Employee referral programs can be incredibly valuable for attracting top talent, increasing employee retention, and positively shaping company culture. However, over time, some referral programs may not function as effectively as they did initially. Often, the right analyses are missing to identify where improvements should be made. At Sprad, we regularly assist companies in analyzing and optimizing their referral programs.
In the following article, we share our personal experiences and insights on how you can objectively assess whether your referral program is still working—or if it's time to make targeted improvements. For more information on the right steps, our tips for measuring the efficiency of referral programs are also interesting.
Is Our Referral Program Accepted?
One of the most important indicators of a functioning referral program is employee engagement. If your employees are not actively participating, your program will not deliver the desired results.
To check if the program has the necessary acceptance, look at the number of referrals per month. Rule of thumb: If applications through referrals consistently fall below 30 percent, you should take action.
Some reasons why employees might not participate:
- Lack of awareness: Employees do not know that there is a referral program or how it works.
- Lack of motivation: The incentives are not interesting or appropriate.
- Lack of transparency: The results of the referrals are not clearly communicated.
We recommend clearly, regularly, and using various communication channels to highlight the program internally (e.g., weekly newsletters, Slack channels, posters in break areas). Emphasize the value of successful referrals through clear rewards and recognition. Implementing effective incentive systems and regular communication is essential for this.
Recommended Analysis Metrics:
- Number of referrals per quarter compared to the total number of applicants
- Measure the response of different communication channels (e.g., clicks on emails)
Do Referrals Actually Lead to Hiring?
Referrals usually have a higher quality than conventional applications. A realistic benchmark is that in healthy companies, about 25–40% of new hires come from referrals.
If you are currently below these values, some of the following problems might exist:
- Criteria for referrals are not clearly defined
- Referred candidates do not fit the job profile and company culture
- The application process is too cumbersome or lengthy, causing motivated candidates to drop out
As a best practice from our Sprad experience, we know: Quick and clear feedback to the referrer builds trust and ensures high participation. A short, smooth hiring process can make a big difference. Effective competence management can additionally contribute to improving recruitment results.
Metrics for Measuring Success:
- Hiring rate from referrals
- Time from referral receipt to hiring (analyze acceleration potential)
Long-Term Retention: Do Referred Employees Stay with the Company Long-Term?
Referred employees have, on average, a significantly higher retention rate than other application channels: various studies show that they stay with the company about 70% longer on average.
Our personal experience confirms: Satisfied employees are happy to recommend suitable candidates from their personal network. These candidates often integrate better into the company culture and fit better in the long term. If your turnover rate is still the same or even higher than for non-referred employees, you need to take a closer look:
- Were expectations realistically portrayed during the application process?
- Are there structured measures such as onboarding or mentoring?
- Do culture and values fit in the hiring process?
Experiences from our Sprad customers clearly show: Professional support through targeted onboarding and regular mentoring significantly increases both satisfaction and long-term retention of referred employees.
Relevant Metrics:
- Long-term retention rate after 12 and 24 months
- Compare turnover of referrals vs. other hires
Do Employees Use the Referral Program Multiple Times?
Repeated use clearly shows that employees trust the program and recognize its benefits—and are accordingly willing to recommend potentially high-quality candidates again.
At Sprad, we have seen how regular interaction, feedback cycles, and interim successes help to sustainably promote referrals. So-called "super-referrers" clearly show: a satisfied referrer remains active when the entire process is transparent and appreciative.
Winning strategies from our customer projects:
- Regular and authentic internal communication about successful new hires
- Varying or increasing rewards for multiple successful referrals
- Gather feedback and integrate employee suggestions for optimization
Recommended Analyses:
- Number of employees who recommend more than once
- Average referral rate per employee over the course of the year
Summary for Immediate Implementation of Success Measurement (Checklist)
- Measure acceptance: Analyze the share of referrals in total applications
- Evaluate hiring success: Measure the hiring rate of referred candidates
- Check long-term retention: Compare retention rates of referred employees
- Measure multiple use of the program: Number of employees who actively recommend multiple times
Our Experience as a Foundation for Your Success
At Sprad, we have been working daily with companies for years to make their recruiting processes more effective. The analyses and methods presented here come directly from our own practice as well as from concrete customer projects.
Our years of engagement with topics around employee acquisition and retention make us reliable experts who pass on in-depth knowledge firsthand. We know not only the theoretical foundations but above all the practical challenges and solutions.
As the founder of Sprad, I share my experiential knowledge here, which I have gathered through countless conversations with HR managers. More information about us and our software can be found at Sprad.io
FAQ – Questions and Answers on Employee Referral Programs
What is a good target rate for hires from referrals?
Healthy programs achieve about 25–40% of all hires from referrals.
Should we reward our referral program monetarily?
Attractive financial rewards certainly motivate, but recognition and appreciation also work effectively as complements.
How long does it take for the first successes to become visible?
With good communication and clear incentives, you often see a noticeable increase in referrals within the first three to six months.
What makes Sprad different in referral programs?
Sprad enables a seamless digital organizational structure, clear analysis options, and intuitive information flow around employee referrals. Simultaneous features such as skill management and performance management make us unique.
Jürgen Ulbrich
Jürgen Ulbrich has more than a decade of experience in developing and leading high-performing teams and companies. As an expert in employee referral programs as well as feedback and performance processes, Jürgen has helped over 100 organizations optimize their talent acquisition and development strategies.
