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The Secret Way Big Companies Hire Via Employee Referral Secret No. 1 is culture: If a company is terrible to work for, employees won't wish it on their worst enemy -- let alone someone they like.

By Heather R. Huhman Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

The headquarters for Appstem, a boutique app-development company, is located in a hub of innovation in San Francisco. On a nice day, the CEO, Robert Armstrong, can stroll the streets of the neighborhood and, within a one-mile radius, pass by the offices of tech giants Google, Salesforce, Twitter and Yahoo.

Related: 4 Ways to Train Employee-Referral Rock Stars

While such proximity might intimidate many leaders of smaller technology companies, Armstrong says it doesn't bother him one bit. He says he's found a way to get top-notch talent that allows Appstem to compete with these behemoths.

That secret: employee referrals.

"We implemented an employee-referral program a year or so ago," Armstrong told me. "It has not only helped us attract new talent, but also retain talent because the new employees are generally friends."

He went on to say that Appstem has a lot to offer tech talent, like a variety of flexible work options and an outstanding culture. The employee-referral program allows him to put his brand out there and attract skilled employees, despite the company's own positioning in the shadow of larger, more established tech organizations.

Here are five ways Appstem and other companies have created employee-referral programs that help them keep up with the big boys:

1. Nurture company culture.

This should be common sense: If a company is terrible to work for, employees won't wish it on their worst enemy -- let alone someone they like. For an employee-referral program to work, the foundations of a great company culture have to be there.

In fact, a 2016 LinkedIn survey of 26,151 of its members found that 61 percent said they wanted to know about a company's culture and values more than anything else. When an acquaintance reaches out to tell them of a job opening, the first question they say comes up is, "What's it like to work there?"

And, not surprisingly, when an organization takes the time to build an authentic culture, employees are ready to spread the word.

"We have an incredible company culture," said Jake Budge, of the company, BambooHR, in Lindon, Utah, where he's talent acquisition partner. "That makes employees sincerely want their friends, family and past co-workers to work here, as well." For BambooHR, and any company with a successful employee-referral program, part of that culture has to be trust. That means the company is confident in its employees' ability to judge the character, skills and, most importantly, cultural fit of a potential candidate.

"We remind them that because they're awesome, they most likely associate with other awesome people," Budge went on to say. "We also emphasize the fact that they have the opportunity to influence the team by impacting who joins it."

Related: 5 Ways to Better Leverage Your Referrals to Hire Top Talent

2. Get organized.

While an employee-referral program can vastly improve hiring, it does mean getting more people unfamiliar with the process involved. More people are passing information around, and things can get confusing quickly unless the organization is prepared.

"Develop a tracking system," advised Lauren Griffin, senior vp of Adecco Staffing in Boston. "It's one of the most important, and essential, parts of implementing an employee-referral bonus program. Due to the number of players in this recruiting tactic, it is important to stay organized, to prevent miscommunication between employees, referees, and the company."

A simple but effective tracking system, Griffin said, records vital information, like the person who made the referral, interview dates and dates of hire. It can also be useful for noting information from periodic check-ins with each new hire to judge the quality of that hire.

3. Make employee-ambassadorship easy.

Employees are not full-time recruiters. They should not be expected to spend hours and hours sharing with their networks how awesome an employer brand or company culture is. Once employee ambassadorship moves from spreading the love to becoming a chore, people will stop participating.

That's where tools like FirmPlay can be powerful for employee-referral programs. FirmPlay allows employers to gather insight from their employees about what they love about the company. Then the organization can create and share material that reflects the brand and employees' perspectives on it.

When employees have played a part in the content that's created, they are more likely to click "share" and pass it on to their network. Then a friend -- and potential candidate -- sees it and becomes interested in the organization.

"This functionality is a natural supplement for employee-referral programs," said Vasilios Alexiou, co-founder of FirmPlay in Boston. Through networking, companies can reach passive talent. "Candidates see this chatter on social media, then start to explore the company. Once they're excited, they apply for the job."

4. Reward employees.

Employee-referral programs are not about "free" talent sourcing. They're about redirecting money that might otherwise be spent on job ads or recruiters, to those who are more invested in the organization: its employees.

"We know what it would cost to use a recruiter for certain roles, and we decided that we would rather pay that money to our employees," said Greg Besner, founder and CEO of CultureIQ, in New York. "We decided on an amount that was a fair incentive while also coming in lower than what it would cost a recruiter."

Many companies require a new hire to stay employed for a certain amount of time to discourage people from referring dozens of friends just for the monetary bonus. However, as Besner pointed out, there's an inherent safeguard built into employee referrals.

"Employees take these referrals very seriously, because they know that they will be working directly with them on a daily basis. Wanting the best co-workers, the quality of referrals we get is extremely high."

5. Make it easy to refer.

If employees believe that they are the ones applying for a job when they refer a friend, the employee-referral system is broken.

In this regard, Alexander Mann Solutions realized that its own in-depth and complicated program was scaring employees away and began overhauling that program in 2015.

"Before, like many companies probably do, we would require our people to fill out detailed information, some of which they probably wouldn't know off-hand, like an overview of employment history or a skills list," said Tanya-Marie Nichols, a senior manager and Americas HR business partner at Alexander Mann. With the company's overhauled program, she said, employees now need provide only the name, job title and location of the referee via the company website.

"Then, we do the rest," Nichols continued. "We add them to our pool and make the determination for what role they are aligned with -- either one open now, or [one] them for the future."

Related: Use Referral Bonuses to Find Top Entry-Level Talent

Another option is to use a tool like Reppify, which matches an employee's networks with open positions at his or her company. All employees have to do is create a referral via the mobile app. They can even prioritize the friends they know who are looking for a new job.
Heather R. Huhman

Career and Workplace Expert; Founder and President, Come Recommended

Waldorf, Md.-based Heather R. Huhman is a career expert, experienced hiring manager and president of Come Recommended, the PR solution for job search and HR tech companies. She writes about issues impacting the modern workplace.

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