The Pros And Cons Of Recruitment Via Referrals

Seana Donnelly, a Talent Manager at Progeny, a B Corp Certified business, explores the pros and cons of recruiting by referrals.

The HR world loves a catchphrase and the latest appears to be ‘nepo-workers’. This was coined in reference to recent research which shows that two in five British workers have gained a job through a personal connection.

Nepotism in its true sense refers to favouritism of relatives or close friends and should obviously have no place in any recruitment process. However, it appears that the ‘nepo-workers’ label is being applied more broadly in reference to people who had got a job, or job offer, based on being referred to an employer through someone they know.

Despite the new buzzword, itseems to be nothing new, with LinkedIn research showing 85% of all jobs were filled via networking back in 2016.

In this article we’ll explore some of the pros and cons of recruitment via referrals and how companies can help overcome some of the potential pitfalls and challenges.
Efficient recruitment

If current employees recommend someone they know
for a role at their workplace, then there’s already an element of informal pre-screening, meaning there’s a much higher chance they’ll be suitably qualified and that their preferences and values will be compatible with those of the business. The natural drop-out rate during any recruitment process is also likely to be reduced for employers by the fact that prospective candidates are able to do their own research on a potential new employer by chatting with their friend or contact who already works there.

Formal referral programmes are common practice and incentivise ‘recommending a friend’ with some kind of reward. Businesses often find this a quicker and more cost-effective recruitment avenue than employing an external agency, with data from Jobvite showing that employee referrals have by far the highest applicant-to-hire conversion rate and nearly 70% of employers said the recruiting process was shorter.

However, it’s vital that referrals are taken through the same formal screening and recruitment process as any other candidates to help avoid biased recommendations, where an employee just wants to work with their friend, or any accusations of unfair advantage or favouritism. Referrals should simply be seen as a way of getting good quality potential candidates through the door and not as a shortcut to any other standard processes.

Consider diversity

Recruitment via referral may have many benefits, but evidence also shows that it can negatively impact diversity and inclusion, since people have a tendency to network with and refer people similar to themselves.

Whilst this is great for tapping into a qualified talent pool, research from Payscale showed that for every 100 referred employees, 44 will tend to be white men, 22 will be white women, 18 will be men of colour and 16 will be women of colour. This means that companies that already have poor diversity figures are likely to simply replicate this issue via referrals.

Recruitment teams therefore need to have a keen eye on referral data and put mechanisms in place to help increase diversity via this channel if required. This could include bigger bonuses for referrals from underrepresented groups or encouraging employees to reach beyond their immediate networks, such as professional groups they may be members of on LinkedIn for example or third party suppliers. A LinkedIn case study from Pinterest revealed that simply asking your employees for more diverse referrals can be effective, with a specific request resulting in a 24 percent increase in the percent of women referred and a 55 percent increase in the percentage of candidates from underrepresented ethnic backgrounds.

Broaden your horizons

It’s not just employees that can extend their networks - companies can to. By getting involved in their local communities via outreach activities such as volunteering, working with schools and colleges or regional professional networking groups, they can help build connectivity and advocacy with a wider demographic. Sponsoring local sports teams or events can also be effective and many firms select a corporate charity to support.

Coupled with an active social media presence, firms can encourage engagement with a much more diverse community for potential referrals, as well as giving something back to their local area.

In summary, referrals are likely to remain a staple part of many firms’ recruitment strategies and there is nothing wrong with this as long as businesses remain aware and work to mitigate the limitations and potential drawbacks of that particular approach.