Topgrading

A recent Wall Street Journal article described several companies’ employee referral programs and highlighted two especially effective programs at WhitePages, Inc. and Concur Technologies.  Since January, WhitePages has hired 27 people, 9 of which have come from referrals.  Forty-eight percent of Concur Technologies 150 hires this year have come from referrals.

Step 3 in Topgrading hiring methods is “Recruit from Networks.”  How do you get your employees to cultivate their networks?  Offer them a bonus for referring A players.  Though none of the companies in the WSJ article mention the quality of the referral, that is an important component of any effective referral program.  It’s not only important that referred employees stick around for a given time period, it’s important that they be high performers.  So we recommend that at least some of the bonus only be paid if the person turns out to be a high performer.

Here is the type of program we recommend: 1) Pay the referral bonus in three installments; one-third when the person is hired, and one-third at the person’s next two anniversary dates.  2) encourage people (particularly high performers) to stay in touch with high performers they have worked with in the past.  3) encourage people (particularly high performers) to stay in touch with “connectors,” people who probably won’t go to work for your company but who know a lot of high performers.

How much should you pay employees for a referral?  Bonuses in the WSJ article ranged from $200 to $5,000.  A client we are currently working with pays $5,000 for an individual contributor, $15,000 for a manager, and $25,000 for an executive, all payable over 4 years.  For their sophisticated organization, that is the right number; $15,000 simply was not enough of an incentive for busy executives to take an hour or so each week to stay in touch. 

The size of the bonus really depends on your existing employees.  How much do you need to offer to get their attention and keep them in recruiting mode when they are at conferences, alumni events, or other networking situations?

Of the tens of thousands of executives we have interviewed over the years, those most successful assembling teams of high performers before they learned Topgrading did just what we are recommending - they hired from their networks of high performers and connectors. 

Bottom line - hiring from your networks is better (people are pre-screened by A players), cheaper (no recruiter fees), and quicker - email people in your network and attractive candidates will be recommended within days!