External Referral Programs Beat Employee Referral Programs

Over time, external referral programs (XRP) will outperform employee referral programs (ERP). And that’s simply because XRPs have two distinct advantages:

  1. Referrer Reputation
  2. Referrer Network Diversity

Let’s examine these two advantages;

Referrer Reputation

Intuitively, having a formal employee referral program (ERP) seems to makes sense. After all, who is more equipped to refer great people—and sell those people on why they should work in an organization—than passionate members of an organization? However, employees, by definition, are not able to operate as a ‘third-party referrer’ which creates a “trade-off” dilemma in the mind of the employee that causes him to consider the risk and rewards of referring “wrongly” that is hard to overcome versus an external referrer.

That’s right. A motivated and confident external referrer will use the trust and credibility they have built with employers and workers to convince them to make a commitment. An external referrer program (XRP) leverages a feedback system that makes referrer reputation transparent. Being motivated to prod for a commitment and strengthen reputation are advantages that external referrers have over employee referrers.

Referrer Network Diversity

In addition, external referrers have a higher chance of interacting with others at the relevant edges of recruiting. They are able to reach out and connect into the rich referral flows which provides them with an information arbitrage of sorts that they can use to connect opportunity with others ability that might not be obvious to employee referrers. This advantage helps companies grow with diverse talent and be more adaptive.

Ultimately utilizing an XRP will get a company closer to best-fit candidates. Where ERPs are structured around organizational “strong” ties via employees, XRPs open up opportunities to support encounters with “weak” ties via referrers outside of the organization and discover talent outside the reach of an ERP. This increases the likelihood of attracting talent with access to new insights, experiences, and capabilities. Over time, many of these edge connections become part of a core network, in the process transforming that core in deep yet unexpected ways to adapt in fast-changing business environments.

Has anyone heard of an external referrer program (XRP) or something similar before reading this?

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