Is networking the best tool for finding talented employees?

“This is the kid. Calls me 59 days in a row and wants to be a player. There ought to be a picture of you in the dictionary under persistence kid. –  Gordon Gekko, Wall Street.

In the iconic 1987 film Wall Street, upstart stockbroker Bud Fox lays out the blueprint for entering the upper echelons of corporate America. Use any method at your disposal to get in front of a senior decision-maker and ride those connections all the way to the top.

For the mass of new talent entering the job market, the message rang loud and clear – the key to getting ahead wasn’t your skills or job performance but the strength of your personal network.

Since then, networking has become a fundamental tool for finding talented employees. Social media platforms have made relationship-building an essential part of every professional’s toolkit. At industry-leading organizations, getting a hiring manager or executive to vouch for your talent can be the only way to get past the intense screening measures that filter out hundreds of other applicants. [1]

That’s if they get a chance to apply for the job at all. According to a 2019 survey of American job seekers, 50% of respondents learn about jobs through friends, and 37% learn of these opportunities through professional contacts. This data points to the fact that the best opportunities are often hidden away from candidates that aren’t in the know. [2]

So how do we remove these barriers and democratize the hiring process? Let’s start by digging a little deeper into the hidden job market. 

Uncovering the hidden job market

“There’s a lot of great positions – at least 60%, I’d say – that never make it to the public job boards, which surprises a lot of people” – Stacey Perkins, career and leadership coach at Korn Ferry.

Recruiting isn’t easy

Why do so many jobs go unadvertised? For most hiring managers, the answer comes down to a simple risk versus reward calculation. 

Traditional recruitment is expensive, time-intensive, and challenging to get right. 

First, you must find the proper channels to post the job description, which might involve paying for a listing on a job board or advertising the position on social media. If these activities don’t turn up a suitable candidate, you may need to enlist outside recruiters to headhunt the role. Then, once the applications start coming in, you have to sift through potentially hundreds of resumes in the hopes of finding someone with the skill, vision, and passion to succeed in the role. 

Trying to predict these outcomes based on a cursory glance at someone’s qualifications and experience is a tall order. But with money on the line and critical positions to fill, there’s often no option but to trust decisions made on minimal information and gut instinct. 

Of course, once that’s done, you have to contend with several rounds of follow-up calls and interviews to validate these scattershot screening measures.

Enter the hidden job market

Many hiring managers choose to recruit through their personal networks, employee referrals, or by directly approaching passive candidates on talent marketplaces like LinkedIn instead. These unadvertised positions make up what’s known as the hidden job market. 

The benefits of this strategy seem obvious: it’s cheaper and faster, and most candidates who come to the interview table are vetted through a referral or recommendation, which makes them look like safe bets.

Silicon Valley veteran Dick Costolo says this is the preferred approach at the biggest tech companies. 

“Yeah, and [writing the company cold or applying online is] generally not how people get hired at Google, Amazon, or any big tech companies. Nobody gets a job by clicking a button.”

It’s also the most commonplace method for recruiting senior executive positions that offer higher salaries, better benefits, and the possibility for exponential career growth. 

Many companies argue that discretion is necessary when advertising for strategically sensitive roles, as publicizing these talent searches could tip off competitors and send the wrong signals to shareholders. 

It’s clear then that candidates who lack the necessary pedigree or established networks to reach the eyes of these hiring managers are barred from accessing the best opportunities. 

The question is, does excluding a large swathe of applicants and relying on personal connections, employee referrals, and highly visible LinkedIn profiles to drive your talent search actually produce better results?

Does hiring through networking produce better employees?

An initial glance at the data suggests that employees hired through referrals and recommendations perform far better than their counterparts:

• On average, referrals stay at companies 70% longer than non-referrals.

• 67% of employers say that referrals reduce time-to-hire while 51% said that they reduced their cost of hire.

• Research shows that referrals perform at high levels.

• Studies also show that referrals generate a high ROI largely because of savings made through the simplified recruitment process.³

But adding some context to these numbers reveals a different story.

