Five myths about referral rewards

It has been wisely said that a myth is nothing that is everything. Everyone understands that one should avoid simplifications, generalizations, and relying on hearsay. In practice, however, it is faster, easier, and simpler to believe what others say—especially if they are numerous—than to verify it yourself. This is how myths grow. The recruitment referral industry has not been spared from myth-making.

Generally, people are familiar with the practice of referrals, for better or worse, but they rarely encounter professionally prepared and implemented referral programs. The situation is not helped by the fact that there is little literature, training, or even well-maintained blogs on the subject. Even a diligent HR professional must often rely on opinions unsupported by data or fragmented information that does not reflect the full complexity of the problem. To at least partially rectify this, we decided to collect the most popular myths about recruitment referrals and explain the reality.

A higher reward means more referrals

A half-truth is a whole lie. It is certainly true that the possibility of receiving a reward influences the willingness to participate in a referral program. It is also good practice to additionally reward an employee or associate for every extra activity. However, the daily reality of referrals shows that while the reward is important, its amount is secondary.

The key is for the bonus amount to be in line with market standards. In times of growing popularity for referral programs, these are easy to determine because many companies openly communicate their amounts or even source referrals from non-employees. The referrer must not feel that the reward offered is lower than a fair market rate. However, research and experience show that above a certain amount, further increasing the bonus does not increase either the quantity or the quality of recommendations.

You have to pay immediately

Many employers assume that to prove a referral program "works," it is necessary to pay the reward immediately after hiring. A common practice here is to split the reward into installments, where the first is paid immediately after the referred candidate starts work, and the next (or subsequent ones) after successful periods of employment. Our experience proves that this is yet another myth that is not supported by data.

If a company is positively rated by referrers, pays market rates, and has good, clear communication regarding program rules, the timing of the payment does not matter much. However, splitting the reward into installments is reasonable and can serve a referral program well. Two payments separated by time act as two separate "signals" reminding people of the benefits of recommending friends for work.

Paying for referrals "spoils" employees

The flip side of the myth described above is the belief that money plays no role and that people recommend friends solely out of altruism. As before, there is a grain of truth in this generally flawed statement. Referrers want to help a friend find a better job. It is also good to have an influence on your own workplace and the shape of the team you work with every day.

The problem is expressing opinions like: "my employees are already recommending candidates to me, so why should I pay for something I already have?" The retort is obvious: if the team is making recommendations without rewards, how many more referrals could be obtained if you ensured proper compensation for their efforts! If a culture of recommendation has spontaneously emerged in an organization (e.g., because it is simply a place worth recommending to friends), these attitudes should be reinforced. Over time, the program should generate more and better, more accurate referrals. By excluding rewards from this equation, we deprive ourselves of an instrument to influence the effectiveness of the entire project in the long run.

It should also be remembered that the days when referrals were the domain of large companies with Western roots are long gone. Today, it is simply an employee benefit that is already a standard at this stage, not just in corporations. To deprive yourself of it is to weaken the competitiveness of your employer brand.

Gamification is just for fun

Gamification modules are unfairly underestimated by those who perform a superficial analysis of the needs and preferences of their referrer community. They associate gamification with something not entirely serious, and the benefits associated with it seem to many to be weaker than a cash transfer. Everyone knows what a thousand zlotys is, but a thousand points could be everything and nothing, right? Not exactly.

The primary goal of gamification is not to make the referral program more colorful or modern. It is rather about removing the binary reward scheme, a situation where we get everything or nothing. We can receive a hundred recommendations for one position, but in the end, we will only hire one person. We are left with one lucky person and ninety-nine disappointed ones. This is not an ideal state of affairs.

It is better to reward every desired behavior that translates into value for the organization. Thanks to an employee's recommendation, do candidates view our job offers? Good, that is a benefit from the point of view of employer branding and recruitment marketing. Are we getting new CVs? Excellent, that is expanding the database. These "partial" successes are worth a return benefit. The same applies to the most active referrers. We reward the headhunter or salesperson who has the best result to encourage greater effort. We should do the same, for example, for the top 3 or 10 best referrers. In this arrangement, no one who has diligently engaged in referrals will leave empty-handed, and the most effective ones will feel that it is worth trying harder.

A referral program has a short shelf life

Another deceptive opinion is the belief that a referral program is good for a year, maybe two, and then "everyone has already recommended who they have to recommend." Eight years of our experience with our clients' referral systems prove the exact opposite: the organization and employees learn about referrals over time, and year after year, the results are usually better, not worse.

Creating an effective referral program requires creating the right culture around it through communication, rewards, and procedures. Quickly involving every employee in the program during onboarding is an example of an action that favors the dynamic acquisition of new candidates through recommendations and tapping into new networks of contacts. Over time, the brand of the referral program is also strengthened: employees see that it works and want to participate in its benefits. A kind of word-of-mouth marketing is at work here, the "corridor" spread of knowledge, especially about rewards; we can also talk about social proof: if colleagues are recommending, it means it is not just an "HR project," but an activity widely accepted by the team. Finally, no self-respecting referral program stands still. After all, new modules (e.g., the aforementioned gamification), groups of referrers (e.g., alumni), promotional activities, or rewards are introduced.

This list certainly doesn't cover every myth about referrals or rewarding employees through referral programs. However, it does highlight several common misconceptions that can seriously jeopardize the success of your project. Organizations that manage to eliminate these errors will be well on their way to faster, more cost-effective, and highly efficient recruitment through referrals.