External Referral Program - What is it and Why You Need One

December 14, 2020
Guest Post
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Start your external referral program today with a public referral page!

Many employers know and use an 'employee referral program,' often shorted to ERP. Employees can refer someone they know to the company. If the hire is successful, the employee gets a bonus, such as paid vacation or cash reward. ERP’s in this sense are strictly in-house, and operate only within the company. But there’s another, more versatile kind of ‘ERP’ – the External Referral Program.

External referral programs have a lot of different names:

  • Community referral program
  • Non-employee referral program (NERP)
  • Bounty hiring program
  • Open referral program (ORP)

… and so on. NERP, ORP, CRP – whatever you like to call it, external referral programs are an in-and-out-of-house program that engage the community to find top talent. Now, let’s go over some External Referral Program FAQs.

Why do I need an external referral program?

Your in-house network is limited by the size of your team. But your company’s collective community - friends, families and acquaintances - is broad and varied. Let’s say a company alumnus Jeff left to start a new company. Jeff knows the perfect fit for your open product designer position. However, he doesn’t bother making a referral because your referral program is limited to employees only. You’re letting one fact - that Jeff isn’t currently employed by your company - bar a valuable introduction that could benefit your team. External referrals:

  • Foster diversity by allowing a more diverse range of people to make referrals
  • Raise the rate of referrals
  • Increase the potential of rare, highly skilled talent in your pipeline
  • Take the pressure of your employees
  • Increase your referral network by a factor of 10

What are the benefits of an external referral program?

Even a 10 person team can have a 10,000 person network. That’s 10,000 candidates. Visualize your referral network as radar, pinging candidates that are great for your team. If you stay in-house with your referral program, you limit the range of that radar to a small circle of people. Opening up your referral program to the community surrounding your company can literally 10x your candidate pool and skyrocket your referrals. Don't forget external referrals are great for diversity too.

ExternalReferral Network Effect

How can I implement my External Referral Program?

  • Add a external referral bonus to your job post, and 1000x the referrers. For every hire made, roughly 1000 people viewed the job post, according to data from Talent Function Group LLC.  A NERP adds everyone who looks at the job posting in the first place into your recruitment team – and that’s a great deal cheaper than hiring a third-party recruiting agency.
  • Publish a notice on your website or blog. Customers and business partners can be referrers, too.
  • Turn to social media. Let people know that you’re offering an incentive to anyone who can bring you that new engineer.
Ready to start your external referral program? Launch your public page today!

What companies use external referrals?

All kinds of companies. Many organizations have leveraged this strategy to maximize their pipelines. We’ve worked with (and even made referrals for) some of these companies, and seen firsthand how external referrals have helped them grow their team.

Companies that use external referrals

How they make their external referral program work:

Toast

Toast offers $10k for a successful engineer referral. They also offer $500 for business partner referrals that work with them for 30+ days.

Smartronix

In 2015, information technology company announced a NERP open to anyone and everyone, that pays up to $3,000.

Yotpo

Yotpo built their own external referrals page called the February Fifteen.

Segment

Segment made referrals a core part of their strategy to grow their team. They display a creative visualization of their referrals – a stylized, branded Referral Tree – on the walls of their office.

Appneta

Appneta’s referral program offers $1,000 to $5,000, depending on the role, for a successful referral from anyone.

OPower

OPower (before they were acquired by Oracle) had a simple and robust external referral program: “you will receive $1,000 after your referral completes 90 consecutive days of employment.”

Why shouldn’t I use an external referral program?

Our answer would be: if you want fewer and less diverse candidates. External referrals have no extra cost, are easy to implement, and only can increase your pipeline. Referrals are simple and effective, and as they say, the more the merrier. Friends, family, old classmates and business acquaintances are all people who understand your company and have networks of their own. They’re going to be a better gauge of character than a cold InMail. All companies start with a few people who know each other, and NERP’s maintain that mentality, allowing you to grow your team through organic personal networks. Your net is already wide. Cast it!

Need some external referral program inspo?

Check out 20 companies already using an external referral program to boost their hiring.

About Drafted

Our mission is to build powerful referral programs by connecting people through their network. Someone already knows your next great hire, we want to help you find them.

At Drafted, we believe that your company network is your biggest competitive advantage when it comes to building best-in-class referral programs. By using the power of your company network, we make it easy for you to leverage referrals to find and hire the best candidates. Companies that use Drafted to build their referral programs 2x their employee referrals and diversify their talent pool through community referrals.