Workplace Diversity: The Unintended Downsides of Employee Referrals

In comparison to recruiting through conventional job boards, employee referrals are considered by many to be one of the best (and cheapest) sources of quality hires. Companies benefit from having their hiring cost cut down, while candidates obtained through referrals are usually better cultural fits as well. Much like dating, there is advantage and convenience in having your friends set you up with someone they already know – an old-fashioned blind date, if you will – as opposed to the modern love-hunt where you anticipate a perfect match by swiping through a vast list of imperceptible “candidates”.

There is nothing wrong about the latter method. In fact, relying too much on referrals comes with unintended consequences that employers must be aware of – like diversity. Though beneficial in many ways, employee referrals are not always a sure win for companies. Let’s find out why.

Unconscious Bias & Unfairness

Referrals can be seen as an invitation to nepotism and favoritism. This is due to the fact that, well… you’re literal pals with the candidate. The thing with biases is that they’re never easy to detect. While it’s possible to put your referred friends or family members through the same hiring process to ensure fairness, there is no guarantee that favoritism won’t get in the way. In most cases, referred candidates have indeed a higher chance of being interviewed, selected, and eventually hired.

Formation of Cliques

Employees usually refer candidates similar to themselves, such as people they attended the same school with, from the same hometown, people they like to hang out with, and so on. These candidates are strong cultural fits as they come in with a social connection that is already present. But while there is nothing wrong about having your friends as fellow coworkers, these “exclusive” relationships can make employees outside of the clique feel alienated and left out. And that, in the long term, is just bad for team morale and business.

Lack of Diversity

A study by Payscale revealed the harsh reality that referral hiring tends to benefit white men more than any other demographic. Holding all else equal, women of color fare the worst and are 35% less likely to receive a referral. Recruiting employees that are very much alike can contribute to consistent workmanship that may actually profit particular industries. However, when you have a homologous team comprised largely of the same backgrounds, personalities and even thought patterns. not only can it jeopardize your diversity efforts, but you’ll also lack the capacity to truly innovate within your company.

The Wrong Fits

We all like to discover shortcuts to make our lives easier; referrals allow us to skip through hurdles and get to someone in a much quicker fashion. The only problem with this generally good practice is that this “someone” may not always be the right fit for the job. As referral bonuses are typically given out internally to employees, there will be people taking advantage of the reward by referring (1) too many candidates who may not even be qualified, and (2) people they only casually know as an acquaintance. It is your duty as a recruiter to appropriately screen, filter, and test the candidates regardless of how they ended up on the hiring board.

There are tactics and strategies for companies to create an employee referral program that works. Though this post focuses mainly on its downsides and risks, it isn’t to discourage you from hiring a friend or a relative. Check out our other blog here on the effectiveness of referrals and what you can implement to strengthen it!