I’ll admit right now that recruiting is not my specialty.  You find them, I’ll assess them.  However, this article in the NY Times caught my eye.  It describes how some companies are aggressively encouraging employee referrals of job candidates.  While the article focuses on how this affects those who have been unemployed for a significant period of time (those without a good network won’t get referred into a company), I’m more curious about the future performance of the person referred.

There is data that shows that candidates referred by high performers are better on the job than those who are not (see Yakubovich and Lup, 2006).  Note that it’s the good performers who are recommending the best candidates (birds of a feather flock together).  However, the companies cited in the article appear to treat all referrals the same way.  I guess it would be a logistical and privacy nightmare to reward employees differently for their referrals based on their performance level.  But, I would think it would make sense to have a two-stage system where the employee is rewarded when the person is hired and if the new hire stays on for a certain amount of time and/or performs at a certain level.

Of course, having too many referred candidates could theoretically lead to problems as employees will tend to refer and hire people like themselves (see this recent post).   Though, since the higher performers tend to refer other high performers, this might not be as big of a problem as long as you have a diverse workforce in the first place.

How can HR manage referrals better?  I would think using the two-tiered reward structure I referenced above would help.  Also, recruiters should approach high performers and ask them to refer members of their network for specific positions.  When I’ve observed experienced recruiters in assessment centers, it’s amazing how few would ask for referrals from “employees” when given the opportunity.

Lastly, track the long term performance of the referred new hires.  This will help identify if they are performing better than those hired without referrals.  Tracking them will help you define which of your employees really has the great network, so you know who the “go to” people are when you are hiring for a tough-to-fill position.

For more information on skills assessment, test validation, and talent management, please contact Warren at 310 670-4175 or warren@allaboutperformance.biz.