Let’s face it: we all love it when an employee brings a great friend or family member into the company and it works out. There’s a certain satisfaction that comes with that referral hire. Maybe it feels like it validates the strength of your team.

Did you know, you’re 13 times more likely to hire someone from a referral than from other sources?

To put it simply, we love referrals. And we want more of them!

But here’s the problem: most employee referral programs aren’t actually set up to drive referrals. Instead, they’re designed for retention, which is a mistake that’s costing you top talent.

Why Aren’t You Getting More Referrals?

You may be asking, “If referrals work so well, why don’t we see more of them?” The answer lies in how most referral programs are structured. Too often, we make employee referrals more about retention than the referral itself.

Many companies only reward employees after the new hire sticks around for a certain amount of time – 30 days, 90 days, even six months. That’s the wrong approach. Why should retention be your employees’ responsibility?

Let’s put it into perspective. Your employee works hard to get their friend or family member to apply. This person is leaving their current job, making a career change, and potentially upsetting their entire family dynamic. Your employee is vouching for your company culture, but they have zero control over how their friend or family member is managed after being hired. The team member who gave the referral can’t control whether their friend loves the work or how they’ll mesh with the team. But in most cases, their bonus is tied to just that – retention.

Referrals Shouldn’t Be About Retention

There’s nothing wrong with wanting your new hires to stick around, but it’s not fair to place that burden on the employee who gave you the referral. You hire the wrong person or create a toxic work environment, and suddenly the employee who referred their friend feels responsible when things go south. Retention is a management issue.

A study found that people who have a best friend at work are 7 times more likely to be engaged, and if they have three “close” friends, they’re 50% more likely to stay engaged on the job. It’s a fact – working with friends makes work better.

But this engagement isn’t built overnight or through a one-time bonus payment. It happens through the daily experiences of a strong culture, good management, and a workplace where people feel valued.

It’s time to shift the focus of your referral program.

Reward the Behavior You Want

If you want more referrals, reward your employees for the behavior of bringing in candidates. Don’t tie it to how long the new hire sticks around—that’s on you as the business leader. Pay the bonus once the referral walks through the door and starts their first day.

It’s tempting to think, “But what if the new hire quits after a week?” That’s a problem with your hiring process or your company culture, not the referral.

Think of it this way: every time your employees provide a referral, they’re helping you build your team. That’s a huge value to your business. But if you penalize them for retention issues they can’t control, they won’t take the risk of referring anyone else.

Example: A Failed Referral

Let’s say you own a construction company. One of your top foremen refers a friend from a previous job to come in as a crew leader. The referral bonus is structured so that your foreman only gets paid if the new hire sticks around for 90 days.

The friend starts the job, but the site supervisor isn’t great at communication, and the work hours are inconsistent. Three weeks in, the new hire quits. Now, your foreman is out the bonus, and the team morale takes a hit.

Was it the foreman’s fault that the site supervisor didn’t create a good work environment? No. Yet, the foreman loses out, and you’ve missed an opportunity to strengthen your team.

The Right Way to Run an Employee Referral Program

Here’s how you fix it: reward for the referral itself, not the retention. As soon as the new hire completes their first day, your employee should get their bonus. This shows your team that you value their effort and their network.

Afterall, it’s estimated that each person that’s hired through an employee recommendation saves a company about $7,500! Between job ad promotion and hours spent interviewing – that’s a lot of money.

You could implement a tiered bonus system to encourage retention, like giving an extra reward if the new hire stays for six months or a year, but the bulk of the bonus should happen upfront.

Take Responsibility for Retention

At the end of the day, retention is your responsibility. You, as the business leader, are in control of creating a culture where people want to stay. You’re in control of making sure your managers communicate well and set clear expectations. If you create a great place to work, your referral hires will stick around naturally.

By shifting the focus of your referral program to the referral itself, you’ll get more employees excited about helping you build a strong team. And when it comes time to assess why some hires stay and others leave, you’ll be looking in the right place – your management, culture, and processes – not at the employee who gave the referral.