In this post I’ll examine the prevalent belief that “the best hires come from referrals.” Is it true?

According to Jobvite’s 2011 Social Recruiting Survey, 86% of employers/recruiters say referrals are their number one source of quality candidates.

The popularity of hiring through referrals is highlighted in how at companies like Ernst & Young and Deloitte, 45% and 49% of hires are through employee recommendations, respectively. emloyee-referrals

What the research shows about referral employees

A recent study on employee referrals examined 375,000 job applicants and 75,000 employees across three industries: call-centers (sales, customer service), trucking (driving), and high-tech (engineering, computer programming, sales, customer service).

The Good

Compared to non-referrals, referrals are

  • more likely to accept job offers
  • less likely to quit
  • more productive on rare, high-impact outcomes (e.g., referred truck drivers have 10% fewer accidents, referred high-tech workers invent 25-30% more patents)

The Bad

Compared to non-referrals, referrals are

  • more expensive (e.g., referred high-tech workers earn 1.7% more)

The No-effect

Compared to non-referrals, referrals are identical in

The takeaways

So should you hire from referrals? The data suggest yes but with a major caveat.

Because referred workers tend to have similar characteristics and performance to the employees making the referral, the value of referrals comes from already having high quality employees working for you. 

It turns out the adage, “A players know other A players” appears to be true.

The main problem with hiring from referrals? It doesn’t scale. And when rapid growth is crucial to the survival of your company, you can’t waste time waiting to hire enough high quality referrals.

In addition, referrals don’t address the original dilemma of hiring A players to begin with before they can refer A players for you.

So establish a scalable, data-based hiring system first. Then invest in a strong employee referral program to supplement your hiring needs.

Like this article? Check out my series on Why Hiring is Broken.

Share on LinkedInShare on FacebookTweet about this on TwitterShare on Google+Email this to someone
Ji-A Min

Ji-A Min

Head Data Scientist at Ideal
Ji-A Min is the Head Data Scientist at Ideal. With a Master’s in Industrial-Organizational Psychology, Ji-A promotes best practices and data-based HR. She writes about trends and research in talent acquisition, people analytics, and workplace diversity.
Ji-A Min