In the third and final part of Convenience Store Decisions’ recent Foodservice Webcast Series, human resources expert Mel Kleiman, president of Humetrics, talked about “tips for finding and retaining outstanding employees” and polled meeting participants as to where their best employees come from. 

Not surprisingly, the majority of Webcast attendees reported that employee referrals generate the best candidates for both foodservice and convenience retailing positions. For more than 20 years now, innumerable surveys and studies have shown that employee referral systems (ERS) are the only recruiting tool that consistently delivers high-quality workers who stay on board longer in every industry across the board. In fact, world-class organizations like Southwest Airlines, Microsoft, Disney, and Ritz Carlton reportedly attain from 50-70% of their annual new hires exclusively through employee referrals. 

Unfortunately, in the c-store industry, the source of the most job applicants is “walk-ins” and Kleiman believes this is the main reason c-store employee turnover is off the charts. “When an applicant walks in exactly when you need someone, they can’t help but look great to you,” he said. “The problem is a great applicant is not the same thing as a great employee.”

Kleiman offered CSD a more detailed analysis of how employee referral systems work and what retailers can do to develop an effective network for recruitment. 

CSD: Why does an employee referral system work so well?

MK: I can share a great case in point and it’s actually about a c-store client. Turnover was running at 270% and the average new hire lasted less than 60 days. When we broke down the data, we found that employee-referred hires stayed on the job at least three times longer. These are the reasons why:

Employees won’t refer people who they don’t think will be a good fit. There’s no faster way to make a bad name for themselves with the rest of the team. You’ll do your normal screening and interview, of course, but a referred applicant has already cleared one level of insider prescreen.

People know what they are getting into. Friends tell each other the truth and your employees tell their friends much more detailed information about the job and working conditions than you ever would. When applicants know up front what’s great and what’s not and apply anyway, there is a much higher likelihood they’ll stay on the job longer because there are “no surprises.”

People like to work with friends. Taking a new job is a scary enough on its own. Not knowing a single soul you’re going to work with makes it worse. The prospect of working with someone the applicant already knows and likes makes the job by far more attractive than any other.

People are always interested in getting a better job. The catch is they want it to fall in their laps. Most ERS applicants are already working and are only passive job seekers at best. They won’t spend a lot of time browsing job boards or noticing your “Help Wanted” signs. But, if a friend thinks they’d be a good fit and would like your organization better, they are much more likely to apply.

CSD: Are there any other benefits of using an ERS?

MK: An ERS also delivers a fantastic return-on-investment vis-à-vis other tools. One survey I saw reported the cost per hire for a non-exempt position as $2,100 via print ads, $1,000 by means of a job fair and $392 via an employee-referral program. Web site banners run in the thousands of dollars per year and recruiters’ salaries or commissions are nothing to sneeze at. Your numbers or the tools you use may vary, but ERS will still deliver the best ROI when you factor in applicant quality and longevity.

And, besides allowing you to hire better people faster (pre-qualifies applicants and shortens the recruiting cycle), an ERS will improve morale and productivity because your employees have a vested interest in seeing the employee they referred succeed and the referred employee doesn’t want to let a friend down.

CSD: Is there any downside?

MK: Sometimes referred candidates can tend to be all from the same background, school or former employer, which can limit diversity. For this, as well as other reasons, it’s still a good idea to use a mix of recruiting tools with the emphasis on your ERS.

CSD: So what do the best ERS look like? 

MK:  The best ones I’ve seen had these things in common:

Commitment. It has to start from the top. For any referral program to be successful, senior management has to buy in and support it consistently. They need to send a clear message that it’s everyone’s job to actively search for new team members. I’ve seen far too many of these programs kick off with a lot of fanfare and hullabaloo only to lose steam or disappear entirely when personnel change or a new program of some sort takes the spotlight. Top management has to walk the talk when it comes to their “most important assets.” You can’t just put it out there and hope it will fly.

Marketing. The ERS must be promoted constantly. In some instances, weekly hot job emails that also list employees who have made successful referrals keep things moving. I’ve also seen a CEO routinely email congratulations to all those who took the time to make referrals. Make sure it’s on the agenda of every staff meeting and announce openings, congratulate people, and award prizes or simply give a round of applause. Also, these programs have to be re-energized at least once a year with new tools, ideas and incentives. Keep putting new life into it.

Incentives. Although some companies do give cash, I’m not a big fan of that. Cash gets spent on something soon forgotten or used to pay bills. Instead of cash, think about things like gift certificates, lunch with the boss, time off or movie tickets. This is where your creativity gets a workout. I’ve also seen drawings for one big prize (like a car, big-screen TV or even a cruise) where everyone gets one entry for every successful referral. And it’s always a good idea to reward every employee for every single referral—no matter what the outcome—with something like a personal thank you, coffee mug or something like first choice of shifts for a week.

No matter what mix of incentives you settle on, do not make the mistake of giving the awards after the newly hired employee has been on board for a certain number of days or months. The only way to reinforce good behavior is to reward it on the spot, not 90 days later. Plus, you don’t pay the recruiter, job board or job fair only if the new hire stays on board a certain amount of time. Why penalize your own employees, who just did you a huge favor, this way?

Ease Plus Efficiency Equals Effectiveness. This is where most ERS go wrong and die a slow death. To make your system deliver, you need to make sure:

 Referred candidates get top priority and there is an efficient system that lets referring employees know how things are going. This is very important to both the employee and the applicant. Kid gloves are called for here.

• Whenever there’s a job opening, everyone knows at once be it via email, bulletin boards and staff meetings.

• There’s an easy way for employees to refer people and
make sure they get the credit for it. Some companies have created virtual postcards that employees can send to friends. Many have online referral forms. An easy way is to provide “referral cards” where the employee can fill in his or her name and give it to the potential candidate.

• No hard feelings result when referrals are not hired. Good communications can ward this off.

CSD: Does an ERS work more effectively in smaller or larger chains?

MK: No matter the size of your operation, you can make employee referrals work for you. If corporate doesn’t institute a full-blown program or you just don’t have the money or time, just make it a point every month or two to ask your best people: “Do you know anyone in your [school, church, class or neighborhood] who might be interested in working with us as a [job title]?” It’ll work wonders.