Passive referrals: The hidden goldmine for quality talent

Robyn Watson is a Senior Customer Talent Advisor at Gem and has spent 10+ years in recruiting. She started in the ranks as an agency recruiter before moving in-house. Most recently, she was a Manager of Recruiting Programs, where she developed and managed a team of program and project managers to build a structure around training & communications and refine the team’s processes, systems, and tools.

Incentivizing employees to share qualified connections for your company’s job openings is by no means a new strategy in the talent acquisition industry. After all, they often lead to higher quality hires at a lower cost and, when designed intentionally with ERGs, can be a crucial lever to your DEIB strategy. 

The current thinking for most organizations is that offering large sum payouts for active referrals will lead to more of them. On the contrary, research has shown this approach often drives the wrong behaviors or has little influence on the program. The referral process can be cumbersome and opaque, often discouraging active participation despite the lucrative rewards.

That said, our team dug deeper into our recruiting data and found that employee referrals consistently come up as one of the best sources based on interview scorecards and offer acceptance rates. We knew we had to double down on our referral strategy and encourage our employees to participate in the process. Thus was born the passive referral program! 

Why Passive Referrals? 

To ensure consistent definitions, we define three types of referrals at Gem:

• Active Referrals: those who have expressed interest and are ready to interview. You’ve spent time with these connections and nurtured enthusiasm for the company. These can range from social connections to previous colleagues.

• Passive Referrals: someone you think the company should engage with to convert into an active candidate but is not yet ready to interview. Similarly, they may range from a former colleague to a social connection.

• Leads: those we do not know well but have come across and think could be a good fit. A lead could be someone that reaches out asking about an opening (active) or someone you’ve just come across on LinkedIn (passive). 

So why are we asking employees for passive referrals? In today’s labor market, more than 70% of all current candidates in the talent landscape are initially passive, which means there are few true active referrals. In recent years, recruiting strategies have evolved to focus more on direct sourcing and experiential recruiting to convert passive talent. That same proactive approach can be applied to referrals. In fact, many of our referrals were identified and hired without them actively looking for a new opportunity. They, therefore, came to us without competing offers, meaning we closed them faster!

Below is the framework we used to build out a passive referrals program. While we used our own recruiting CRM, Gem, such a passive referral program apply to any TA tech stack you have on hand!

Organize & Standardize Your Talent Pools 

You want it easy for employees to quickly add referrals to your CRM, and you always want a way for them to keep track. At Gem, we encourage employees to create their own passive referral talent pools. 

These individual talent pools are then nested under one broader referral talent pool. This hierarchy allows our team to run targeted branded nurture campaigns from one central location. Additionally, our recruiters can easily filter their search to start with this talent pool, allowing them to begin their initial search with referrals.‍

Our employees use standardized naming conventions for easy searching and all individual talent pools are nested under one broader referral talent pool

Pro Tip: Standardize naming conventions for passive referral talent pools, making it easier for recruiters to search for specific talent pools. It also makes it easier for employees to share their referrals with managers or recruiters when the opportunity arises (but you don’t remember where they are!)

Offer Simplicity from Start to Finish

The more complex your referral process is, the less likely people will be to submit referrals. Most referral programs require employees to log in to the ATS, a system they mostly have no other business in, to find a specific requisition to attach their referrals resume. We dared to offer an alternative experience, meeting employees where they’re at, LinkedIn.‍

A typical referral workflow involves a number of cumbersome steps, often discouraging participation

All employees have the Gem extension installed on their web browser, meaning the extension will surface whenever they look at a potential candidate on LinkedIn, email, or the ATS. We configured the extension so that the option to add candidates to their referral pool immediately appears, allowing them to simply 1-click add - no more hunting for contact information or resumes! From there, the candidate is automatically added to the employee’s passive referral pool and the broader referral talent pool mentioned above. Employees can also add quick notes for context like, “I know them socially but think they would be a great culture add,” empowering faster collaboration with recruiting.

Pro Tip: Strike while the iron is hot with new hires by inviting them to participate. By starting early and removing any programmatic red tape, you can build referring passive candidates into your employees' daily habits. All Gems have access to the product and are encouraged to create a passive referral talent pool to add their favorite colleagues within their first few weeks.

Provide transparency & visibility

One of the most common gripes about employee referral programs is the lack of transparency. Nothing feels worse than referring your friend and being left to wonder if they were even considered. Our employees can track all activity from the recruiting team in Gem, providing real-time transparency and insight into the quality of their referrals (also helps if we ever encounter a referral source dispute 😉). Meanwhile, recruiters can pull reports to ensure referral bonuses are accurately paid. ‍

Employees can easily track who on the recruiting team is engaging with their passive referrals and for which roles

Measure results and identify opportunities

We’ve seen massive success with our passive referral process here at Gem and can attribute 59 hires, or 30%, in the past year to the program. As we dig deeper into pass-through rates, time-in-stage, and gender/race/ethnicity breakdowns, we can also diagnose and resolve any breakdowns in the program. For example, we can uncover if referrals lead to more diverse hires or if there are any troubling bottlenecks at the job, hiring manager, or team level. 

We can easily track stage-by-stage metrics to identify wins or opportunities.

Celebrate the Wins & Keep It Top of Mind

We love the simplicity, transparency, and impact our passive referrals program has delivered. But this program would be nothing without our employees, and we never want them to forget that. Our recruiting team has hosted quarterly referral races with awards for top individuals and departments (on top of the usual referral bonus). Prizes range from time off to subscription services to team offsite events with our C-Suite to get facetime with execs. The leader board is shared weekly and surfaced in all-hands meetings. Not only does this motivate employees to stay engaged, but it also keeps our passive referrals program top of mind.

Conclusions

When businesses compete to hire talent, recruiting teams need to tap into their employees’ existing networks. This is the case even if they are not active candidates, as engaging passive referrals means there are fewer competitive offers. And while lucrative bonuses can incentivize referrals, designing a program that encourages and facilitates passive referrals can be the difference-maker in finding and hiring great talent!

Want to join a roundtable discussion with Robyn to pick her brain on what more you could be doing to drive passive referrals? Register here!