Kissing Your Cousin - 3 Times When Referrals Can Be a Sign of Inbreeding...

We're trained that employee referrals are a good thing, and I would venture a guess that most of us have drank most, if not all, of the kool-aid.  I know I believe that the best hires come from current employees who are willing to reach into their networks and provide referrals.  How about you?

That being said, there are probably some referral practices that are a sign of inbreeding that can hurt your company.  More on the questionable referrals from Inc. magazine:

"We have become a race of prepositions linking people to people, things to things. Companies are just learning the power of networks for marketing, but in the world of recruiting networks are venerable, tested tools. Employees have long nominated their friends and relatives for open positions, and many companies offer finders' fees when those referrals take. It's an elegant idea. After all, employees know both their friends' talents and personalities and their employer's culture. Who better to spot matches made in heaven?

Employee referrals presumably reduce risk in the same way that Amazon referrals do: managers who liked Martin will also like Isabelle. But I wonder whether the practice has unrecognized drawbacks. Biodiversity is one sign of a healthy ecosystem; mutts tend to be sturdier than purebreds. Companies that hire lots of people who know one another—because they attended the same schools or play golf together every weekend or used to work together someplace else—may reduce the diversity of their workforces' experiences and perspectives. Innovation flourishes in the interstices of unlike ideas. How many surprises will emerge from a half dozen people who pal around in the Facebook groups "I Love Beer," "I'd Rather Be Skateboarding," and "South Park Lovers of America"?

Companies rich in pre-existing networks can also seem insular and unwelcoming to outsiders. Joining established workplace cliques is tough, but joining cliques that also thrive outside the office and share long personal histories is truly daunting. When the CEO and other leaders belong to those cliques—startups, after all, are often seeded with friends and family—issues of favoritism may arise. A manager friend who recruited several people from her college alumni network has heard the group referred to—not fondly—as "the Cornell Mafia." She sometimes holds her old friends at arms' length for fear of seeming biased."

Fair assessment and an interesting reminder that not all referrals are created equal.  With that in mind, here are my top three signs that you're dating your cousin when it comes to referrals:

1.  Outsiders come in your company and are stunned by the number of relatives working in the company.  Don't get me wrong, relatives in the same company aren't necessarily a bad thing.  It's when the percentage of family working at a company approaches a significant percentage that things can get a little funky - I'll say 20-30%.  We've got a major employer in the Birmingham area that has a known issue with family members working all over the place.  Drives the outsiders away....

2.  You are known to love to hire only from a certain college or university.  It's like the Cornell Mafia example above.  An over-reliance on hiring only people from your school of choice means you're dating your cousin.  Again, nothing against developing a pipeline, but watch the feedback loop when you have a candidate from your favorite college going up against an outsider.  Are they picking the known entity for firm, or soft reasons?

3.  We like the big or small play - Less of a company wide concern, this one can sneak into teams, especially where the leader has to build quickly.  The issue?  The person doing the hiring has a certain background (let's say she worked for a Fortune 500 company), and as a result only works referrals from big company sources.  As a result, she loses the good stuff that comes with a bootstrapping candidate from a small company.   The opposite can hold true as well.

Referrals are a good thing.  A lack of diversity in referrals can lead to some problems.  Don't kiss your cousin.  It's gross, and let's face it, unsafe in the long run.

Diversity - It's about more than Title 7.

Comments

[Jason]

Kris... nail on head... "drives outsiders away".

'Nuff said.

[DG]

On the positive: a company-aligned influential friend or relative can bring others along to create valuable impact; on the negative: think union and EFCA - as one friend or relative goes, so can go all of the others!

[adowling]

When I first started with my current employer, we had so many relatives our office seemed like an ongoing family reunion; mothers and sons, in-laws, cousins, you name it. The company started this office in February 08 and had a major hiring push and thus hired nearly every employee referral. The employee that did most of the referring was let go in October and it has been interesting to see those she referred slowly leave. One of the drawbacks we’ve seen in employee referrals is just that; when the person referring leaves, voluntary or not, those referred employees tend to go with them. To that note we look harder at employee referrals, try to assess the relationship to see if it will fit our company; we’ve also put a ‘no relatives’ statement on the referral form. Hearing ‘Mom, can you get that document of the printer for me’ is just too much.

[Katheryn]

Couldn't agree more!

[www.google.com/accounts/o8/id?id=AItOawkVJToLOXfF7gPRed866MrYBwe5J4YuSJk]

I agree with some of the things you say Kris. However, it sounds like you're problem is with nepotism more than the traditional employee referrals. I worked for a woman, her son and her daughter in law at a business and it wasn't the most ideal working environment. But we were all on the same page on making money so it worked out.

In this economy, if you're not making money then you better be saving money. Employee Referrals are the most cost effective way to hire and find passive candidates. The alternative is the traditional job boards where you pay $300 for a 30 day posting and you'll get 100 resumes and delete 97 of them. Even worse, you hire a 3rd party staffing agency and get billed $34.00/hour while they pay the contractor $17.00/hour. If you like that person and bring them on full time, get ready to pay a conversion fee as well.

If you feel that you have a diverse work force, you should be able to get a diverse amount of employee referrals as well. This solves your compliance issues and maintains your diverse company culture.

Kissing your cousin may not be ideal, but neither is kissing a stranger you know nothing about.