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Why Employee Referral Programmes Fail

25.06.21 | Talent Acquisition

Employee referrals are becoming the number one source of hires for many companies. So we had expert Arnim Wahls join us for a TalentTalk with Adam Gordon, CEO at Candidate.ID, to share with us his insights on why employee referral programmes are gaining such momentum.

Whilst working in recruitment for a large law firm, Arnim, now CEO of Firstbird, was given the task of reducing the recruitment spend. This was his first ever attempt at implementing an employee referral programme. Once it was set up, with a reward in place, he sat back as the referrals rolled in. This activity had a great response at first, but alas, the programme slowly frizzled out and the project was deemed a failure.

But not all was lost. Arnim knew there was a way to make the programme work. He realised from this failed attempt that you need to constantly nurture the programme and leverage the networks you already have in place through your employees.

Through trial and error, Arnim managed to set up Firstbird, Europes number one employee referral programme.

During his TalentTalk with Adam, he shared with us the 4 main reasons employee referral programmes fail.

1. Poor communication

Many companies just post a job on an internal job board and expect everyone to see it and share it. You need to actively communicate with your employees and encourage involvement. The best way to do this is to create a story for your programme. Arnim says that you can’t simply sit your employees down and desperately beg them for referrals. You need to give them a reason to participate. Saying that sharing stories like “This is our company, let’s shape it together” or “ Why not chose your colleagues?” work best in inspiring involvement. You also need to communicate through multiple channels. Sending out an email blast will hardly encourage participation, but holding meetings and sending out social media posts boasting about employees receiving rewards for successful involvement will.

2. Transparency

After extensive research, it became evident to Arnim that many people don’t participate in these programmes due to a bad past experience. Many saying they had put forward a candidate to HR and heard nothing back. This is upsetting for not only the candidate who never gets contacted, but also for the employee who feels frustrated that they put themselves on the line for the company and for a contact and have been left with no feedback. HR can often be a black hole when it comes to referrals. This is essentially a poor candidate experience.  Companies using referral programmes need to ensure complete transparency. What will happen from the moment a referral is given to the moment a decision on the applicant is reached.

3. Lack of recognition for participation

Many referral programmes are designed in such a way that there is only one big reward at the end IF A HIRE IS MADE. This means that if you are an employee actively participating in the programme, sharing job postings, handing over candidates, but none are hired, you essentially get zip. As you can imagine this is frustrating for those who participate. A good programme needs to have a system in place where recognition is given for each step taken by staff to participate, even if it’s just a case of sending the employee updates on the progress of their referral. Arnim says that some of his most successful programmes actually offer smaller rewards for steps in the process instead of one large reward at the end. This allows employees to receive rewards for things they are in control of (the referral) which makes sense because they have no control over the outcome of the interview.

4. Most referral programmes are still manual

For most companies, an employee will walk into the HR department and hand over a CV. This will then need to be manually uploaded to the system and if not qualified will be lost due to data protection acts. This makes the process complicated to keep track of and time-consuming.

Arnim also emphasises the fact that an employee referral programme needs to be combined with a good recruitment process. You cannot leave your employees in charge of the companies hiring decisions. They can aid the process, but in the end, the candidate needs to be screened by professionals to determine their fit.

So what rewards are best?

Money? A day off work? An iPad? Arnim says that when deciding on an award you need to consider two factors:

  1. Reward the individual
  2. It must add to your marketing efforts for the programme


Offering an iPad to someone who already has one won’t be very motivating. That is why offering specific prizes is not always the best way to go. Money can be a strong motivating factor, but money is a silent reward. It will land up in the employee’s bank account and nothing more will be said of it. If you get creative and offer something exciting, something the employee will want to tell others about, you will have staff sharing their success stories which will feed into the programme. Arnim shared with us a story of a company who built superyachts. This company offered staff a weekend away on one of their yachts as a reward – who wouldn’t want to tell their friends and colleagues about that?

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