How referrals impact diversity and inclusion

If you rely on a largely homogenous employee base or personal network to recommend candidates for open positions, you’re likely to end up with a referral pool that looks, acts, and thinks the same way as your current teams. This has an obvious impact on diversity and inclusion initiatives. 

Indeed, data from Glassdoor shows that white candidates make up 54.3% of U.S. referral interviewees, while 50.2% are male. By comparison, over half of the interviewees who came from online applications were BIPOC or women. These disparities are even more pronounced in the healthcare, retail, and business services sectors, amongst others. 

Apart from these gaps in gender and ethnic diversity, referrals also reduce the diversity of skills in your applicant pool. For example, sourcing candidates for technical SEO positions may be much harder if your network comprises mainly content marketers. Of course, this will impact your team’s innovation, creativity, and competency level.

Some referrals matter more than others

In their study on ethics in hiring, authors Rellie Derfler-Rozin, Bradford Baker, and Francesca Gino describe the issues that arise when higher-power employees, executives, for example, recommend candidates to lower-power hiring managers. 

According to the paper, “when the hiring manager abides by the referral request of the referrer, the referrer is more likely to feel obligated to return this “favor” in the future…this return of favor can take the form of better performance evaluations, promotions, better job assignments, etc., making the act of reciprocity in the future even more important from the point of view of the hiring manager.”

As a result, there is an inherent preference toward referrals from senior executives and managers compared to junior employees, which means that many skilled candidates may be passed over for those with better connections. 

We saw the consequences of this effect play out in the “nepo baby” controversy that took over social media in early 2023. 

The trend saw users across Twitter and TikTok call out several celebrities for their family connections. The implication being that stars like Dakota Johnson (daughter of actors Melanie Griffith and Don Johnson), Maude Apatow (daughter of producer Judd Apatow and actress Leslie Mann), and Timothee Chalamet (son of Broadway star Nicole Flender) leaned on their famous relations to gain access to jobs that could otherwise have gone to more deserving but less privileged talents.

Affinity bias and retention

It’s not just hiring that’s affected here. When candidates are hired through referrals from existing employees, there’s a real danger of cliques forming. People build networks based on affinity bias and recommend people with similar backgrounds, interests, and values. Naturally, these individuals will then stick together in the workplace. 

Tightly knit in-groups can affect how long referrals stay at your company. For example, if an employee’s internal sponsor decides to switch to another organization, they might be more likely to leave.

Conversely, some referred candidates might end up sticking around far longer than they would otherwise because they feel indebted to the person who referred them.

Management may also have a much tougher time firing referred employees due to their existing relationships within the firm. This issue becomes particularly apparent when the referees hold senior positions at the company. 

In 2015 JPMorgan Chase and its affiliate in Hong Kong were ordered to pay out $264 million to settle a lawsuit in which the company’s senior executives were accused of hiring the children of high-rank Chinese officials in exchange for lucrative business opportunities in the country. The problem was brought to light during the 2008 recession. 

While many long-standing employees at the bank were being fired, these underperforming hires were still retained in many cases showing just how far-reaching the effects of a high-powered referral can be. 

Be careful recruiting through social networks.

Research from BetterTeam shows that 70% of hiring managers use social media for recruitment. Of these networks, LinkedIn stands out as the premier network for building professional relationships. However, it has significant drawbacks as a recruitment tool.

In the past, LinkedIn has come under fire for only matching candidates with roles they’re likely to apply for based on their gender, ethnicity, and other personal characteristics. This reinforced existing prejudices that discourage women and minority groups from applying to certain jobs. 

Although the company has taken steps to correct this issue in the intervening years, it’s still far more likely that your connections will be made up of people with similar interests and backgrounds. This will limit access to more diverse candidates that are equally well-suited for the role.

Another issue to consider here is that social networks (especially highly curated platforms like LinkedIn) provide an extremely superficial view of candidates’ capabilities. Trying to predict their performance based on a review of things like their LinkedIn recommendations, certifications, or work experience is difficult, to say the least. 

