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11/13/96

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It helps to have a foot in the door

STANFORD ­ Knowing someone on the inside always helps when you're applying for a job. Stanford Business School organizational behavior Professor Roberto Fernandez has taken a closer look at just how much it can help and why.

Fernandez plumbed the hiring practices of a large multinational bank to find out if people hired through referrals from employees of the bank are any more successful than applicants from the outside. Fernandez, who collaborated with Columbia University sociologist Kathryn Neckerman and coauthored his report with Stanford sociology student Nancy Weinberg, homed in on the central office that does all the Western states hiring for a large American bank. He sampled more than half of the 5,568 applications for 326 openings in four beginner positions: business banker, personal banker, mortgage consultant and teller.

Fernandez found that 80 percent of the referrals were invited for interviews, very close to the 83 percent interview rate enjoyed by in-house employees applying for the same jobs. By contrast, a paltry 26 percent of the nonreferrals made it to the interview stage. Not surprisingly, the in-house applicants received the most job offers ­ 66 percent received offers. Among the outside applicants referred by employees, a favorable 38 percent were asked to join the company, compared with only 12 percent of the nonreferrals.

The difference between applicants was apparent from the time their resumes hit the recruiter's desk. The difference was that the resumes of the inside referrals were appropriate to the jobs. Some had characteristics that gave the applicant a special advantage. Among them were such qualifications as second language skills, which statistically gave an applicant a 15 percent greater chance of being called to the interview, and computer skills, which gave applicants a 7 percent edge. A bachelor's degree, nothing more and nothing less, was an advantage, too. The employer wanted neither under- nor over-qualified applicants. Overall, the most appropriate resumes were found among the pool of applicants who had been referred internally.

Why? Fernandez says it's all a matter of information. People who hear about the job from an insider will know more about the position and self-sort, sometimes eliminating themselves from the running if they believe that the job is a poor fit or if they don't have the skills.

Fernandez also discovered that referral applications were better timed than nonreferral applications. The job seeker got critical information about the hiring process, including not only what to emphasize in his resume but when to submit it.

Indeed, referrals tended to show up at times when there were relatively few competitors. The average nonreferral applied for a job in a month when there were 112 competitors. But referrals' applications consistently showed up in months when there was an average of just 83 applications. The number of openings was always about the same. In interviews with Fernandez, bank recruiters disclosed that whenever the bank was short on applicants, the human resources staff would get on the phone and ask employees for referrals. In sum, when applicant pools were low, employees made more referrals and divulged important tips on timing and qualifications to the applicants.

Further analysis showed that after statistical adjustments for factors such as special skills and timing, the referrals still had a 45 percent greater chance of getting an interview than a nonreferred candidate. Moreover, the researchers found that during the interviews, recruiters went back for a second look at the resumes ­ which gave the referral candidates a renewed edge since they tended to have better resumes.

Fernandez also found that there are more random mismatches among nonreferrals; and if an employee is a bad match, he quits or is fired. That means that a firm can expect higher turnover among employees who were hired as nonreferrals compared to those who were referred. As a result, Fernandez believes that human resource bounty programs, which offer employees a reward of anywhere from $250 to $1,000 for each successful referral, may actually pay for themselves.

-Barbara Buell-

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