Hiring the right people is an important part of keeping your small business running smoothly.

As a small business, you can’t afford to absorb the losses associated with hiring people who are unsuited for the job, so you need to be certain that you have a pool of top candidates to choose from and that you’re making the best possible choices from that pool.

One way to ensure a great pool of potential employees is to start an employee referral program.

This gives you access to prospective hires with the best possible references, from people that are already doing the job and know just what your company needs.

Take a look at some things that you should know about employee referral programs….

Why You Need Employee Referrals

The first thing that you need to understand is how an employee referral program can benefit you.

The article “Top 5 Reasons to Start an Employee Referral Program” explains some of the ways that an employee referral program can benefit you.

Most importantly, the candidates referred by other employees are less likely to quit and more likely to be profitable than employees located from other sources.

Employee referral programs also give current employees a way to contribute to and share in the company’s success.

You can reward your employees by offering incentives for referring good candidates that are likely to work out.

Employee referral programs also speed up the hiring process, especially when you use software to automate the recruiting and hiring.

Set Clear Goals

To help your employees make the best possible recommendations, it’s important to make sure that you have a clear hiring goal to work toward.

Are you looking to recruit more diverse candidates for your business, or beef up one particular department or branch?

Communicate your goals to your employees, and consider opening the employee referral program up to select employees that are most likely to bring you the types of candidates you’re looking for.

For example, if you specifically need IT employees, it’s your current IT employees who are most likely to know others in their field that might be suitable for the job, so focus on them to help you with your recruiting efforts.

Make Sure to Measure

Another important aspect of an employee referral program is to make sure that you’re measuring the success of the program. That can tell you whether or not your program is working the way that you want it to and what types of things need to be changed.

Keep an eye on the participation rate of your employees in the employee referral program, the percentage of the referrals that turn out to be qualified and the overall percentage of hires that come from employee referrals.

You should also track the quality of referred hires versus non-referred hires, perhaps by reviewing performance reviews.

On average, referred employees tend to be better quality employees, so if that turns out not to be the case for your company, you might need to make some adjustments to your program.

By carefully constructing and monitoring an employee referral program, you can raise the value of your workforce and improve your company’s profitability.

About the Author: Cheryl Baer is a freelance writer who writes about business and recruiting.