Four Reasons to Invest in a Corporate Alumni Network

September 1, 2014

We all know co-workers who have left our company. Imagine if there were a structured way to stay in touch and get more out of our relationships with them. Reid Hoffman offers a way to do this in his latest book, The Alliance . Reid and his co-authors,  Ben Casnocha  and  Chris Yeh , share why creating a corporate alumni network will strengthen your recruiting and talent brand, network intelligence gathering, and customer referrals.

The Mutual Benefits of Lifelong Alliance

LinkedIn. Tesla. YouTube. Yelp. Yammer. SpaceX. What do all these companies have in common?

They’re not just examples of innovation and mas­sive financial success. All of them were founded by the alumni of a single company: PayPal.

Lifetime employment might be over, but a lifetime relationship remains the ideal, and as the alumni of PayPal know better than anyone, it can be extremely valuable. Unlike the free agency model, the alliance can and should persist even after an employee’s final tour of duty. Typically, both company and employee aren’t getting as much as they could from a strong corporate alumni relationship. As you’ll see, despite evidence of pent-up demand for stronger alumni re­lationships, few companies have a good strategy for maintaining a relationship with former employees. Conversely, few of the alumni themselves realize how helpful a former employer can be to their career.

Establishing a corporate alumni network, which requires relatively little investment, is the next logi­cal step in maintaining a relationship of mutual trust, mutual investment, and mutual benefit in an era where lifetime employment is no longer the norm.

To maximize the benefits of the corporate alumni network, a company should clearly articulate the bi­directional value both parties get from the continuing relationship. Fortunately, this isn’t a difficult task. Em­ployees clearly want an alumni relationship. LinkedIn (the service) now hosts over 118,000 corporate alumni groups, including 98 percent of the Fortune 500. Yet surprisingly, most of these alumni groups have little to no relationship with their former companies.

In fact, the majority of alumni networks that do exist are run completely independently from the com­pany. A study from the University of Twente in the Netherlands showed that while only 15 percent of the companies surveyed had formal alumni networks, an­other 67 percent had employees who independently organized informal alumni groups. Think about that—alumni want to connect so badly that they are spending their own time and money to set up these networks.

The value to both parties can be much greater when a company actually contributes to its alumni network.

Here is why creating and main­taining alumni networks is a compelling proposition and key element of the alliance:

1. The Alumni Network Helps You Hire Great People

The first way an alumni network helps with hiring is making it easier for “boomerang” employees to return for another tour of duty after an absence from the company. Boomerangs are uniquely valuable because they offer an outsider perspective combined with an insider’s knowledge of company process and culture. An ex-employee will be more interested in returning if the company stayed in touch and maintained a rela­tionship in the interim. As the saying goes, Dig the well before you get thirsty. For example, the Corpo­rate Executive Board reports that rolling out the CEB Alumni Network doubled the firm’s rehire rate within two years.

Chevron takes things a step further with its Bridges program. Chevron alumni can sign up to be consid­ered for specific contract assignments. It’s an obvious win-win. Alumni get consulting opportunities that might turn into full-time gigs; Chevron gets a highly qualified pool of potential consultants whom it knows are a good cultural fit.4

Alumni can also refer great candidates. Given the cost of professional recruiters and the value of a vetted job candidate, soliciting alumni referrals ought to be a best practice. For example, companies ranging from consultancy Deloitte to payroll giant ADP offer cash bonuses to corporate alumni who refer successful can­didates. Beyond simple referrals, corporate alumni can help with reference checks and judging cultural fit, even when they don’t directly source the candidate.

Finally, the very presence of a properly implemented corporate alumni network can help an employer close great candidates. Candidates don’t need to guess what impact one or more tours of duty might have; in­stead, they can simply use alumni as surrogates to get a sense of whether they’d like the job. The fact that McKinsey alumni have gone on to lead hundreds of billion-dollar companies helps illustrate the benefits of joining the firm. 5 Does McKinsey remind prospective employees of this fact? Of course they do.

Recruiting great people is expensive. An alumni network that generates just a few hires a year is easily worth six figures on hiring value alone.

2. Alumni Provide Useful Intelligence

Alumni are a great source of network intelligence—competitive information, effective business practices, emerging industry trends, and more. Not only do they have knowledge of the outside world that a company’s current employees do not, they also understand how the organization works.

Simply conducting regular polls of alumni using stan­dard questions can unearth key nuggets of information, such as how the company is perceived as an employer, competitive intelligence and industry trends, and point­ers to potential customers. At LinkedIn, reports and rumors about emerging technologies like WhatsApp are taken more seriously when they come from former employees than from random commentators.

Finally, alumni provide a much-needed outside per­spective. Companies find it all too easy to drink their own Kool-Aid; alums can have both the necessary objectivity and the respect and trust of the company to be listened to when they point out uncomfortable truths. For example, an alum who tests the beta ver­sion of a new product is more likely to offer honest feedback than a current employee.

3. Alumni Refer Customers

Alumni can become customers or refer customers, especially when incentivized to do so. Implementing formal incentive programs for alumni can require a bit more paperwork and process—no financial soft­ware includes an out-of-the-box “alumni rewards” module. But the value can be enormous, and even small steps like giving out high-end swag as a reward can help.

Business-to-business (B2B) and business-to-consumer (B2C) companies will generally adopt different ap­proaches. A single B2B customer might represent mil­lions in revenue (remember those ex-McKinsey CEOs who hire their old firms?), whereas a single B2C cus­tomer might be worth a small number of dollars. B2B firms should incentivize direct customer introduc­tions, while B2C companies should focus on encour­aging influencers.

4. Alumni Are Brand Ambassadors

Your company’s brand is no longer fully under your control. Spending money on advertising campaigns can drive awareness, but buzz emerges from grass-roots interest, especially on social media. Corporate alumni can help in this regard, especially if they out­number a firm’s current employees. They also have the advantage of being third parties and thus are per­ceived as more objective. They’re not getting a pay­check to tweet. If they promote a product or initiative on social media or respond to the tweets of customers or prospects, alumni have credibility that current em­ployees simply can’t duplicate.

In sum, the more a corporate alumni network strengthens the company’s brand, the easier it be­comes to leverage that network for hiring, network intelligence, and customer referrals.

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