Bringing In Talent

By Scott Westcott

Linda LaPoint is a walking advertisement for using personal contacts to recruit nonprofit employees. In 1997, a friend encouraged Ms. LaPoint to apply for a job at YAI/National Institute for People With Disabilities, a social-services group in New York. She landed the position, coordinating domestic and international travel for people with disabilities — and her friend, who also worked for the charity, received a cash bonus.

Today, Ms. LaPoint still works at the organization as supervisor of the group's Bronx Recreation Program. And now she is the one who's doing the recruiting, including a recent referral of a University of Pennsylvania graduate who was hired for a leadership job in the nonprofit group's housing program.

Ms. LaPoint says the employee-referral program, which pays $200 to $1,000 per referral, depending on how hard a job is to fill, benefits all parties involved: "You do something good for somebody, you do something good for the organization, and you end up with a little extra cash for yourself."

Indeed, more than 40 percent of the disability group's workers arrive via employee referrals — a testament to the success of the program that has been a staple of the organization's recruiting efforts for more than two decades.

'Truth in Advertising'

"You have your own staff, who understand the organization, culture, and the jobs in a very real way, talking to friends, family members, and associates," says Jules Fineman, director of human resources at YAI/National Institute for People With Disabilities. "People pick up the energy that you feel about your job. It's definitely truth in advertising."

Recruiters and personnel specialists agree that employee referrals could well be the most cost-effective and successful way for nonprofit organizations to find high achievers who are likely to stay.

"They are just darn better," says Christian Forman, chief executive officer of AIRS, a recruiter in Wilder, Vt., that works with nonprofit clients. "Research paper after research paper shows that people who are hired through employee referral perform better and stay longer at an organization. It is just a wonderfully affordable way of getting talent through your door."

Hard-to-Fill Slots

The basics of employee-referral programs are simple. Current employees are encouraged to recommend friends, former co-workers, business associates, or family members — often for hard-to-fill positions. In return for a successful referral, the current employee typically gets a cash bonus; organizations usually pay anywhere from $200 to $2,500. Often, payouts are made in two increments: a partial payment shortly after the hire, and the balance after the new employee completes 90 days or six months of work.

For relatively low cost compared with newspaper advertising or online job boards, the benefits are many. For starters, a referral comes with what amounts to an automatic reference: the current employee. In effect, he or she serves as a front-line filter.

Ms. LaPoint can testify to that. "I would not refer someone who I didn't think could live up to the YAI standards," she says. "Any person I refer is a reflection on my reputation."

Getting employees to help in recruiting workers can also cut down the time it takes to fill a critical position, and that reduces the high cost of turnover. "I can stick my head out of my office and say, 'Anyone know a good software engineer?' and have the job filled in two weeks," says Mr. Forman.

The programs also serve as an incentive for current employees. At organizations where employees can get as much as $2,500 for referring a job candidate to a hard-to-fill position, the cash bonus can represent a hefty increase in annual earnings. And employees who make successful referrals know they are contributing to the success of the organization.

What's more, the charity benefits from the good will generated when people hear of solid performers consistently landing at a particular nonprofit organization.

"It gives you a better employer-of-choice persona," says Karen Lowe, clinical recruiter at Care Partners, in Asheville, N.C., a consortium of nonprofit health-care providers that has had an employee-referral program for two years. "It gives you a good name in the community, and that, in turn, increases your referrals and your business."

Laying the Groundwork

It's a simple truth: Happy workers will refer their friends and associates; disgruntled workers, not so much. So before instituting a full-blown referral program, experts say it is essential to evaluate how content current employees are. If the majority of the staff would not advocate the organization, it may be time to deal with the complaints and make employee-friendly changes.

And even if workers are satisfied, it is important they are prepped before they start recruiting in earnest. Mr. Forman says employees should be in tune with the organization's vision and know how to tell its story so they can share it when pitching to would-be candidates. For most nonprofit organizations, that shouldn't be too difficult, he says.

"The best place to work in America, according to Fortune magazine, is Wegmans," Mr. Forman says. "Now let's think about that: Wegmans is a grocery store. If you're a nonprofit, you've got to have a better story than a grocery store. You've got to come up with the keys to attracting the type of people you want to recruit."

Mrs. Lowe echoes his sentiments.

