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Do Employee Referrals Hurt Diversity?

employee referrals

Our 2016 recruiting benchmarks report confirmed what we all anecdotally already knew: Referrals are gold. Just how gold? An average of one in every 16 referred candidates is hired, compared to one in every 100 candidates across all sources. To put it another way, if a recruiter’s pipeline was filled only with referrals, that recruiter would be able to make six hires for every one hire made by their peers.

employee referrals

Referrals have also been shown to have a faster time to hire, lower cost per hire, and higher retention rate compared to other candidate sources. Naturally, smart recruiters want as many referrals as they can get, and therefore invest a great deal of time and effort into strengthening their employee referral programs.

The more referrals the better, right? There’s one catch: People gravitate towards – and therefore refer – people who are similar to themselves, meaning a hyperactive referrals program can have the unintended effect of reducing a company’s diversity. Friends refer their friends until you have a company that looks like the image on the right, instead of the one on the left.

employee referrals

It’s how a startup with a founding team of men ends up hiring early employees who are overwhelmingly also men, or how the first people to hear about an executive opportunity at a new company are the ones with fellow executive friends. (Only 14% of the top five leadership positions at the companies in the S&P 500 are held by women.)

These scenarios are natural, but preventable side effects of the fact that a person’s closest connections usually have a similar set of educational, professional, and personal experiences as themselves.

That doesn’t mean, however, that you should pump the brakes on employee referrals in the name of diversity, but rather that you should be deliberate about the way you scale them. Here are five ways to preserve, and even grow diversity at your company as you increase employee referrals:

employee referrals1. Ask for diverse referrals

Have you ever seen a “These come from trees” sign when you’re washing your hands in a public restroom, and used fewer paper towels because of it? This simple sign in one restroom can save a tree’s worth of paper every year, because all that most people need in order to make an environmentally friendly decision is the reminder.

The same simple solution can be applied to referrals. In order to refer diverse candidates, employees need to be reminded that it’s a priority. Whether you encourage employee referrals through company-wide announcements, in one on one meetings, or another way, make a specific point ask for diverse referrals. You can ask directly, “Do you know anyone who belongs to an underrepresented group?” This low-effort nudge to get employees thinking about diverse candidates who may extend beyond their closest connections can go a long way.

employee referrals2. Vet referrals as much as you vet other candidates

Referrals often have an advocate inside the company, which might expedite how fast you screen their resume, but it shouldn’t make you go easier on your evaluation, giving them a leg up over candidates who apply. To avoid discrimination against candidates who aren’t referred, vet all of your candidates equally, regardless of source.

employee referrals3. Let non-employees refer

Why limit your employee referrals program to employees only? By broadening eligible referrers to spouses, former employees, friends, and even the general public, you expand your network and broaden your referral candidate pools.

Some companies offer a financial incentive for referrals who are ultimately hired, but this could potentially lead to lots of noise and candidates in your pipeline who are not a fit. If you find that that happens, consider removing the reward and seeking referrals from people who are genuinely looking to help out a friend.

employee referrals4. Make your commitment to diversity known

Referrals come in many shapes and sizes. Sometimes, your current employees do the reaching out, and sometimes it’s the other way around. By making your commitment to building a diverse team known, you increase the chances of the latter: diverse talent proactively reaching out to you. Additionally, if you do have an open referrals program where anyone can refer great candidates, your public stand on diversity can encourage people to get involved.

There are many ways to spread the word about your diverse and inclusive workplace. Empower diverse talent to share their experiences (at Lever, we do this via our company blog, Inside Lever), highlight diversity as a value on your company careers page, speak at events, host meet-ups, and even hire a head of diversity and inclusion who can focus on these efforts full time.

employees referrals5. Pair your referrals program with a candidate sourcing strategy

If you’re still struggling with hiring diverse employees through a referrals program after the efforts above, it doesn’t mean that diversity at your company has to suffer. There are other ways to find diverse talent. A <candidate sourcing strategy, for example, is the best way to take control of who is in your pipeline. Instead of waiting for diverse candidates to come to you, you can come to them.

Your referrals program can hurt diversity at your company, but only if you let it. Scale referrals with intention and make hiring for diversity a well-known priority at your company to make sure a well-intentioned program doesn’t hurt you down the line.

For tips on scaling an employee referral program, read our post, 9 Tricks to Put your Employee Referral Program into Overdrive.

Kiran Dhillon is the content marketing manager at Lever, the hiring software firm that companies of all sizes – from AnyPerk and BloomThat to Netflix and Lyft – use to power their recruitment process. Check out their blog for more insights on recruiting strategies and hiring best practices. 

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