The Ups & Downs of Hiring an Employee’s Friends

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referred candidates have better chancesIt’s not news that being referred to a company by a current employee will help you land a job. But in this era of LinkedIn, Facebook and highly visible professional networking, the pervasiveness of this practice is raising some concerns.

Across the board, the percentage of new hires that come through their current employees’ network is increasing at an unprecedented rate.

Employee recommendations account for 45% of non entry-level placements at Ernst & Young, compared to 28% in 2010, according to The New York Times. The same article states, “Referred candidates are twice as likely to land an interview as other applicants,” and that “for those who make it to the interview stage, the referred candidates had a 40% better chance of being hired than other applicants.”

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For the job seeker, applying through a contact helps ensure your resume makes it through the bottomless pit that is the jobs@company.com inbox and lands on the right desk. For the current employee, it might mean a decent referral bonus.

And companies like it, too: It’s less expensive, more efficient and often, more fruitful. A steady flow of referrals means less money spent on expensive recruiters, less manpower spent going through slush piles of resumes and interviewing unimpressive candidates and, according to the article, referred employees are 15% less likely to quit.

But what if you’re not a part of one of the aforementioned parties? There are currently three times as many US workers who’ve been out of work for 27 weeks or more than there were in 2007. And since the recession, the average length of unemployment has jumped from 17 weeks to 38 weeks. When you’re out of work that long, your network naturally gets weaker and contacts become less likely to feel confident referring you. This makes it much more difficult for people to re-enter the workforce.

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In fact, referred candidates are so much more desirable that some companies have even created specific departments within their recruiting teams to manage incoming leads. Meanwhile, those who apply on their own, through sites like Monster.com or otherwise, have a different reputation. An HR expert quoted in the Times article refers to them as “Homers,” after the lazy Homer Simpson.

However, while hiring through referrals may be more efficient, it’s not necessarily the best for business. Just like other aspects of life, people are more likely to refer people who are like themselves. Check out these stats: “63.5% of employees recommended candidates of the same sex, while 71.5% favored the same race or ethnicity.” In other words, like begets like, and in the long term, that can lead to a serious drought of necessary skills.

All good things to keep in mind regardless of what side of the job hunt you stand.