Inside Referral Candidates: Birds of a Feather & All That Fluff

Two of the worst interviews I can recall in my recent history were both referred from one of my most successful, highest producing employees. Both candidates were abrasive, arrogant, and unfriendly, and neither interview lasted very long. At first the disparity between the unpleasant applicants and the accomplished referring employee left me somewhat perplexed. But later as I tried to make sense of the situation, it struck me that although incredibly knowledgeable within the industry and very successful with sales and negotiation skills, the referring employee could at times be pompous, whiney, abrasive… hey, wait a minute…

My star producer, from what I recall, was appreciably more personable and engaging in the very first interview. Any arrogance at that time was splendidly portrayed as professional confidence, and the bold demeanor that promised certain profitability and increased sales numbers never seemed to cross over from assertion to aggression. I felt very good about that interview. Even now, despite the occasional whining and some intermittent neediness, it doesn’t take the last six years’ worth profits to see that this hire was still the right choice.

So did I make the wrong decision not to consider hiring the other two? In my gut, I don’t think so. Regardless of how these candidates happened upon the recruiting desk, neither one demonstrated a personality that seemed it would fit into the “plays-well-with-others” category. If abrasive arrogance was what a candidate represented on their best-foot-forward first impression, what kind of demons would bubble to the surface after the honeymoon? (insert scary psycho movie music here). What if, instead of intermittent neediness, the employee providing the referral has won the “mediocre worker of the year” award four years running? Birds of a feather, etc. etc. (insert repetitive tune of dreary mediocrity here).

Despite these experiences, referrals remain a wildly successful, and often lucrative, recruiting method in many companies. In a late 2008 employer study conducted by World at Work, 66% of responding employers reported that a referral reward was their most widely distributed type of retention-based bonus (http://bit.ly/1epKSc).  And the referral bonus spigot apparently just keeps flowing. In a 2008 HRWorld.com article citing data for such firms as Nortel Networks, Ernst & Young, IBM and Intel, referring a new hire could fetch you anywhere from $350 to almost $5000 or more (http://bit.ly/1cfxTc). Sounds expensive to maintain. But given a median of a $50k starting salary, and an average 20% fee for a headhunter’s cut invoiced at $10k, that referral expense just became a savings. Seems like the referral system fans all have some serious jingle to sing about (insert Vegas slots cha-ching sound here).

But there is a risky, and potentially rather costly, downside to employee referral programs, as the Illinois meat processing firm Carl Buddig & Co. discovered in 2004 (http://www.eeoc.gov/press/9-7-04.html). The company had a regular practice of sourcing most of its new hires through its employee referral program. But an inherent problem that even the EEOC has identified with referral programs is that most people refer candidates who are similar to them, and usually along racial lines. In the Buddig case, the large majority of non-minority workers referred similar non-minority candidates, resulting in significant disparate impact in its low percentage of minority hiring. Buddig claimed that it was simply selecting its candidates from its referral pool, and that any discrimination was unintentional. But the EEOC doesn’t often consider intention when the disparity of impact is evident, and this discrimination lawsuit was settled for $2.5 million (insert more scary music here, with a scream for good measure).

So, can employee referral programs work? Absolutely they can. When wisely monitored and used in conjunction with a well-planned recruiting and retention strategy, referrals can be instrumental for finding highly specialized and highly desirable candidates, often at a noticeable savings to the recruiting budget. Not a bad feather for the HR cap.

In my next post, I will be taking the referral logic one step closer, to discuss the pros and cons of referring family into the workplace.

Nanci Lamborn – BrightMove Blogger/Writer

World at Work article reference (http://www.worldatwork.org/waw/adimComment?id=30574) reprinted with permission.

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