Inside Spendesk's new employee referral program
Like many startups, Spendesk is full of enthusiastic team members who love explaining their work to friends. And naturally, one of our best sources of new team members has been referrals from existing Spendeskers. That was certainly true in the early days.
But in 2019 we began to accelerate our growth - we doubled the team in two months from November 2018 to January 2019.
And the rate at which Spendeskers were making referrals started to decline.
To be honest, at that time we didn’t really realize since we weren’t tracking it. As long as we could fill each position with great talent, we didn’t need to pay close attention to the source.
But then we raised our Series B round, with the key goal of dramatically increasing our hiring targets. We had 100 new Spendeskers in 2019, and we wanted to reach more than 150 new hires in 2020!
So we made a plan is to re-invigorate our employee referral program. And this wasn’t just a matter of offering big rewards to our team members.
As I’ll explain, our referral program focuses on different incentives to motivate our team to share. Here’s how it works.
Why create an employee referral program?
It’s no secret that your own employees make wonderful work ambassadors. They have first-hand experience of your excellent company culture, and their friends can (hopefully) feel their enthusiasm and passion for their work.
And at Spendesk, we have indeed found referrals to be the best candidate sourcing channel. They lead to the shortest hiring process, higher offer acceptance rates, save upfront costs (there’s no agency fee, for instance), and have a high retention rate in the long run, because referral hires tend to be more engaged.
But most importantly, your employees personally vet and vouch for people they refer, and truly believe that they’ll be the right fit for the company.
In early Q4 2019, as our ambitions grew for 2020, we moved fast to build our own Talent Acquisition team. And at the same time, we decided to increase monetary rewards for employees who successfully referred new hires.
Although Rod, our CEO, was a bit reluctant about it, we believed this would boost the number of referrals and thus help us hack the hiring challenge we faced.
Which turned out to be crap. It didn’t change anything!
The real secrets to our employee referral program
As I’m sure is typical in most companies, we assumed that offering Spendeskers more money would lead to more referrals. These were pretty significant sums, and referring someone doesn’t take too much time or effort.
But as I said, more money did not actually bring in more candidates. So what was the problem?
The truth is, our team already wanted to refer their friends and top connections without a financial incentive. They believe in the company and want to share it with everyone.
But we in the leadership weren’t providing them with a good referral program in line with their own commitment to the company.
There wasn’t enough internal communication on open positions, not enough follow-ups on referrals, and only one-in-fifteen referrals got hired. [This is more than other recruitment channels, but still very low, since our process is highly selective.]
Obviously, this just led to frustration!
So we rolled up our sleeves and worked on improving the process at all levels. Which began with clear internal service level agreements (SLAs) on referrals.
The new SLAs include:
Weekly communication on open positions to ensure everyone knows how they can help.
Feedback to the referrer within 72 hours following each referral.
At least one call is made to all referred candidates, and Spendeskers can be confident of this.
Regular updates about the candidate’s hiring process are made to the referrer, to keep them up to date and in the loop.
We also spent more time with the teams to help jog their memories for good contacts. This helped to enrich our prospects databases, especially in new geographies where the brand is not well known yet.
We increased sourcing sessions with teams and asked Spendeskers whom they would recommend for this or that position. This included open questions such as:
"Who is the best salesperson you know in Berlin?"
"Who is the best developer to work on a banking infrastructure?"
"Among the people you worked with, who has the best skills in digital marketing?"
The point was to engage our teams more directly and intentionally, rather than hoping that money would be the answer. Because everyone is motivated to help in our hiring process - they just needed clearer instructions.
And we learned one big, clear lesson through all this...
Personal incentives don’t match our team culture
As I wrote above, Spendeskers are already intrinsically motivated to refer their connections for roles. So doubling the reward to €3,000 for each new hire made no real difference.
Because it wasn’t aligned with our culture. We didn’t recognize ourselves in this mindset of personal gain.
On one hand, we stand for a culture of ownership, autonomy and accountability. Together, we’re building a company we’re proud of, that we enjoy working in, and where everyone drives the company’s success.
And on the other hand, we had set up a program where we had personal incentives to act in the best interests of the company. The two are contradictory.
Keeping this referral policy implied promoting a culture of mercenaries, not a culture of ownership.
At Spendesk, we’re all owners of the company success. Because, if we are truly owners, we’re all accountable to bring the best people we know to join us. This is everyone's role as a builder of the company.
And there are personal incentives that align with this. We all want to work with people we know are truly great, aligned with our values, and make our work even more enjoyable teaming with them.
And it makes our lives easier to have them in the team. Which is a serious enough incentive by itself.
Big and bold change, for the better
Can you imagine a better person than someone referred by a Spendesker? We can't. As true owners, every Spendesker expects high standards from their coworkers - regarding their mindset, their behavior, and their work ethic.
And who better knows than a Spendesker whether someone new will fit within this company culture? That's why, instead of individual incentives as a referral reward, we’ve decided to make a bold and radical change:
From now on, referral incentives go directly to something we believe in, either something collective or a cause we individually want to support. Mostly, we’re giving this money to charities.
As Rod, our CEO, wrote in an email to all Spendeskers: "The company culture is only realized when it’s part of every process and system we have. The choices we make, the way we behave, and the actions we take are what define our culture.
Sometimes we make a mistake. It’s important to acknowledge that and reverse when we can."
So we’ve made this big change. And we’re confident it’s for the better.