External Referral Programs Beat Employee Referral Programs
Over time, external referral programs (XRP) are expected to outperform employee referral programs (ERP). And that’s simply because XRPs have two distinct advantages:
Referrer Reputation
Referrer Network Diversity
Let’s examine these two advantages;
Referrer Reputation
Intuitively, having a formal employee referral program (ERP) seems like a sensible approach. 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’, which creates a “trade-off” dilemma in the mind of the employee that causes him/her to consider the risk and rewards of referring “wrongly”, which is hard to overcome, versus an external referrer.
That’s right. A motivated and confident external referrer will leverage the trust and credibility they have established with employers and workers to persuade them to commit. 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
Additionally, external referrers have a higher chance of interacting with others at the relevant edges of recruitment. They can reach out and connect to the rich referral flows, which provide them with an information arbitrage of sorts that they can use to connect opportunities with others' abilities that might not be obvious to employee referrers. This advantage enables companies to grow with diverse talent and become more resilient.
Ultimately, utilizing an XRP will help a company find the right-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 the organization and discover talent that is 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, transforming that core in deep yet unexpected ways to adapt to fast-changing business environments.
