Referral-based hiring is a commonplace practice for modern organizations, which holds considerable benefits for employees hired based upon a referral, including greater chances for upward mobility within the company. A recent paper published in ILR Review entitled “Lasting Effects? Referrals and Career Mobility of Demographic Groups in Organizations,” further studies the benefits of referral based hiring, and finds that the positive impact does not effect different demographic groups equally. Rather, authors Jennifer Merluzzi and Adina Sterling find that referral-based hiring provides the biggest increase in promotional opportunities for racial minorities. The abstract for the paper:
While prior research has suggested that network-based hiring in the form of referrals can lead to better career outcomes, few studies have tested whether such career advantages differ across demographic groups. Using archival data from a single organization for nearly 16,000 employees over an 11-year period, the authors examine the effect of hiring by referrals on the number of promotions employees receive and the differences in this effect across demographic groups. Drawing on theories of referral-based hiring, inequality, and career mobility, they argue that referral-based hiring provides unique promotion advantages for minorities compared to those hired without a referral. Consistent with this argument, they find that referrals are positively associated with promotions for one minority group, blacks, even after controlling for individual and regional labor market differences. The authors explore the possible mechanism for this finding, with initial evidence pointing to referrals providing a signal of quality for black employees. These results suggest refinement to prior research that attests that referral-based hiring disadvantages racial minorities.
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