A few weeks ago, a couple of my kids were studying some of Jane Austin’s works in their literature class.
Her most famous novel, Pride and Prejudice, takes on the age-old question of whether an individual should get married for love or money.
I’m sure this topic will continue to be debated for years to come, with no conclusive answer emerging any time soon (if you’re lucky enough to be Austin’s protagonist, you got both).
However in the world of recruiting referrals, Google may have definitively solved this issue.
Are you surprised they study such things? You shouldn’t be. Understanding recruiting referrals is an important performance indicator for any organization.
Recruiting Referrals
Your company is not the only one after recruiting referrals. It’s a common hiring practice for most high-performing organizations. In a recent article written by Max Nilsen, Google’s focus on referrals is explained:
Like just about every employer, Google is keen on referrals. They come with a built-in reference and, on occasion, some inside information, and provide a sense of familiarity to both the candidate and the interviewer. That tends to lead to a much shorter hiring time, a higher rate of acceptance, and a tendency for the referred hire to stick around the company longer.
How do you get your agents to refer those talented individuals in their networks? Of course, many real estate companies pay incentives.
Paying for Referrals
Some years ago, Google tried to incentivize referrals and found it didn’t work very well.
Over time, Google got better at referrals, as its hiring chief Laszlo Bock writes in his recent book, but financial incentives had nothing to do with it. When the company tried doubling its referral bonus from $2,000 to $4,000, it didn’t help at all.
Of course, Google had a bunch of money and a problem to solve. The easy fix was to just throw money at their recruiting problem.
Many real estate companies try the same thing. They don’t have as much money as Google, but they still believe incentivizing agents for referrals will cause those referrals to materialize.
Referrals for Love
What does work? Google soon figured out a simple principle:
People made referrals because they liked working at the company, not because they were hunting bonuses.
Sounds simple, right? Not so much.
It’s much more difficult to build an organization where people enjoy working than it is to pay some bonuses. But, the latter strategy works better every time.
In his article, Nilsen went on to describe the detailed and measured approach Google took towards managing recruiting referrals (techniques the company still uses today).
While Google’s actions were all based on the notion of attraction (outsiders are attracted to great places to work), there were still some minor obstacles keeping individuals from making referrals. They worked hard to remove these obstacles and produced a 30% increase in referral hires. If you have interest in these techniques, I would recommend reading Nilsen’s article that goes into much more detail.
One final point to note: Referrals will probably not solve your whole recruiting problem regardless of how effective you become at managing them.
…If Google were to hire referrals at 10 times the rate it hires applicants from other channels, the company would need 300,000 referrals a year to hire as many people as it hoped to. It never got more than a third of that figure.
In other words, referrals are important, but they’re not everything. If Google, can only gain one third of their hires through this channel, you’ll probably not do much better.
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