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Posted by Lisa Farrell, Marketing Manager on Jul 28, 2020 4:59:33 PM

Referral recruiting is touted as a panacea for empty talent pools across all industries and sectors. But are referral programs really an effective way to find the best talent? Like anything that seems too good to be true, there are hidden drawbacks. Your employees may give you hundreds of candidates to nurture in your pipeline, but are those individuals the right talent for your company?

Diverse companies perform better than their non-diverse peers. In fact, one study showed that companies with a diverse workforce enjoyed 19% more revenue. But basing your hiring decisions primarily on referrals could prevent you from reaping these benefits. The research shows that traditional referral programs tend to primarily benefit white men. And these kinds of programs may actually perpetuate bias and limit diversity in your organization.

Although it’s a time-honored way to boost your talent pools, referral-based recruiting might be a legacy process that’s actually hurting your bottom line. Here’s how.

Network-Based Hiring Promotes Affinity Bias

Most personal networks are built on affinity and similarity, such as who you went to school with or who lives in your neighborhood. Hiring decisions based on referrals can result in a lack of diversity, which eliminates the friction and conversations that lead to meaningful change. “People tend to stick to their groups,” says executive support professional and DEI specialist Aaisha Joseph. “There’s not a lot of room for diversity.” If you ask a homogenous workforce for referrals, you’re likely to keep hiring people with the same backgrounds and experiences as your current workforce.

“If your workforce doesn’t reflect the workforce that you want to attract, then it’ll be really difficult to refer individuals from underrepresented groups into the company,” says Desiree Booker, principal consultant and career strategist at ColorVizion Lab. “Having a referral system can really augment your recruiting efforts, but you should be conscious about where you’re getting your talent from.”

Consider restructuring your referral network to intentionally recruit diverse candidates. Focus on building diverse talent first, and then promote your referral recruiting program once your numbers reflect your consumer demographic. Or take it a step further and work to build diverse relationships within your organization. Setting up a mentorship program between employees and students at your local HBCU, for example, can both increase and diversify your talent pool.

Privileging Referrals From the Top Distorts Objectivity

Referral recruiting can skew hiring towards more subjective criteria. Referrals from top level executives are often weighted more heavily than other, more objective factors, like skills, experience or qualifications. In many cases recruiters have been implicitly required to give candidates recommended by higher-level leaders and top executives preferential treatment — whether they’re qualified for the role or not, Booker points out. “There is an issue of the quality of the hire,” she says.

Frequently employers will open up a position to accept applications — often to avoid charges of favoritism — even though they already have someone in mind for the role. Qualified candidates who apply for that role are automatically passed over, Joseph points out. As a business relying on a skilled workforce, practices that privilege referrals over objective skills damage your bottom line.

You can accept referrals as a means to grow your talent pool without giving those candidates an unfair advantage, though. Consider implementing a blind referral program just like you might blot out names or other arbitrary factors that increase bias. This allows your recruiters and hiring managers to focus on objective, job-related skills — not who made the referral.

Putting Connections First Erodes Engagement

Placing too much weight on referrals can impact your existing workforce. Employees who earned their role may feel betrayed if someone gets a position largely because of a referral. This is especially true for diverse employees, who often have to work harder to achieve the same goals as other employees at your organization. This can impact overall engagement, productivity and even retention. Your employees will know when someone isn’t qualified for the role, Joseph points out, and they’ll talk about it.

This is extremely damaging for your employer brand, too. When employees feel like they’ve been treated unfairly, word spreads quickly. “Are you positioning yourself as an ideal employer to people of color or the LGBTQ+ community, for example?” Booker asks. Privileging internal referrals over more qualified candidates signals that you value culture fit — which often translates to conformity — over quality.

Consider restructuring your referral program rewards to incentivize skilled and diverse talent. “There needs to be a restructuring of the process,” Joseph says. “Don’t tie an incentive to just finding a person.” You might consider distributing rewards based on how well the referred employee performs, for instance, or how they further the organizational mission — not just for getting them in the door.

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