Hire My Friend! The Easy Logic (and Hidden Dangers) of Employee Referrals

If you're unemployed, this will come as either great news or terrible news -- depending on how much you envy your friends' jobs.

The New York Times reports that referrals from employees make up a growing number of hires at some large companies that face the daunting task of wading through thousands of applications to fill a single position. At the accounting and consulting powerhouse Ernst & Young, nearly half of advanced hires these days were recommended by the company's own workers. (That's up from 28 percent in 2010, and the company's goal is to surpass 50 percent internal-referral rate.) In thewhat you know vs. who you know tug-of-war, personal connections are pulling stronger. 

It's both utterly predictable for companies and quietly dangerous for workers.

Companies like referrals because they're cost-saving, energy-saving, and people-saving. Picking through hundreds of resumes and cover letters is a tremendous investment of time, money, and human resources labor. Giving weight to internal referrals might not be the most comprehensive way to evaluate potential hires, but it's a not-entirely-crazy short-cut. As much as old-school economics likes to pretend that rational beings relish infinite choices, the research suggests people tend to be overwhelmed by them. What we really relish is taking short-cuts to prune our options. Exhaustive evaluation can be, quite literally, exhausting. 

Read more at The Atlantic.

Image via Luna Vandoorne/Shutterstock.com