In the continual race to find and hire the best technicians, particularly during the great skills gap drought of the 2020s, there is one method of recruiting many dealers underutilize: employee referrals.
As an element of your recruiting strategy, employee referrals done right can help you address immediate workforce needs. What's not to love about higher-quality candidates, a lower cost per hire, reduced employee turnover, and bonus goodwill with your current employees?
It might come as a surprise then to learn that while two-thirds of companies in the US have some type of referral program, only 7% of employees are hired through a referral. In my experience, these numbers closely resemble the employee referral success rate in equipment dealerships.
With recent budget announcements for infrastructure spending in both the US and Canada, the demand for skilled technicians to replace those lost to attrition or support your business's growth is set to increase further.
If you’ve struggled to find and hire techs, it’s not about to get any easier.
This article includes tips and considerations to help you improve your employee referral program and to find and hire the techs you need.
The skills gap and technician shortage
The technician skills gap for the equipment industry is now widely known and recognized by industry trade groups, OEM’s, and their dealers, and public policy agencies and legislators. Impressive strides are being made in awareness, education, and public policies to strengthen the pipeline of technicians over the coming years through the end of this decade.
Unfortunately, these actions do little to address the immediate need many dealers have today to fill the void.
Here are some recent data from a quick job search on LinkedIn (as of April 22, 2021):
4,276 postings for heavy equipment technicians in Canada
27,457 postings in the US
25% of these jobs were posted in the past 7 days
Consider that the average technician job takes about 60 days to fill and you begin to see the financial impact of these vacancies.
If you own an average-sized dealership or run a service department with ten technicians in the shop or field and hire, on average, 2 techs per year, this can add up to $100,000 per year in lost, unrecoverable revenue due to vacant positions.
The market for technicians is highly competitive and you simply can’t afford to let these positions remain vacant.
Why your employee referral program isn’t working
Here’s an excerpt from a referral flyer I read recently (wording changed slightly to maintain confidentiality) from the notice board in the lunchroom of a dealership.
Refer a friend! We are always looking for great people, and you can help. Attracting the best talent to [Dealer X] is a priority for us to serve our clients and achieve our growth goals. We are now offering $1,000* to any employee (excluding managers and administrative staff) that send us a qualified applicant who is hired. Just email your HR rep the resume of your referral and we’ll take it from there.
*Payment will be given in two terms: (i) $500 paid immediately upon hire and (ii) $500 paid after the three-month probationary period.
How many referrals did the service manager at this dealership receive in the past 12 months? Exactly zero. His techs simply weren’t interested.
Here’s what’s wrong with this referral message:
There’s too much about "we", the company, and not enough about the benefit for the referring employee. The “So what” or "what's in it for me" questions are unanswered.
The managers and admin staff are excluded. Why?
It’s too complicated. There’s too much hassle involved to get paid. Having to email the resume? Wait for full payment? It’s just not worth the hassle.
When you attempt to sell what’s important to you, make your employees go through hoops to get paid, and exclude specific people from participating, your employee referral program is set up for failure for the get-go.
The path forward
Here are 8 things you can do to drastically improve the success rate of your employee referral program to find and hire technicians for your dealer.
1. Determine your goals. Are you aiming to hire one technician or 10 with your referral program? Don’t just have a referral program because everyone else does.
2. Make it easy. You’re getting something incredibly valuable from your employees. The easier you make it for them (your employees) to do business with you, the more likely they will give you that valuable commodity.
3. Make it easy. This is so important that it needs to be stated twice. I mean dead easy. One click of the mouse button. One 2-minute phone call.
4. Match the incentive to the risk. Your existing employees are taking a personal risk by making a referral. The reputational loss that accompanies a failed referral is far more impactful than a small monetary gain (often $1,000 or less). To lessen–or counteract–this perceived risk, you need to do two things:
Ensure your referral program clarifies that all candidates go through your standard hiring process and that their performance outcome is independent of the referring employee.
Bump up the value of the referral (~1-2 weeks wages) and make it personal, or at the very least, provide the referring employee with a few options from which to choose (offer rewards people actually want). For example, rather than paying technicians $1,000 as a referral bonus, make their incentive personal and visible by having the local tool truck pull up and let them select $1,000 worth of tools for their personal use.
5. Open it up so that anyone in the organization can participate. According to the Society for Human Resources Management, limiting participation in employee referral programs can “increase the chance of unintentional disparate impact and may be a de-motivator if employees perceive the program to be unfair.” I tend to agree.
6. Know when and how to communicate. There are two considerations here. First, when to market your referral program to your employees. Do it long before you actually need the referral. All too often there’s a mad scramble to hire a tech on the day in which the need arises. Keep your pipeline full by having an ongoing acceptance of referrals. And second, send out or post the referral notice when your employees are most likely to read it. Monday at 8 am is the wrong time. Try later in the week and the afternoon. It is even better if you can make an emotional connection between the benefit of the referral and their personal activities for the weekend.
7. Celebrate the wins. When you hire a referral, celebrate it and make it public. Your employees won’t know that your program actually works if you don’t talk about it. Share a picture of the referring and referred (hired) employee when you make their announcement or refer to both employees in the next dealer team meeting.
8. Measure success and keep it simple. Go back to your goals and measure the result. Here are a few metrics to consider when evaluating the success of your employee referral program:
Quantity of employees hired from referrals vs. other methods
Posting open duration (days)
Cost to hire the new employee via referral vs. other methods
Retention dates of referred employees after 12 months
Opportunity cost (billed labor) of hiring a referred candidate vs. a traditional hire.
Referral programs are great, but…
While there’s no question that these programs work great to get pre-qualified candidates into your hiring pipeline, there are a few considerations to keep in mind as you implement or update your employee referral program.
To mitigate unintentional discrimination (who can provide a referral), ensure your program is open to your entire organization.
To keep biases in check, evaluate all applicants using the same criteria (behavioral assessments, structured interviews, experience, and skills).
Recognize that those making the referral are likely to refer candidates that look and sound like them. This can have an adverse effect on your organization's diversity and the long-term resilience of your team.
A well-constructed and well-executed employee referral program can help you to address technician hiring shortcomings at your dealership. When made inclusive, easy to use, and rewarding, your employees will be happy to provide you with stellar referrals.