Harnessing the Power of Employee Referrals By Joseph Daniel McCool For today's human resource professionals, there's no more powerful recruiting pitch than that offered by a current employee to a prospective employee. That's why leading companies are getting creative about exploiting employee referrals. That's also why online recruiters increasingly want to help you get more referrals than you might get without them. Paying a couple of thousand bucks is a small price, indeed, to find the right candidate for a key job—especially in today's tight labor market. So it should come as no surprise that employee referrals have become the source of most new hires at companies such as Microsoft, Unisys Corp., and Sun Microsystems. To successfully recruit new workers through employee referrals, however, you have to be creative, and communicate your company's recruiting needs to employees. You have to be willing to invest whatever it takes to turn all of your employees into recruitment field reps for your company. Novel Approaches and Rewards Realizing that high-tech talent is scarce, Nortel Networks, the world's second-largest maker of network equipment, has upped the ante in the war for talent: It's offering $1 million in cash and prizes to employees who entice skilled contacts to join the company. This, despite the fact that referrals already account for nearly half of Nortel's hires in North America. The Canadian technology giant needs to fill 5,300 optical Internet positions (mostly in the United States and United Kingdom), so it's asking employees to refer family, friends, and their best-skilled acquaintances. It's paying its employees $2,000 for every new hire they refer, and enters each such referring employee in lotteries that promise $100,000 payoffs. The company's million-dollar publicity stunt has already garnered more than 2,000 applications. And Nortel's not alone. PeopleSoft has begun paying $5,000 finder's fees—structured so they're tax-free—to employees who refer marketing managers, and BabyCenter.com is offering a $2,000 bonus and a bottle of pricey champagne to its employees who refer new hires. Referrals Move to the Web Today, smart recruiters are tapping the resources of an increasing number of Web-based employee referral systems. Karen Davis, the manager of recruiting strategy at Allaire, a Web software company, says Web-enabled referrals "broaden our network of potential candidates at a fraction of the cost of headhunters." Take Referrals.com, the latest entrant in the war for your recruiting dollar. The recruitment startup offers a targeted approach to engaging a company's best-performing employees to contact a handful of other professionals whose work they respect in return for bonuses for referrals that result in hires. If a hire is made, the online venture gets 20 percent of the referral bonus as its fee. Referrals.com CEO Woodrow Chin cites the research of author Malcolm Gladwell as proof of the effectiveness of employee referrals. In a survey, Gladwell found that 56 percent of the people he interviewed found their jobs through personal connections. "In today's tight labor market, where companies can spend thousands of dollars sifting through piles of resumes to fill a single position, referrals can pinpoint job candidates and share the cost savings with those who pass on the information," Chin says. Other Online Referral-Program Options Referrals.com isn't the only technology-enabled referral option for recruiters. CareerRewards.com pays from $1,500 to as much as $10,000 to those who successfully get a friend, family member, or acquaintance hired into a job opening listed on its site, which makes money from the commissions it charges companies who use the site to land new talent. The standard commission is 20 percent of a new hire's first-year salary, and there's no fee if no one is hired. If a company lists multiple job openings, it pays a subscription fee and is charged less than the 20 percent standard fee when someone is hired. Another player in this space is Refer.com, which was just launched by idealab! and Webhire.com. For each job, Refer.com posts a reward that it will pay to referrers. If a hire is the result of multiple referrals, everyone in the referral chain shares in the reward. Site visitors can e-mail compelling job descriptions to their contacts to make it easier for them to apply online. Finally, there's Angami Systems, a PeopleScape.com spin-off, which also provides Internet-hosted solutions to facilitate employee-referral programs. Angami.com claims recruiters can find 50 percent of their new hires through creative, online referral systems. Also See • Branding on a Budget • How to Manage Online Job Applications • Recruitment Website of the Week Posting date: 8/2/00		Recruitment Technologies
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