The case for finding employees via referrals

Laura Price

Imagine that your best friend likes to buy used cars on Craigslist. He drops about $9,444 on each car, and 62 percent of the time, they break down within a year. Still, your friend keeps buying the same type of car from the same place and gets the same results.  

You might call your friend crazy, but this is exactly how many restaurant managers hire. It’s no surprise, then, that the NRA estimates turnover at restaurants is a whopping 62 percent (versus the national average of 40 percent). The price of that turnover adds up: the average cost of losing an $8 per hour employee is $9,444, according to the Houston Chronicle.

Unfortunately, hiring managers often feel that they have no choice but to use the same job boards again and again and hire rapidly…because they needed someone yesterday.  

The main difference between my used car example and reality is that the cost of turnover is invisible in restaurants. You, as a restaurant manager or owner, might pay $50 up front to post a job opening and hire someone, but you won’t see the cost of turnover when that person walks out the door three months later. No one writes a check for turnover. So rather than spending $50 to lose $9,444, what if you offered your best employees $50 each time they refer someone to your restaurant who actually wants  to work with you?

Today, only 7 percent of job candidates are referred, yet referrals account for 40 percent of hires, and they are hired 55 percent faster than the average candidate. Compared to job board hires, referrals are far more likely to stay in a job: 47 percent of referrals will be around in three years, while only 14 percent of job board hires will remain.

The discrepancy between job boards and referrals makes sense. People trust recommendations from friends and acquaintances more than the generic job descriptions they read online. When friends tell a referral about how much they love working in your restaurant, that person will be excited to get hired.  

He or she will begin working with the mindset that the job is a valuable opportunity. Having a friend in the business will also help referrals fit in socially and culturally, and if problems do comes up, new hires can rely on their friends/coworkers for help.   

Moreover, referrals will think twice about leaving a job when a friend provided the opportunity. During a rough week or month, employees sometimes jump ship, believing that the restaurant is the problem. Referrals will feel social pressure to power through because they don’t want to tell a friend, “Hey, the last two weeks were terrible so I’m going to leave this job, even though you stuck out your neck and advocated for me.” Instead, they will approach the situation with more perspective.  

So let’s return to the $50 plus $9,444 question. You can spend $50 to post a job, weed through hundreds of unqualified applicants, hire and train someone, and then watch him or her walk out in three months.  

Or, you could offer that $50 referral bonus to loyal employees and hire candidates who are primed to appreciate your restaurant and have a social stake in sticking it out. It’s not a difficult choice; but once you higher referrals, how do you encourage them to stick around? The answer is give your A?team an offer too good to pass up.

Typically, this means enrolling them in continuing education or management training programs, and then providing a clear pathway for growth in the organization. Much like startups that offer key employees equity, I would not be surprised if restaurants began offering ownership or performance-based bonuses to employees who play a leadership role. If you’re trying to grow any business, it pays to have people who are as invested in growth as you are.  

As the owner of Pittsburgh’s Bar Marco said when asked about his decision to offer a salary and benefits to full-time employees, "America needs to realize that working in the restaurant industry is an occupation."

I wholeheartedly agree, and I believe referrals will help transform restaurants into places where people can build careers. The high turnover job board system currently cheapens the importance of employees, who in turn devalue restaurant jobs and feel free to move between them opportunistically.

So if your goal is to retain loyal, effective restaurant employees, find the right people with referrals, then keep the right people with a long-term career path. Stop spending $9,444 so you can lose it all over again.  

Laura Price is senior content manager at HotSchedules.