What are some really smart recruiting methods

The recruitment of new employees via the employee recommendation


1 The recruitment of new employees via the employee recommendation Bachelor thesis at the Institute for Strategy and Business Economics University of Zurich Chair for Human Resource Management Prof. Dr. Bruno Staffelbach Supervisor: Martin Bannwart, lic. phil., Psychologist FSP Subject: Business Administration I Subject: Human Resource Management Author: Manuela Morf Alte Landstrasse Oetwil an der Limmat Matriculation number: Field of study: Business Administration Number of semesters: 6 Submission date: July 11, 2008

2 Abstract- The reasons for using employee referrals are controversial. Some scientists suspect that employee referral can generate more suitable applicants than other recruitment channels. The aim of this work is to find out to what extent the employee recommendation is suitable for the search for suitable applicants. Based on the relevant scientific literature, the selection effects associated with the employee recommendation are first described. The reliability of the employee recommendation is then checked as an indicator of the suitability of an applicant. Finally, the relevant operational factors that promote or reduce the use of the employee recommendation are discussed. The knowledge gained suggests that the selection effects mean that the recommended applicants are usually more easily socialized than those not recommended. However, no evidence was found that recommended employees perform better than those who are not recommended. In addition, the employee recommendation does not seem to be able to reach a large and diversified number of applicants. In addition, certain operational factors have a negative effect on the efficiency of the selection effects. This can explain why some companies use the employee recommendation more intensively than others. Abstract- Scholars argue about the reasons why Human Resources uses employee referrals. Some assume that employee referrals are able to generate more suitable applicants than other recruiting sources. Therefore, the aim of this paper is to find out, to what extent employee referrals are suitable for finding capable employees. Drawing on relevant scientific literature, the effects of selection, which are associated with employee referrals, are firstly described. Then, the reliability of employee referrals for predicting the suitability of a candidate is tested. Finally, some important operational factors that cause an increase, or rather a decrease, in the use of employee referrals are discussed. The results indicate that the effects of selection ensure an easier socialization of referred candidates compares to non-referred candidates, although there is no evidence that referrals perform better than non referrals. Moreover, employee referrals seem unable to reach a large and heterogonous number of applicants. However, some operational factors constrain the efficiency of effective selection. This can explain why some companies use employee referrals more intensively than others.

3 Contents 1 Introduction Current state of research Employee recommendations in recruiting Recruiting in human resources Problem of asymmetrical distribution of information Understanding of the terms of employee recommendation Employee recommendation as a recruiting channel Selection effects of employee recommendation Concept of selection Information advantages Thesis evidence Selection effect Different accessibility Thesis Evidence Selection effect Homophilia thesis Evidence effect Selection effect Applicant pool Employee recommendation as an indicator of the suitability of applicants Concept of suitability Recruitment frequency Concept of recruitment frequency Findings from research Assessment of findings ... 25

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5 7.2 Relevance of the findings Stimulus for further research efforts Conclusion to the employee recommendation Bibliography ... 66