"People would refer here whether they get a bonus or not," she says. "They enjoy working here, and they feel this is a place of integrity." The cash rewards provide an added incentive, she says, "but if they are happy, they are going to tell people about it."

Publicizing the Program

After their creation, many employee-referral programs die or stagnate due to neglect. The programs begin amid great hoopla, then gradually drift off workers' radar screens. Often an employee will learn about the program only when they are hired, possibly from a few lines buried in the employee handbook. But to be successful, referral programs need to be promoted to the point that everyone in the organization thinks of him or herself as a recruiter.

"At a lot of organizations, people just don't know about it," Mr. Forman says. "You have to assume every single day that the entire organization is not thinking about your employee-referral program. Maybe you had a big event three years ago — but that was three years ago. You have to raise awareness around the program and need to teach the impact it has on the organization. Let the staff know you are looking for diverse talent and the benefits of that."

YAI/National Institute for People With Disabilities includes information about its program in its employee-orientation packets, but its human-resources managers then reinforce the message by frequently publicizing the program to workers. Supervisors are encouraged to talk up referrals, and the organization produced a video that shows new employees how to cultivate word-of-mouth referrals.

"We try to give guidance that we don't just want everybody's best friend," Mr. Fineman says. "Those who are successful at making referrals know how to be self-editing. They know the type of employee we are looking for."

If diversity is one of a charity's goals, then that should be conveyed to current workers, says Mr. Forman. "You need to teach the impact and importance of referring diverse candidates," he says.

Those who come to job interviews through a referral usually have a clearer sense of what the organization does, its culture, and the pros and cons of the job for which they are applying, Mr. Fineman says.

"They end up with a pretty realistic job preview from the person who is referring," he says. "They have a head start on what we do, and the result of that is a more knowledgeable, realistic applicant from the beginning. That comes from the fact that your friend is not going to lie to you about what the job entails."

'It's Like a Chain Reaction'

At Children's Memorial Hospital, in Chicago, the list of "hard to fill" positions is updated each year — and adjustments to the bonuses offered for referrals to those jobs are made as well, says Maria Rivera, special project/work-force development coordinator at the hospital.

For instance, because of the challenges finding specialized nurses, she says, the hospital increased the bonus for a referral of a pediatric intensive-care nurse and some other positions to $2,500, up from the $1,000 it offers for referrals to jobs such as pharmacist, radiologist, or respiratory technician. (Referrals for jobs that are not considered hard to fill net a $100 gift certificate from Giftcertificates.com.)

In the past year, employees made more than 250 successful referrals to the hospital, which employs 4,300 workers. Ms. Rivera emphasizes the importance of promoting the program to new employees — often those are the people who have more contacts with other job seekers — or know colleagues from their previous employer who are looking for new opportunities.

"They come in, they are happy here, and then they make a referral," says Ms. Rivera. "It's like a chain reaction."

Maintaining Standards

While employee-referral programs are often highly successful, those who run the programs caution they are not perfect. They say that the programs must work in concert with other recruiting efforts, such as attending job fairs, building relationships with colleges, and traditional advertising.

And Mr. Forman stresses that organizations must maintain the same hiring standards with all candidates. When it comes to referrals, he cautions, it is often important to consider the source: "A players will refer A players, and B players will refer B players, and so on down the line."

Employers should also guard against referral programs hampering efforts to diversify a staff. To combat the tendency of workers to only recommend people from their immediate social circle, it is important to repeatedly make the case for how diversity can help the organization thrive. Many people often have a more diverse network of friends and acquaintances than they think, says Mr. Forman.

In addition, new evidence shows that referral programs work best when they not only bring in talented new employees, but also retain the employees who referred them. A new study by researchers at the Massachusetts Institute of Technology of such programs in the for-profit world found that referred employees tended to leave or become less productive if their mentor moved on.

"The presence of the referrer seems to be the factor that accounted for any initial performance differential between referrals and nonreferrals," says the study's author, Emilio Castilla, an assistant professor of management at MIT who specializes in strategic human-resource management. "The explanation for the initial better performance by referrals appears to be more sociological rather than economic. It may be that having the referrer present makes the company a better place to be for the new hire."

Still, those who recruit through employee referral say the programs usually run with minimal hassle — and a big payoff.

"It's a pretty foolproof way, in my opinion, to get a great employee in here," said Mrs. Lowe. "Any organization looking to improve recruiting should definitely put their heads together and do this. It's something that will save you time and money."