If You Want to Diversify Your Workforce, Stop Hiring Referrals

If You Want to Diversify Your Workforce, Stop Hiring Referrals

| By Jennifer Kuklenski |

Stop hiring referrals? Hiring managers love referrals! They serve a valuable purpose and can certainly be more cost effective than going through all the motions associated with recruiting. Perhaps even more importantly, referrals usually come from someone we trust – a colleague, a family member, a friend. It is no wonder that most job openings are never posted and are instead filled through either internal hires or referrals [1]. When managers ask their team for a referral however, most people will only refer others who are like them.

The Prevalence of Referrals

Referrals are the first external source of hiring in the U.S. [2]. In fact, many organizations have implemented formal employee referral programs (ERPs) through which employees recommend possible candidates from their personal or professional networks and may even be compensated if their referral ends up being hired. Employees therefore have a strong incentive to recommend good candidates.

As shown by several studies, employees hired through referrals can be of higher quality than those resulting from other recruitment processes in terms of productivity, tenure, and wage [3]. There is no question about the efficiency benefits associated with referrals. Unfortunately, such hiring practices can exacerbate labor market inequalities and organizational exclusion [4].

In-Group Preferences

The reality is that most people’s social networks – their friend groups, neighborhoods, even their communities – remain largely non-diverse. For example, a 2014 survey conducted by the Public Religion Research Institute (PRRI) about homogeneity in American social networks found that the majority of Black and White respondents (65% and 75% respectively) stated that their core social networks were composed entirely of people from their own racial group [5]. Although this in-group racial preference was less prevalent among Hispanic respondents, nearly half – 46% – indicated that their core social network consisted entirely of people who were Hispanic (the survey did not look at other racial groups).

People’s core social networks also demonstrate homogeneity by religion. The PRRI survey found that 72% of Catholics and 68% of Protestants had core social networks composed primarily of others from the same religious group. Likewise, those who identified as religiously unaffiliated were more likely to have connections with others who had no religious affiliation. The study indicated that people tend to associate with others from the same political party as well, although in-group political preference was not as prevalent as in-group racial or religious preference.   

Additionally, people may be more likely to refer someone of the same gender for job opportunities. A 2016 study published in the Journal of Labor Economics, which examined hiring processes using firm-level data for a single corporation, found that 63.5% of the referrals from 2000 to the first half of 2011 were for people of the same gender [6]. Interestingly, another study found that this in-group gender preference may be more common among women [7].

Referrals & Exclusion

According to research published in the Journal of Personality and Social Psychology, the “social niche” construction of relationships (i.e. developing relationships with people we perceive as like us) allows for stability in our identity, ideology, and values [8]. This serves a practical purpose because similarity in traits and values can help create an environment of cooperation and trust, potentially facilitating collaboration in the workplace.

However, the ability to pursue relationships with people we perceive as similar also creates an opportunity to avoid interactions with people perceived as dissimilar. Within organizations, this is a problem because it can intentionally and unintentionally lead to exclusion. Additionally, it may prevent organizations from capitalizing on the very real benefits associated with diversity, such increased innovation, improved problem solving, and better decision-making.

The other problem with referrals is that we often fail to assess referred job candidates with the same scrutiny as non-referrals. Because they trust the person who referred the candidate, hiring managers sometimes go easier on referred candidates during the interview process [9]. For instance, they are less likely to ask as many questions or as tough of questions. The action of referral itself causes a positive bias in favor of the candidate. Hiring mangers figure, “If so-and-so likes this person, I’m sure I’ll like this person too.” Skipping the tougher questions, however, means that hiring managers may be missing potential red flags for referred candidates.

Use Referrals Wisely

Truth be told, organizations probably don’t need to completely stop hiring referrals. I have personally benefited from referrals and it is true that referred candidates can sometimes end up being the best hires. If organizations want to get serious about becoming more diverse and inclusive though, they need to reconsider their hiring practices. They must be more deliberate and intentional with how they fill job openings. If they do use ERPs, organizational leaders should include incentives for employees who recommend candidates from diverse backgrounds while ensuring that referred candidates are assessed the same way as all other candidates during the application and interviewing process.

3P INSIGHTS is a consulting firm that offers training, speaking and support services to help organizations attract and retain diverse talent, create inclusive workplaces, become better environmental stewards, and improve their overall social, environmental, and economic impact.


[1] Stahl, A. (2020). 10 Steps Businesses Can Take To Improve Diversity And Inclusion In The Workforce.

[2] Beugnot, J. & Peterlé, E. (2018). Gender Bias in Job Referrals: An Experimental Test.

[3] Ibid.

[4] Calvo-Armengol, A. & Jackson, M.O. (2004). The effects of social networks on employment and inequality. American Economic Review, 94(3): 426–454.

[5] Cox, D., Navarro-Rivera, J, & Jones, R. P. (2016). Race, Religion, and Political Affiliation of Americans’ Core Social Networks. Washington, DC: PRRI Research.

[6] Brown, M., Stetran, E., & Topa, G. (2016). Do Informal Referrals Lead to Better Matches? Evidence from a Firm’s Employee Referral System. Journal of Labor Economics, 34(1): 161-209.

[7] Fernandez, R. M. & Sosa, M. L. (2005). Gendering the job: Networks and recruitment at a call center. American Journal of Sociology, 111(3): 859–904.

[8] Bahns, A. J., Crandall, C. S., Gillath, O., & Preacher, K. J. (2017). Similarity in Relationships as Niche Construction: Choice, Stability, and Influence Within Dyads in a Free Choice Environment. Journal of Personality and Social Psychology, 112(2): 329-355.

[9] Fontana, C. (2016). The Downside of Employee Referrals.