The Downside of Employee Referrals

Every recruiter loves referrals. Nothing makes our hearts skip a beat like when a trusted employee forwards a resume of “this guy I know who may be interested in learning more about jobs here at Acme Corp”. It is a glimmer of hope amongst the onslaught of unsolicited, and unqualified, resumes that cloud our daily existence.

The sun shines a little brighter. Choirs sing. Cute kittens dance feverishly. Ok, maybe not. But it sure feels like that.

But there is a dark side to employee referrals. Like Voldemort, it is the recruiting topic that cannot be spoken about. But as the great Dumbledore once said, “Employee referrals are a beautiful and terrible thing, and should therefore be treated with great caution.” ***

So let’s do the unspeakable and discuss the downside of employee referrals:

  1. Diversity

Hiring diversity is a hot topic right now, particularly in the tech and consulting industries which are notorious for employee bases that lean heavily white (or Asian) male.

If you have always worked for companies that were predominantly white male, likely the majority of your professional contacts are also white male. Subsequently, the majority of people you refer will also be white male. Nothing wrong this and likely some of those white males are awesome candidates. However, be mindful that your employees’ referrals may not give you most diverse talent pool.

Similarly, but completely unrelated to race or gender, if your employee base leans heavily towards one skillset (say Java) they likely have a robust Java referral network. But what if your company wants to start hiring .NET developers too? Your referral network may be limited.

If your organization is already diverse across gender, age, race, and skillset, referral diversity may not be a problem for you. (And way to go!) But for the majority of us, it is a real issue.

2. Pipeline Health

I am a numbers geek. I know most of you reading this are normal people who don’t share that love. So I promise not to deep dive into the math behind referral networks.  Instead, let’s do some back-of-the-napkin math using hypotheticals:

Starting scenario: Your company has 100 employees, and they each can produce about ten quality referrals. The maximum expectation of your referral network is about 1000 candidates (100 x 10).

Best case scenario: Your company size grows quickly. More employees (let’s say 200) means more referrals. Your network maximum is now 2000 candidates (200 x 10). Great! Your referral network has grown.

Middle of the road scenario: Your company size remains the same. Your existing employees may build their networks out a bit, but it likely will not be substantial. So your network maximum is 1300 (100 x 13). Not terrible, but since it’s not growing much that well may run dry over time.

Worst case scenario: Your company downsizes to half its original size. Eventually, things take a turn for the better, and you are ready to hire again. But your employees are probably a bit shell-shocked and more hesitant to refer their friends. They refer half as many people as before. Your network maximum is now a quarter of what it was: 250 candidates (50 x 5). Sigh. Pass the tissues.

This is a very simple illustration and does not incorporate 2nd and 3rd-degree connections. But the story is the same: there is a mathematical limit to your referral network. Unless your company is growing aggressively, you may tap out your potential candidate referrals.

Our business development friends are always trying to diversify their revenue streams. Recruiters need to steal that concept and make sure they have a healthy candidate pipeline with multiple, well-developed sourcing channels.

3. Interviewing Rigor

In an ideal recruiting world, every candidate would undertake the exactly the same interview process with exactly the same steps, interviewers, and questions. As we all know, we don’t live in an ideal recruiting world. Every candidate will have a slightly different experience despite our best intentions.

It is easy with referrals to slack off in the interview process. “So-and-so referred him in. I like So-and-so. So I’ll probably like So-and-so’s referral” This unconscious bias causes hiring managers (and recruiters!) sometimes to lighten up the interview process for referrals. And, as we all know, when we short change the process mistakes happen.

 

Don’t get me wrong – I love referrals! Referrals come from your best source, your employees, and thus often make your best hires.

A strong referral program is a key piece of your candidate sourcing plan. Just make sure your employees provide diverse referrals, your other sourcing channels are healthy, and interview rigor is maintained. Now, who has some great referrals for me? 🙂

 

*** OK. Dumbledore actually said: The truth is a beautiful and terrible thing, and should therefore be treated with great caution.” – Harry Potter and the Philosopher’s Stone

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