Why Do Companies Implement Alumni/Associate Referral Programs?

There is a level of allegiance that you carry with you long after you have left an organization. For many, we spend more time with our colleagues than we do with our family and friends. There is an unspoken bond that is harnessed with the connections made with a company that remains long after you have left.

Associate referrals have long been essential to many successful talent acquisition campaigns. Who more qualified to understand the technical skills, soft skills, culture, team framework and day to day responsibilities of a role better than our associates? A successful talent acquisition team is only as successful as its supporting players: each and every company employee. It is the collaborative team effort that allows company to pursue the best talent in the market.

As an extension of that philosophy, some organizations have developed alumni talent communities and provided opportunities to continue rewarding dedicated service to former associates by awarding an alumni referral for leads that result in on boarding new talent.

What is the positive message that can be taken from this type of initiative?

If a former associate has such a positive impression long after they have left an organization that results in a referral; that is a tremendous compliment to the company.

The value of an effective Associate and Alumni Referral program has financial and efficiency advantages that go beyond the bottom line cost savings.

1.) By utilizing active viral marketing campaigns through internal communication tools as well as alumni community networks, low cost or free marketing tactics are utilized to promote key roles. Traditional advertising has a structured cost model but this method can reach a much more targeted base audience at little or no cost.

2.) It drives a partnership between management, talent acquisition and associates and enforces a team focused business model

3.) Referral bonuses can be viewed as one element of a corporate rewards and recognition program providing monetary gain for assisting in the talent acquisition process

4.) Through statistical methods of reduced training costs and time and effective output, a successful program can reinforce the monetary and non-monetary savings of a strong Associate/Alumni Referral program. Overall goal: Positive ROI.

5.) With hard to fill roles, relying on the expertise and hands on knowledge of the top internal or alumni talent, one can pool off their communities to seek similar talent to fill these very difficult roles.

6.) Successful programs reduce the risk of cultural and environment fit issues. Being a part of the culture gives an inside perspective on what type of personality and skill set will be a long term success in the work setting.

7.) By involving the executive leadership in promotion of the program, providing updates to the referrers and monitoring performance of the referees, there is a multi-level involvement that reinforces the critical importance of the program and gives an added sense of value to all the key players that have participated in the process.

8.) The bottom line is that this is a partnership between the company and its talent both past and present who are joining efforts for one common goal: the continued growth and development of the company and the value it brings to its customers.

Recent studies have found some very noticeable advantages.

Baptist Healthcare and Allstate reported in a recent survey that their employee referral program produced a much lower percentage of “non-qualified” applicants. A 2009 survey found that on average, nearly 40 percent of hires in most India firms are employee referrals. Agilent Technologies has a referral program in America, Europe and Asia that have all yielded positive results.

A study reported by Smarthire of a major Healthcare company with approximately 40,000 associates found the following results:

Referral                                Internet Advertising

Cost of Source                                                                      $2,796                               $ 1,877

Offer Acceptance Rate                                                         95.4%                                   81.2%

Voluntary Turnover < 1 Year                                           9.3%                                      22.1%

Voluntary Turnover > 1 Year                                          3.2%                                       12.5%

Termination Rate < 1 Year                                                1.2%                                          4.4%

Performance Rating                                                             4.14*                                         3.62*

*Calculation of performance rating not provided

Driven on the growth of these programs, some companies have initiated client/customer referral programs. If a company provides excellent customer service, top level implementation and high retention, it would value the clients to help bring talent into the pipeline to help continue to enhance the performance of the organization that has given such loyal and productive business. As companies see measured return on investment and valued added results of associate and alumni referral programs, the web of contact will begin to expand to the customer base.

There are even more advanced applications of this idea. Ceto and Associates, A bank management consulting firm, headquartered in Suwanee, Georgia has implemented a program called People Enhancing Profits (PEP). The concept of the program is that associates make cost savings/efficiency recommendations. If the program or measure is implemented, then the associate will receive between a 5% to 10% bonus based on the annualized savings of the measure. This is an exception method of promoting morale, reducing attrition and rewarding innovative and creative ideas.

In summation, there are a number of positive attributes from the employer and associate/alumni perspective that can be taken to demonstrate the critical importance of Associate/alumni referral programs:

1) The quality of hires is greater

2) Decreases the time to fill

3) Higher acceptance and retention rates

4) Lower costs for higher and training costs

5) Higher level of associate satisfaction and strong morale

6) Better cultural and environmental fits

7) The solidification of a strong team concept

If it is promoted from the top down, reinforced and used effectively to target critical hard to fill roles, the positive implications are tremendous toward the stability, growth and harmony of an institution’s success.

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