The Vice President and CFO of 100-person firm wrote in the online discussion forum that is an exclusive benefit for PSMJ PRO members, “I’ve seen discussion in this forum regarding referral programs offered to staff as a recruitment strategy. I’m just wondering if anyone can offer any downsides they’ve experienced with such a program. We do not currently have anything in place, and we are looking at alternative strategies to bring good talent to our firm.”

One of the main issues highlighted in the discussion is when to pay the referral bonus – on the new hire’s start day or some time later. The post drew 10 comments offering advice, including the following:

A PSMJ PRO member wrote, “We aren’t aware of any downsides, nothing notable anyway. We’ve hired 19 people this year via our referral program, and, like many other AEC firms, we prefer this method due to the higher rate of success these hires have vs. applications and external recruiters. Our people know talent when they see it and they know who will fit our culture. We haven’t used an external recruiter for any hires this year and we prefer to avoid them at all costs for a variety of reasons.”

Another PSMJ PRO member added, “Referrals can be a great way to hire. We require [that our employees] personally know the person and stand by the recommendation, and we do not pay the bonus until three months after a hire (although I am leaning toward changing it to six months), and also that the referrer is not in a position to make the hiring decision, such as their would-be supervisor (to reduce bias).”

A downside was offered by another PSMJ PRO member “One potential downside is hiring a referral, paying the referral bonus and then having the new hire not work out. To ensure that we avoid this situation to the extent possible and ensure that our staff are referring new hires interested in a long-term position, we do not pay the bonus until the new hire reaches their six-month anniversary.”

Other PSMJ PRO members added, “The key is making sure they are recommending someone they know that is looking for a job or a new opportunity. We do not recommend or encourage poaching from our competitors. We have made many good hires with this program and would always rather reward our employees than recruiters or staffing agencies. The hires tend to acclimate faster and stay longer as they are coming into an environment where they know someone and can lean on them for guidance.”

Another PSMJ PRO member advises being meticulous in developing a policy. "My key recommendation is to create a detailed, written policy that clearly outlines the referral process. This is crucial, especially for small firms like ours. We learned this after starting our program with just an informal staff meeting announcement, which led to confusion about what constitutes a valid referral. We had an employee claim a referral bonus for a candidate they knew personally after we made an offer. We had no prior knowledge of his involvement with this referral. Apparently [the new hire] had reached out to this individual at some point, but he hadn't actively referred the candidate, at least in our minds.”

A PSMJ PRO member says, “The general concern is that it doesn’t create more diversity, but I have diverse candidates making referrals also. Our referrals have been our best hires.”

PSMJ’s David Burstein gets the last word: “A recent PSMJ survey on recruiting practices identified referral bonus programs as the single most effective strategy for sourcing experienced candidates. However, one firm I know had a CAD operator who posted all their open positions on Craigslist and flooded their HR department with resumes in the hopes that some of them would be hired and he would get a bonus. After that experience, the firm modified its referral program to require some personal knowledge of the candidate being referred. We now recommend this element be part of all referral bonus programs.”

Burstein suggests that firms consider the following guidelines in creating an effective employee referral program:
•    It requires that the referring employee has some personal knowledge and can vouch for the candidate.
•    It pays enough to get people’s attention – at least $1,000 minimum for any new hire; $2,000 for degreed professionals; $3,000 for licensed professionals and $5,000 for hard-to-find categories. And gross up the amounts for taxes.
•    The firm pays the bonus immediately when the new employee starts working; don’t wait for the probationary period to end. This isn’t how most firms do it, but it is the firm’s responsibility – not the referring employee’s – to perform the due diligence to ensure the new hire is a fit and to create an environment in which they’ll want to stay.
•    The firm makes the bonus payment a public celebration, not just a check in the mail that no one sees.

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