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(April 21, 2006) On Tuesday, we solicited industry leaders Jason Goldberg (Jobster) and Hans Gieskes (H3) with a series of questions about referrals. The Jobster crew will have their responses available shortly. Once both perspectives are available, we'll see if we can't coax out a larger dialog.

Always right on time,  Hans got back to us very quickly, Here's his take:

Hans: Carpenters don't solely use a hammer to build a house nor do recruiters rely on a single tool to source candidates.  They both show up with a toolbox full of specialized tools to get the job done.  In this increasingly difficult labor market, people use specialized tools simultaneously from multiple vendors rather than relying on one vendor with "multi-tool" solutions.  The same can be said for RPOs and other 3rd party recruiters.

Large scale wall-to-wall software based solutions are often career killers for the people who sponsor such projects (Standish Group report on "chaos" reported that 16% of all projects over $1m never get completed, only 8% do so on time and on budget – all the others exceed budget and time and cause great pain).

Sumser: There is a lot to be learned about referrals. The most obvious questions are:

  • Do referral systems negatively or positively impact diversity programs?

Hans: They can do both, depending on how the recruiter manages the tool. I don't think employees in general want to abuse referral programs to pursue their personal vision of diversity, as they realize that every unqualified candidate they bring forward could damage their reputation with their employer.   Some of our customers consider using higher rewards for candidates that would improve their diversity hiring record.

  • On a related note, do referral programs really get you "more of the same"?

Hans: If you have great employees, you would hope so. If not, your referral program is probably the least of your worries…

  • Is there a limit to the extension of the referral network? (In other words, do you, at some point, reach a set of diminishing returns?)

Hans: According to Professor Mark Granovetter, ("The Strength of Weak Ties") the quality of the extension and the network's built-in screening is still strong when new hires are found within three degrees (i.e. two referrers).  Most hires are found wiithin this distance anyway.  Of course, there are exceptions.

  • What is the geographical or industrial overlap between competitor referral groups?

Hans: Monster reports that 29 regional markets have 50% of all jobs, and represent 75% of all online recruiting.  The same applies to the reach of key referrers. (i.e. "talent scouts"). However, the higher the position, the more national reach of recruiters and referrers will be.  Industry expertise and networks are key.

  • Are referral processes fundamentally geographical? Do they evolve along professional lines or other affiliations?

Hans: College alumni networks probably hold more power than 3rd party affiliations like Linkedin, especially as there's often a sense of honor and obligation to help other grads (even if they're 15 years younger). Although if 8,500 Microsoft employees have a Linkedin account, that network should be an interesting extension of a virtual employee referral reward program.

  • Are there really "super connected" referrers?

Hans: Absolutely, even on our modest scale we're seeing evidence of Malcolm Gladwell's ("The Tipping Point") theory that 4% of people are true connectors.  There have been examples of people who have participated in 4-5 different candidates searches for different companies be it largely in the same regional geography.

  • What are the things that supplement and/or turbocharge the referral process?

Hans: You have got to have positive relationships with people, even if they're only acquaintances. And there needs to be a meaningful way to say thank you to the people who take the time to help.  Cash rewards for referrals will turbocharge the referral process much faster than a mere "thanks for your help".  Most people who are frequently contacted by 3rd party recruiters are aware of the hefty sums of money recruiters make from their referrals. 

  • Can a referral system be built on a blog (or other publication) audience?

Hans: Yes, blogs are a good way to stay in touch with your personal network and hence supplement the power of e-mail based communications.

  • Is there enough connection between members of an audience to consider them the foundation of a referral program?

Hans: Sixty percent of people say they found their job through some form of referral, and 75% of them will state that it wasn't a close friend but an acquaintance. Helping friends and acquaintances find employees is an excellent way to cement a relationship, and when a cash reward is shared/earned/offered it is a gracious way of saying thank you.

Does a purchased audience (using job ads or outright click acquisition) improve or corrupt the value of a referral system?

Hans: This is a matter of conviction.  At H3.com, we do not believe in publicly broadcasting jobs and rewards to the World Wide Web.  When there's no relationship in place, the danger of bad referrals gets real.  Late last century Refer.com proved that for its customers?

  • What are the ten things that are most likely to improve referral program results?


1. Happy employees who are proud to vouch for their employer
2. Meaningful cash rewards – do not run risk of being perceived as cheap / non-competitive in the eyes of both employees and external referrers. 
3. Get rid of the complexity and rules of old employee referral programs: allow non-employees to make referrals, stop worrying about executives earning rewards.
4. Facilitate network extension: allow employees to share rewards with people they know who may know more / better candidates.
5. Treat referral candidates as VIPs:  not as another req number in your ATS, not just as courtesy to them, but more importantly to encourage your own employees to make more referrals.

  • Is money only useful during an employment peak (like today's environment) or should it be a component of the overall offering?

Hans: Rewards should always be component of the offering.  In both good and bad times referrers provide a service of real economic value.  The labor market tightness or lack thereof will influence the levels of rewards.  We believe that the war for talent will increasingly be the war for the attention/favor of these referrers or talent scouts. Employee referral programs of different companies are already reaching out to the same external referrers as 3rd party recruiters. Confronted with so many requests for help talent scouts will decide based on the quality of relationships and the size of the rewards, just like professional recruiters they will not waste their best inventory on the wrong client….

 John Sumser . - .  Permalink . - . Today's Bugler

Check out this podcast interview with John Sumser on Jim Stroud's website.

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