Employee Referrals, The Ugly Truth

Employee referrals are often lauded as the most effective and successful way to hire. On the surface the stats on look pretty compelling; referred employees stay longerproduce more profit, and get up to speed faster. These stats are so compelling that the general consensus is that referrals are a cheaper way to hire, a faster way to hire, generally produce better results and lowers the turnover rate at your company. But referred candidates have an unfair advantage, and it’s called empathy.

The stats don’t stack up

Here’s the rub; referred candidates are 3-4 times more likely to be hired than non-referred candidates. But have we ever stopped to ask why? Are referred candidates 3-4 times more suitable, intelligent or credible than non-referred candidates? Clearly not. Other than marginal gains in the levels of interview preparation and insider knowledge, there is little to suggest this would correlate to 3x or 4x interview success rate.

So what’s going on?

The problem is that most people hire with empathy. And according to Paul Bloom, a professor of psychology at Yale, empathy leads us to bad decisions. With a referred candidate there’s a quicker route to empathy, you have a common connection and because we empathise more with them, they have an irrational and unfair advantage over other applicants.
Racist biases show up tremendously in who we feel empathy for.‘ Paul Bloom
We feel a lot less empathy for people who aren’t in our culture, who don’t share our skin colour, who don’t share our language. It’s a terrible fact of human nature, it operates at a subconscious level, but we know that it happens. There’s dozens, probably hundreds, of laboratory experiments looking at empathy and they find that empathy is as biased as can be. Lauren Rivera, a sociologist at Northwestern University, spent three years studying the recruitment practices of global investment banks, management consultancies and law firms, which spent millions of dollars on apparently objective processes to secure “top talent”, and concluded that among the most crucial factors in decision-making were “shared leisure interests”. Squash players hired squash players. Golfers hired golfers. Why? Empathy.
Assessors purposefully used their own experiences as models of merit,” Lauren Rivera

False Assumptions

It’s not only hiring that suffers from the irrationality of empathy, “Companies who use employee referral programs report average retention rates of 46 percent“, compared to the 33 percent of people hired through career sites and 22 percent hired through job boards. This data leads us to the false assumption that referred candidates are also better quality hires. Not necessarily. Referred employees are more likely to stay because of their unwillingness to disappoint their internal sponsor. It also follows that the company would be less likely to fire someone because of the empathy they have with the referrer; firing one will upset the other.  

Hire slow, fire fast

In my experience the conventional wisdom to “hire slow, fire fast” seems to go out of the window when it comes to employee referrals. They often get fast-tracked, prioritised and offered positions without as much due diligence or consideration for team fit. Empathy is doubly bad for companies; on the one hand it makes it easier to hire someone who won’t fit, on the other it makes it more difficult to fire them. The reason why recruiters strongly favour referrals over non-referrals is that good recruiters typically have high levels of empathy. To be good recruiters we have to understand people and build rapport. In other words we need to have high cognitive empathy.  It’s what makes us so good at understanding candidates and selling job opportunities.

Hiring with compassion

I’m not saying referral programs are bad. An employee’s willingness to refer their friends is often an indicator that you have a good culture. It’s just that referred candidates are at an unfair advantage to non-referred candidates who have no immediate empathy path with the hiring manager. Their odds of getting the job are increased, irrationally so. A great recruiting plan is diverse. It doesn’t rely on referrals. It builds bridges with talent communities. It considers all talent to be equal. Instead of hiring with empathy and falling foul to irrational behaviour, I encourage you to embrace hiring with compassion instead.
“We are much better off if we give up on empathy and become rational deliberators motivating by compassion and care for others.” Paul Bloom
At the heart, this was the basis from which we decided to build ThriveMap, an empathy-free (!) software tool that surfaces insights on how people like to work to enable better hiring decisions. ​These insights are independent of age, race, gender and most importantly empathy. Objectively measuring team fit in this way allows us to make hiring decisions that may contradict our natural empathy.

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