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How to Build an Employee Referral Program

July 21, 2022

May 11, 2022

Bringing the right people on board is one of the most crucial parts of building any successful business, and few people understand that better than Ozzie Osman.

Ozzie is the Co-Founder and Head of Engineering at Monarch Money, a company that helps people manage money and plan for their financial futures. For him, hiring has always been a major focus point. Ozzie says, “Hiring’s always been something I've been really passionate about. It's been the most critical part of pretty much every job I've had.”

Ozzie’s enthusiasm and experience in the world of hiring make him the perfect person to dive into employee referral programs with. In our chat, Ozzie shared some of his wisdom about the importance of employee referral programs and shared some of the key lessons he’s learned when it comes to building a successful one.

Why do you need an employee referral program?

Employee referral programs have a ton of unique benefits. “Referrals have a bunch of benefits, but they basically win, win, win,” Ozzie says. “The thesis is that good people know good people and smart, driven, talented people know other smart, driven, talented people.”


The company gets to hire the best people, the person providing the referral gets to help the company and work with people they like, and the new hire gets what is hopefully an exciting and rewarding new career move.


Referral programs are often the best recruitment channel for brand new companies that don’t have an established brand or recruiting team yet. In these cases, the best resource you have is typically your existing network, and the people they can bring you into contact with.

How to Build an Effective Employee Referral Program

Make sure your company is a great place to work

It’s obvious, but it’s important. If you want your referral system to succeed, you need to lay the right foundations by building a company that people want to work at and are excited to recommend.


If your existing employees are happy and satisfied with their work, you cut a huge amount of friction out of the process. Instead of having to encourage and incentivize people to refer others, they will do it willingly and proactively.

Don’t make it all about the money

One of the most common ways companies start with their employee referral program is by making this mistake.

Ozzie says a lot of people start by looking at whatever big tech companies are doing — which typically involves enormous referral bonuses stretching well into the thousands of dollars. Trying to emulate this kind of method without the bottomless budget of a Facebook or Google almost never works.

Many companies implement this system before they’ve even built their company into a desirable place to work. The result — employees aren’t excited to refer anyone even if they get a reward for it. And they might even hold off on referring friends or former co-workers because they don’t want to seem like they’re doing it purely for the money.

He has even seen companies where the referral flow decreased as soon as they implemented a reward. That’s not to say financial rewards for referrals are always a bad thing — they can be a useful tactic in the right circumstances — but they should never be the central part of your referral program.

There are also other ways to reward referrers aside from financial ones. Call-outs and public congratulations are a great way to give the referrer a boost and encourage others to take part in the program. And things like gifts and company perks can also work well without relying solely on hard cash.

Add structure to your program



When it comes to referrals, people have a lot to think about. The best person you know for the job might not be the first person that comes to mind, so having the right structure in place can be useful to help get things moving.

For example, holding regular meetings with employees can be a good way to ask them directly about people they might know who could be a good potential fit for the company. Ozzie says asking general questions like who the best person in their college class was, who they looked up to most at their last job, and so on can be useful prompts to help people remember good referral options they may have forgotten.

Keep your referrers in the loop

A good recruiting process is about the person being referred and the person doing the referral. Ozzie recommends giving regular updates to your referrers, letting them know if you decided to hire their referral and, if so, what the next steps are and how they are doing.

This keeps people in the loop, allowing them to see the concrete results of their referrals and helping them stay engaged and interested, which might encourage them to refer people in the future.

Choose who gets to participate carefully

Not everyone should take part in every referral program. For example, people who contribute directly to the hiring process as part of their job — like recruiters and hiring managers — would typically be excluded to avoid conflicts of interest.

As your company grows, this can change. For example, if you’re a hiring manager for the engineering team and refer someone for the marketing team, there might be no problem. But to claim a reward for hiring someone as part of your job wouldn’t make sense.

Treat referrals like royalty



You should be treating all candidates well, but referred candidates deserve a special touch in most cases. In some cases, it may be difficult to give every candidate full attention, but those who come with a seal of approval from your existing network are always worthy of top treatment.

That said, Ozzie is quick to stress that, wherever possible, every candidate should be given the white glove treatment. “In general, no one who wants to work at your company should have a bad experience,” he says. “Because, well, it's not a nice thing to do, but it also has a lot of downstream ramifications.”

One consequence to consider here is what Ozzie calls “referral referrals”. In other words, candidates often refer other candidates — people who go through your recruitment process and don’t get or accept the job but have a positive experience may still recommend you to their friends and contacts.

On the other hand, if people interview with you and have a negative experience, they’ll also spread the word, making it harder to connect with quality candidates in the future.

Encourage referrals even when your team members are unsure

Sometimes, your team members might hold off on referring someone because they’re a little unsure and don’t want to waste your time.

In these cases, Ozzie says, “You're not wasting my time. This is a big part of what's going to make our company successful — finding the right people. So just send people through the program, send them to me, send them to the recruiter we're working with, and we will decide whether there's a fit.”

It’s crucial that your employees know they are never wasting your time or being an inconvenience by referring people. This is another area where the structure of regular meetings with people can be useful — directly asking for referral ideas instead of passively waiting for them.

Build an employee referral program that lasts



The best employee referral programs are structured, well thought-through, and built on a solid foundation — a company employees enjoy working for and a culture where they’re encouraged and reminded to share ideas for new candidates.

Read our playbook to find out how The Swarm can help you implement and grow the best employee referral program for your business.