Referral Bonuses: Do they Support — or Hinder — Diversity, Equity and Inclusion Efforts?

Referral bonuses are a long-standing practice at many organizations. They reward employees who refer candidates that become successful hires. The two major organizations I’ve worked at had referral bonuses in place. The thinking was: internal employees understand what it takes to succeed at the organization; therefore, their discernment of a prospective candidate (read: ‘culture fit’) is a valuable add to the process. In some instances, referrals are considered stronger candidates right from the start, even if the recruiter or hiring manager have no previous exposure to the individual. 

If you have this practice at your organization, the question to be asking yourself is, “Does this process support, or hinder, our diversity & inclusion efforts?” I don’t know what the answer is for your organization, because I don’t have the details of your process, culture and self-awareness of your team members. However, there is a high likelihood that this program is hindering your efforts. 

Here is why:

1. Referral programs can be wrought with unconscious bias.  The person referring the candidate is likely biased in what they believe is a ‘culture fit’ for the organization. Recruiters and Hiring Managers may consciously, or unconsciously, have a positive bias toward referrals and be less-curious about candidates who are not referrals. The hiring playground becomes inequitable.  

2. Referral programs can reinforce the current representation of your company. There is a high probability that referrals come from similar backgrounds as your current employees. If your goal is to diversify your teams, your referral programs might be working against those efforts.  

3. Successful referral candidates may not support your inclusion efforts.  While a referral may feel welcome because he/she/they know someone in the organization, the rest of the team could inadvertently become the ‘outsiders’ when the new hire has a personal relationship with someone on the team or a person in power at your organization. Referrals can sometimes be treated more positively in an organization; they can have a ‘leg up’. This ‘inside group’ vs ‘outside group’ or ‘popular’ vs ‘unpopular’ environment can disrupt efforts for an equitable and inclusive culture.  

4. Referral programs can perpetuate privilege.  There are some people who ‘know’ people, as a result of their privilege. And, there are many more who don’t ‘know’ people at the organizations they strive to join. It can feel impossible for a candidate to get into an organizations when he/she/they don’t have a connection. Is this fair and equitable? Is this a requirement we want to enforce?

Bottom line: referral programs are not inherently bad. But everyone should think critically about how they are applied and who they advantage. I would not recommend a referral program, based on my experiences working in Talent Acquisition, HR Business Partnering and Diversity & Inclusion. I would advise a company to repurpose those dollars in developing their Talent Acquisition team and expanding their efforts to source new talent that has no current connections at the company. That is one way you can begin to increase representation and create fair and equitable hiring processes.