Neither does an inactive social media profile nor a lack of followers indicate anything about a candidate’s ability to do the job. In fact, a lot of great talent probably isn’t on social media at all. 

Taking unconscious bias out of networking

Despite all these concerns, networking can still be a great method for sourcing candidates and can become even more effective if proper steps are taken to mitigate the bias and prejudices created by referral programs and social media recruitment.

Try blind referrals

Instead of separating referral candidates from those who came through online job applications and other channels, put all applicants for open positions into the same pool. This will weed out preferences towards specific individuals during the hiring process and allow everyone to be evaluated on a level playing field.

There are three key aspects to getting blind referrals right:

1. Make sure that the referee isn’t involved in making the hiring decision.

2. If the candidate brings up their connections before or during the interview, an official note should be made, and they should be made aware of the blind referral policy.

3. The referee should not disclose their association with the candidate to anyone on the hiring team.

Expand your social networks

If you’re using platforms like LinkedIn for direct recruitment or referrals, you must push past your comfort zone and find diverse talent outside your immediate connections. 

A great way to do this is by joining professional groups that promote opportunities for minorities and underrepresented groups. Some examples include:

• The Blacks in Technology Group

• The Hispanic Professionals Networking Group

• The Disability Student Services Professionals Linkedin Group

• The LGBT Professionals (Lesbian, Gay, Bisexual, Trans, and Friends) group

Another essential aspect of this strategy is to look for candidates based on the skills they advertise rather than their experience. This will help you find people who might not appear on your recommendations list. 

You can start engaging with more diverse candidates on Twitter by following trending diversity-related hashtags. In the past, phrases like #ilooklikeasurgeon, #womeninmedicine”, #womenintech, and #blacktechtwitter have been used to ignite viral conversations. Pay attention to these trends and engage and follow users whose perspectives resonate with you, and you could find entirely new sources for your talent search.

Use skills-based assessments to evaluate candidates

Whether candidates come through an employee referral process, your network, or an online job application, they should all be assessed on the same criteria based on their skills. 

Unfortunately, this type of standardized screening process isn’t possible when relying on a one-page resume or LinkedIn profile because work experience, education, and even personal recommendations are poor predictors of job performance. 

To get a true sense of the unique characteristics and competencies individuals can offer, you need to look past these untrustworthy metrics and assess their skills. 

Let’s say you’re looking to hire a front-end developer. While it’s important to determine whether your candidate is proficient in languages like HTML5, CSS, and Javascript, mastering the hard skills isn’t enough. At a time when technical skills become obsolete faster than ever before, you have to ensure that new hires can learn on the job, pick up new skills, and contribute to new projects that exist outside of their current purview. 

To measure potential, you must assess candidates for qualities like culture add, cognitive ability, attention to detail, and situational judgment. 

By leveraging both types of screening tools in what’s known as a multi-measure assessment, you can get an accurate understanding of who your candidates are without the lens of personal bias coloring your perspective. 

Make networking equitable and improve your recruitment pipeline

The truth is that networking isn’t going anywhere. Personal relationships will always improve jobseekers’ chances of getting seen by recruiters, and hiring managers will continue to rely on their networks to source potential candidates for open positions. 

By mitigating the biases and assumptions obstructing a proper assessment of these candidates, you can make these strategies more objective, accurate, and equitable.

Ready to adjust your screening and bring skills assessments into your hiring process? Find out more about the science behind our tests here.

Sources

1. Forbes, ‘How to get your resume read by an employer’ (2014) https://www.forbes.com/sites/nextavenue/2014/03/18/how-to-get-your-resume-read-by-an-employer/?sh=3a3342136865

2. Jobvite’s 2019 Job Seeker Nation Survey https://www.jobvite.com/wp-content/uploads/2019/04/2019_Job_Seeker_Nation.pdf

3. Fernandez, R. M., Castilla, E. J., & Moore, P. (2000). Social capital at work: Networks and employment at a phone center. American Journal of Sociology, 105, 1288-1356. doi: 10.2307/3003768