it’s not good for our culture” or “employees already get a salary they’re not entitled to a reward” are popular among executives not wanting to shell out the extra dough, or simply being too lazy to deal with another policy.

But, our report found that companies that did not offer a reward only had 21 percent hires through their referral programs on average.

Does Your ATS Matter for Getting More Referrals?

This is going to be a controversial one. Out of the companies surveyed, we found that referral results were largely agnostic to which ATS they used. For every single ATS in the survey, we found both companies that outperformed and underperformed the average by a significant margin. But admittedly, our sample-set per ATS was relatively small, so I’d encourage other folks doing surveys to try and get a bigger dataset to either reinforce or debunk this conclusion.

Another report that coroborates some of our findings is the recruiting trends report published by Lightspeed Ventures earlier this year, although it mostly surveyed startups and we looked across companies of all sizes.

Takeaways (based on data skewed toward private tech companies)

  • The average referral based hires is 29 percent, with 45 percent being one standard deviation above
  • Offering some reward performs better than offering no reward
  • Of the companies that offer rewards, a majority opt for cash
  • Rewards beyond $4,500 offer diminishing returns on referral hiring percent
  • Companies 4 to 6 years old may want to pay special attention to referrals
  • No significant impactfrom ATS choice on referral hiring success
  • Companies are beginning to turn to external referrals to augment existing referral programs

Vinayak Ranade is the founder and CEO of Drafted, the first referral network. Before that, he served as the director of mobile at Boston-based KAYAK, which was acquired for $1.8 billion. Vinayak holds a B.S and M.Eng in Computer Science from the Massachusetts Institute of Technology.

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7 Comments on “We Asked 145 Companies About Their Referral Programs. Here’s What We Learned

  1. The company you spoke to who hires 45% probably uses EmployeeReferrals.com. Best employee referral program technology in the world.

  2. Although I always enjoy your articles, Vinayak, this one is a bit broad and seems to relate only to smaller companies and startups. (Also why your survey respondents are primarily from Greenhouse, Lever, & Jobvite ATS users.) Many SMBs and startups can raise participation from a simple companywide email, team meeting, or @company Slack message. But what if their organization is larger than that? You report zero responses from Workday, Taleo, and other Enterprise ATS users, and their referral program challenges are in greater quantity, are more complex, and represent much more of the total pie than the slice you’re discussing above. Do you have any learnings to share for this larger, enterprise group, as well?

    1. Brett – thanks for the kind words, and you raise some good questions. We reached out to over 1000 companies to ask for participation in this survey, many of which used some of the other ATS systems you mentioned, but unfortunately did not get enough data from those segments to be relevant to this study. We wanted to be transparent in what segments this data applies to, so at least you can interpret the results for what they are :). From individual conversations and anecdotal experiences working with larger companies, I can say that there are some things that apply across all organizations – for example, employees are almost never aware even of which positions are open at their company, and simply keeping them informed about this with weekly or monthly updates can drive higher engagement in referral programs.

      Submissions for referralprograms.org will continue to be open, and we hope to publish more results around some of the other segments you mentioned when we get enough participation. Thanks for reading!

  3. Thank you, Vinayak. Is theri an optimum $ reward range? You mentioned diminishing returns after $4,500..

    1. Great question Keith – the results look fairly similar between $2,500 to $5,000, and you don’t really gain much from having a $10K reward other than the PR value (which is useful short term, but not for a sustainable program). Keep in mind also that this survey was skewed toward smaller private tech companies, so if you’re one of them, then I think anything between $2,500 to $5,000 is fine, and many companies with with this range of rewards are found in the 45% hires through referrals range.

  4. Awesome findings! I think that an ATS can most definitely have an impact on the amount of quality referrals, as long as you are using it correctly. A solid ATS should come with a sourcing tool (here’s what that means: http://recruit.ee/hire-sourcing-tool-eb-bh) that allows employees to refer candidates easily, quickly, and painlessly. As long as you set guidelines, and those guidelines are easily accessible in that same ATS, this is the best way to motivate employees to submit referrals. Don’t penalize them for not participating, but, as you said, do reward them for quality referrals. Forcing referrals will get you nowhere! Thanks for sharing. Great findings and tips here 🙂

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