Does Your Workplace Lack Diversity?

Employee referral programs might be to blame

26 February 2017

Job applicants are more likely to get hired if workers within the company have vouched for them, according to a study conducted by labor researcher Glassdoor. Tech firms are among the companies that rely on employee referrals the most.

Recommending candidates is a win-win for those involved: The company doesn’t have to spend as much to find talent, the employee receives a referral bonus, and the applicant finds a job. But there is an unintended consequence: Hiring people referred by employees can hurt diversity in the workplace.


Ian Schmutte, an economics professor at the University of Georgia, in Athens, studies referral networks. He has found that most referrals are the same race, gender, or ethnic background as the employee who recommended them. That’s because people look to their social circles when a position opens up at their company.

Diversity is about more than meeting a quota. Research shows that companies with a diverse workforce perform better and report higher earnings. Because of such findings, employers have spent millions of US dollars on inclusion programs. But as it turns out, the programs are not very effective and they sometimes backfire.

One study that followed more than 700 U.S. companies found that implementing diversity training programs might have decreased representation. In fact, such programs have even allowed employers to get away with unfair treatment. Some companies have won court cases simply by demonstrating they have anti-discrimination policies in place. The “diversity defense” often succeeds, making organizations less accountable, according to a Harvard Business Review article. Therefore, such policies’ strongest accomplishments might be protecting the organization from litigation—not protecting the interests of underrepresented groups, the authors add.

Silicon Valley inclusion programs could be the epitome of the problem. Facebook, Google, and Twitter made Glassdoor’s list of the top 30 companies that use referrals for hiring, and they have had a hard time recruiting non-white and non-Asian male workers, according to Bloomberg.

In their attempts to change their statistics, the companies have invested millions in inclusion programs and offered incentives for recruiters to increase diversity, but the efforts apparently haven’t paid off. As of last year, only 4 percent of Facebook’s U.S. employees are Hispanic and 2 percent are black. Moreover, Google’s staff is 69 percent male.


One way to solve a lack of diversity might be to incentivize employees who refer diverse candidates, according to Bloomberg. Pinterest, for example, experienced a significant increase in candidates from various backgrounds after it offered larger bonuses for diverse hires through its employee referral program.

Regardless of their impact on diversity, referral programs are here to stay, Schmutte told Bloomberg. Employers, he said, want to know: “Is somebody going to show up to work? Are they going to be a good worker?” And the best way to find employees with a strong work ethic is often to entrust the people who already work for you.

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