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Pay Employees for Referring New Hires? Heck, I’ll Pay Anyone for a Great Hire!


Many businesses have realized that the best source of new hires is through referrals from current employees – and that’s certainly true for our business. While Craigslist and other job boards drives the vast majority of our applications, the best applications usually come through employee referrals. For example, we review about 100 applications for each new hire we source from a job board. For employee referrals, this ratio is about 15 to one – much better.

That’s why, like many companies, we pay a bonus to employees who refer a candidate who we ultimately hire.

Last year, we got to thinking: if employees can make great referrals, why can’t people who don’t work for us? So, last year, we introduced a program that takes our referral bonuses a step further: the 500 Bucks Program. Through this program, we’ll pay $500 to anyone who refers a candidate who we hire.

After running the program for a year, we’ve found that we hire one out of every five outside referrals! That’s even better than employee referrals.

Here’s How It Works

We hand out business cards to all our employees, but instead of the usual personal contact information, it’s more of an advertisement that we’re hiring. Here’s an image of the front and back:

500 Bucks Referral Card, Front

500 Bucks Referral Card Back

The employees then give the cards out to friends, family, acquaintances or anyone, really. Those people, in turn, refer people who impress them.

Let’s say, for example, an employee’s friend has a favorite barista at Starbucks. She may not know what he’s good at – besides putting just the right amount of foam on her caramel macchiato – but she knows he is positive, energetic and cares about doing his job well.

So, the friend fills out the bonus card with her name and gives it to the barista. He applies for a job with us and mentions the friend’s name. He fits our criteria and we hire him. We then send the friend a check for $500 (and maybe she uses this to buy an espresso machine, since now she’ll have to make her own caramel macchiatos).

So far, we have paid out five of these referral bonuses. Three went to former employees or friends of the company. Another referrer had met with me once on business. And one was a candidate we had interviewed who was fully qualified, but ended up withdrawing his application.

Our Recruiting Parties Provide an Efficient “First Date”

Recruiting parties are another tactic that go hand in hand with our referral program. Basically, we’ll go through the resumes we’ve received recently and narrow them down to 20 or 25 applicants. We invite them to the office after hours, provide snacks and beer and mingle with them.

This approach allows us to meet about 25 candidates in two hours, when it would otherwise take us several days to interview them all one-on-one. These parties provide a more casual environment in which candidates’ true personalities can shine through. And it’s not just for us to evaluate them – it’s also a low-pressure way for the candidates to see if employment at our company is something they want to pursue.

It Works for Us Because We Value Talent Over Experience

Recruiting tactics like parties and the 500 Bucks Program work for us primarily because we hire for talent more than experience. Not all companies work this way: If we were hiring doctors, lawyers or engineers, we’d need people with very specific backgrounds and our shotgun approach would not work as well. Instead, we are primarily hiring sales and marketing people. And we can draw hires from the bar or the bank as easily as from the boardroom, because we’re really looking for people with drive, ambition and a willingness to learn.

Here’s a great example. My wife once took her iPhone to the AT&T store to get it fixed. She was so impressed with the staff person who helped her that she recommended I bring him in for an interview. He was hired, and still works for us to this day. Another of our employees was impressed by a young woman who worked at his gym. She came to one of our recruiting parties, came back for a formal interview – and has been an employee for almost a year.

But What About Cheating?

Cheating was, of course, a potential problem we considered with the 500 Bucks Program. In theory, a candidate who gets an offer could name a referrer at the last minute in order to give that person the bonus. We have avoided this issue by making it clear that the candidate has to name a referrer on day one. The online application will ask how the candidate heard about us. If they say “a friend”, and we decide to select them for an interview, we will re-open that question and ask the applicant their friend’s name – but that’s the only chance they get.

More importantly, we have avoided the issue of cheating by upholding high standards throughout our hiring process. In reality, it would be almost impossible for someone who wanted to scam us to make it all the way through to the offer stage. We would have already figured out that they weren’t a good match for our company and culture.

The Results We’ve Seen

All the employees who came to us through the 500 Bucks Program are still with us, so it is clearly generating quality candidates. It’s been successful in part because it matches us with candidates who have to some extent been vetted. Despite the broad nature of the program, in most cases the people referring candidate to us have a sense of our culture and what we’re looking for, so they refer people who fit that mold.

This program is just one tactic we’ve used to make our recruiting process more effective and efficient – and we’d love to see even more referrals coming in. Our company is a unique place to work, and we’re always looking for unique individuals to join us.

NOTE: As of December 10, 2014, This referral policy is no longer in use by Software Advice.

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About the Author

Austin Merritt is COO of Software Advice. He has performed a number of roles at the company, ranging from marketing and research to taking out the garbage. Austin is an avid outdoorsman and can often be found running the Town Lake trail in Austin, TX or exploring the mountains of Southwest Montana with his wife, Melissa.

Connect with Austin Merritt via: 
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