What is a Referral Network?

Aubrie Przybysz
Marketing at Drafted

Do you ever hear a term thrown around and think to yourself what does that mean? Maybe that’s a thought you had when you’ve heard the phrase Referral networks. Referral networks are an important source of hiring for every company, if not one of the most important sources to nurture. Let’s take some time to unpack this term and set a clear guide for leveraging referral networks in your hiring to keep you on top of the biggest trends being adopted by the most competitive companies.

To give you a better understanding of what hiring through a referral network means, take the next sixty seconds to watch the video below.

Now let’s start in a place you might be more familiar with and that’s the fact that referrals make the best hires.

Referrals make the best hires

If we agree referrals make the best hires, then we should talk about where they come. That’s what really matters.

To keep it simple -- referrals come directly from people currently working at your company and people outside of your company. They’re typically categorized as internal referrals and external referrals. 

A nice statistic to help visualize this -- 60% of hired referrals originate from inside your company and 40% of hired referrals come from people outside your company.

How does this shape up exactly?

Every person at your company has professional connections. These connections include past colleagues, business contacts, advisors, or investors. They also have social connections which include schoolmates, friends, family, clubs, etc. It’s safe to say they know a lot of people. A lot more people than those handfuls of connections that are always top of mind, like friends or colleagues.  

By combining these two separate connection groups, the professional and the social, a person’s referral network is created. If you go one step further to combine those individual networks into one greater network, you are left with the true referral network of your entire company. The sum of all networks. 

The referral network becomes your community. Every company has a referral network. Even small companies can have a large referral network. 

Tapping into your referral network

Since every company has a referral network there are things you can do right now to find your next potential hires. Here are three steps to help you begin to tap into this network.

1. Proactive referrals instead of reactive referrals

Reactive referral

Recruiter: Who do you know that could be a good fit for our open marketing role?

Me: Um, let me think. Not sure if I know anyone.

Proactive referral

Recruiter: Aubrie, I see you went to college with Andrea (link to her LinkedIn). I think she could be a good fit for our open marketing role and would like to talk to her. Could you make an introduction?

Me: Sure! Andrea is great and I would be more than happy to make an intro and reach out to tell her a little bit more about what we do.

See the difference? One is a snap decision, the other requires much more work for the desired result. 

2. Start a referral program outside your company

Reward your community for contributing to your referral program. 

Internal vs external referral programs look something like this. An internal referral placed hire is rewarded with a $4k bonus whereas an external referral bonus is $1k. It can also be the same as an internal reward to keep things simple. Referral rewards don't always need to be monetary either. Some companies use E-gift cards to reward an external referrer. Nothing says thank you like a $500 Amazon gift card. 

3. Invest in your referral network

Invest part of your hiring strategy and your focus on your referral network. 

Leverage the combined networks of people at your company and beyond to help create more conversations with candidates. Your referral network is going to give you warm introductions and stronger leads to the best kinds of hires.

Arm people inside and outside your company with tools to help them unlock their networks. If they can easily match up their connections with your open jobs to help them judge who they can refer, it will help them knock down a major barrier. Making referrals to a company, whether or not you work there, should be simple and straightforward. 

The virtuous cycle

Referrals create a virtuous cycle. Referrals lead to better hires which create happier teams and a great culture that fosters more referrals.

The virtuous cycle

The same can be said about community-based, external referrals. They help amplify the virtuous cycle. 


A referral network is a highly valuable recruiting tool that you can tap into to help boost quality hires while contributing to the internal and external perception of your company. With more people outside of your company talking positively about your job opportunities and sharing with their network the reason why they recommend your company, the greater the potential pool of candidates becomes. Since referrals are one of your best, highest converting sources of hires -- a dedication to creating and maintaining your company referral network is key. Focusing on understanding how to leverage your referral network, the collective networks of people inside and outside your company, will give you a leg up when competing with other companies vying for the same talent. Once you shift to a proactive referral program structure with a clear plan for rewarding all referrers, the virtuous cycle created by the investment you're making in your referral network will only lead to more of your best hires. 

About Drafted

Your company network is your biggest competitive advantage when it comes to building best-in-class referral programs and making great hires.

Create your free account to join companies like Better.com and Karat who use Drafted to power their referral hiring.