This blog post is an excerpt from our newest study, The Impact of Job Referrals on Employee Engagement and Workforce Diversity.
Between April 24, 2017 and August 25, 2017, PayScale asked 53,000 workers if they had received a referral. Because respondents also provided demographic information and details on their current position, we were able to study the impact referrals have on pay, engagement, which groups benefit from referrals as well as which groups are detrimentally impacted by referrals. You can check out the full report here.
Companies in all industries rely on employee referrals to fill their talent pipeline. It seems like employees are well-positioned to identify the best future hires. After all, they know your company culture, the jobs you need to fill, as well as how your organization can take advantage of the strengths of candidates they are referring.
Yet, there is an ugly side to referrals. Our latest study found that relying on referrals to fill your pipeline may have the unintended consequence of creating less diverse work environments — because referrals disproportionately benefit white men.
Holding all else constant, female and minority applicants are much less likely to receive referrals than their white male counterparts. White women are 12 percent less likely; men of color are 26 percent less likely and women of color are 35 percent less likely to have received a referral.
To put it another way, if you have 100 referred employees, 44 of them will be white males, 22 will be white females, 18 will be minority males and only 16 will be women of color, holding constant industry, location and other relevant variables.
Holding all else constant, female and minority applicants are much less likely to receive referrals than their white male counterparts.
By comparison, according to the Bureau of Labor Statistics, white men are only 34 percent of the U.S. labor market. That means that white men are 129 percent more likely to be in your pool of 100 referred employees than what demographics suggests they should be.
There is a significant body of research that documents how and why women and minorities face more obstacles to networking than their white male counterparts. Regardless of the reasons, the fact remains that relying on referrals to fill your pipeline may generate a less diverse talent pool.
For companies to reap the benefits of both hiring through referrals and having a diverse talent pool, they need to be proactive about expanding their own networks. Attending career fairs focused on diversity and connecting to schools that have diverse student bodies are two ways to achieve this. Having a strong social media presence can also ensure that diverse candidates know who to connect with to get a referral.
If you’d like to dive deeper into the findings of this study, you can download it here.
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