Who Does Referral-Based Hiring Help Most, and How?

9323706832_efbf0759ba_zReferral-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 Current Issue Coverthe 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.

You can read “Lasting Effects? Referrals and Career Mobility of Demographic Groups in Organizations” from ILR Review free for the next two weeks by clicking here. Want to stay current on all of the latest research from ILR Review? Click here to sign up for e-alerts!

*Image attributed to Cydcor (CC)

SAGE Journals Recently In the News

In recent weeks, SAGE journals have cropped up in news outlets including The New York Times and the Toronto Star, offering fresh insights on management topics ranging from employee burnout and worker mobility to sports economics.

In today’s post, we bring you those media highlights and take a closer look at the studies that inspired them. We hope you find this selection interesting and useful.

Matthew Bidwell of the University of Pennsylvania published “Paying More to Get Less: The Effects of External Hiring versus Internal Mobility” in the September 2011 issue of Administrative Science Quarterly (ASQ). The article was discussed in The New York Times’ Job Market section’s “The Pros and Cons of Hiring Outsiders” piece, which commented on its assertion that external hires out-earn and under-perform internal workers who are promoted:

The findings may well stir indignation among internal employees passed over for jobs in favor of outsiders. The implications are worth considering as the economy improves, loosening hiring budgets and letting more employees seek greener pastures. They come amid a long-term trend of job mobility, with the idea of working for one employer for life seeming downright antiquated.

Read more at NYTimes.com, and access the full ASQ article here.

* * *

John J. Binder of the University of Illinois at Chicago and Murray Findlay of Soccer Success Inc. published “The Effects of the Bosman Ruling on National and Club Teams in Europe” in the April 2012 issue of the Journal of Sports Economics (JSE). New York Times blogger Jack Bell called the article “food for thought” in that it sheds new light on the 1995 Bosman ruling, which gave free agency status to out-of-contract soccer players:

While the authors discuss — and generally debunk — Bosman myths having to do with the dominance of a few clubs in their domestic leagues and the effects on national teams, they assert that the ruling’s biggest effect has been on the Champions League — and that the effect has been nothing but positive.

Wrote Bell: “Take a look at the complete report. It is an eye-opener. Academics and soccer … perfect together!”

Read more at Goal: The New York Times Soccer Blog, and access the full JSE article here.

* * *

Émilie Lapointe of the University of Montreal, Christian Vandenberghe of HEC Montreal, and Alexandra Panaccio of Concordia University published “Organizational commitment, organization-based self-esteem, emotional exhaustion and turnover: A conservation of resources perspective” in the December 2011 issue of Human Relations. The article, widely released this month in various Web outlets, appeared in a Toronto Star piece on employee burnout, which quoted Professor Panaccio:

“We found two forms of commitment had a negative impact and made people more likely to experience emotional exhaustion or burn out — a chronic state of physical and mental depletion resulting from continuous stress and excessive work demands,” Panaccio told the Toronto Star in an interview.

Read more at the Toronto Star, and access the full HR article here.

Are you interested in receiving email alerts whenever a new article or issue becomes available? Then click here!

A New Issue of Administrative Science Quarterly is Now Available Online!

The September 2011 issue of Administrative Science Quarterly is available online. Please click here to view the Table of Contents.

Matthew Bidwell, University of Pennsylvania, published “Paying More to Get Less: The Effects of External Hiring versus Internal Mobility” in this current issue.

The abstract:

Individuals often enter similar jobs via two different routes: internal mobility and external hiring. I examine how the differences between these routes affect subsequent outcomes in those jobs. Drawing on theories of specific skills and incomplete information, I propose that external hires will initially perform worse than workers entering the job from inside the firm and have higher exit rates, yet they will be paid more and have stronger observable indicators of ability as measured by experience and education. I use the same theories to argue that the exact nature of internal mobility (promotions, lateral transfers, or combined promotions and transfers) will also affect workers’ outcomes. Analyses of personnel data from the U.S. investment banking arm of a financial services company from 2003 to 2009 confirm strong effects on pay, performance, and mobility of how workers enter jobs. I find that workers promoted into jobs have significantly better performance for the first two years than workers hired into similar jobs and lower rates of voluntary and involuntary exit. Nonetheless, the external hires are initially paid around 18 percent more than the promoted workers and have higher levels of experience and education. The hires are also promoted faster. I further find that workers who are promoted and transferred at the same time have worse performance than other internal movers.

To learn more about Administrative Science Quarterly, please click here.

Are you interested in receiving email alerts whenever a new article or issue becomes available online? Then follow this link.

Bookmark and Share