6 Introduction 1 Introduction It s not what you know but who you know that matters, this is a persistent cliché about the job search (Mouw, 2003, p. 868). In fact, it seems that many job seekers know the right people. About half of all American workers owe their jobs to help from friends or relatives (Corcoran, Datcher & Duncan, 1980, p. 34; Montgomery, 1991, p. 1408; Mouw, 2003, p. 868). Efforts by employees to ensure that their acquaintances are preferred when filling vacancies do not always seem to meet with rejection on the part of companies. The example of an American company at the time of the Internet boom around the year 2000 can be cited as an extreme case. This company rewarded every employee for placing ten applicants with a Ferrari (Jetter, 2003, p. 40). Employees can therefore be actively used as intermediaries for the search for applicants. The employee recommendation provides the framework for this. It seems to be a very popular method for recruiting new workers. In May 1996, a ranking of the most efficient recruiting methods was published in the journal HR-Focus, based on a survey of HR managers. The employee recommendation took first place (Terpstra, 1996, p. 16f.). The reason for the popularity of the employee recommendation is controversial among researchers. Some scientists attribute the use of employee recommendations to the quality of the associated selection effects. They should be responsible for ensuring that the applicant pool only includes those job seekers who are particularly suitable for filling the vacancy (e.g. Fernandez, Castilla & Moore, 2000, p. 1291ff .; Kirnan, Farley & Geisinger, 1989 , P. 295f .; Rees, 1966, p. 561ff .; Yakubovich & Lup, 2006, p. 710f.). As a result, the uncertainty about the wrong filling of a position could be reduced through the use of employee referrals. Mencken & Winfield (1998), who interviewed HR managers about recruiting methods, came to a different conclusion. They stated that recruiting follows routinized and customary practices or perceptions of advantages, rather than a rejection of some techniques on the basis of concretely identified disadvantages (p. 145). Simon and Warner (1992) also consider the possibility that favoritism could be responsible for the preferred use of employee recommendations (p. 307). If the employee recommendation is actually only used on the basis of habits, belief in avoidable advantages or favoritism, then 1

7 Introduction this is alarming. Because personnel decisions are among the most important and at the same time most demanding decisions in companies (Jetter, 2003, p. 1). The competitiveness, performance and development potential of a company directly depend on them (Bertehl & Becker, 2007, p. 550f .; Jetter, 2001, p. 1; Shahidi, 2004, p. 19; Stock-Homburg, 2008, p . 11). The aim of this work is therefore to use the relevant scientific literature to find out to what extent the employee recommendation is actually suitable as a recruiting method to acquire suitable applicants. For this purpose, this work deals specifically with answering three questions. First of all, it should be clarified to what extent a pre-selection of applicants takes place through employee recommendations. In addition, it is important to check whether the employee recommendation is a reliable instrument for drawing conclusions about the suitability of an applicant. And finally, it should be determined in which way operational influences affect the use of the employee recommendation. The concrete procedure for dealing with these questions is as follows: In Chapter 2, the current state of research is recorded and this work is classified in the research process. In Chapter 3, the employee recommendation is introduced as a term, defined and embedded in its larger context. Chapter 4 is devoted to answering the question to what extent a preselection of applicants can be expected through the employee recommendation. The concept of selection is explained for this purpose. Then the individual selection effects associated with the employee recommendation are described and their implications for the applicant pool are shown. Chapter 5 looks for an answer to the question of whether the employee recommendation has proven itself as a prognostic tool for the suitability of the applicants. For this purpose, the suitability as a term is first specified. Then the impact of the employee recommendation on individual criteria that indicate the suitability of an applicant is discussed. Ultimately, it is recorded which conclusions the employee recommendation allows for the suitability of an applicant. Finally, in Chapter 6, the question of what effects operational influences have on the use of the employee recommendation is taken up. First, the operational influences are differentiated from other influencing factors. The use of the employee recommendation is then discussed depending on the most important operational influences. Finally, it is recorded what significance the operational influences have in relation to the employee recommendation. In the last chapter, chapter 7, the use of the 2nd

8 State of research Employee recommendation for personnel recruitment assessed on the basis of the findings from the previous chapters. It remains to be seen whether the first place in the employee recommendation in the ranking of recruitment methods can really be traced back to a comparatively better suitability of the recommended applicants for the vacant positions or whether the reasons for this can be found elsewhere. First of all, however, there is an inventory of the current research findings in the area of ​​employee recommendation. 2 State of research Both in economics and in sociology one finds employee recommendation as a research subject (Ioannides & Datcher Loury, 2004, pp. 1061f.). However, the research interests of the two disciplines each have a different historical background. One of the pioneers in economic research was Albert Rees (Jones, 1989, pp. 277f.). In his work he showed the advantages and disadvantages of the various recruitment methods, but without empirically substantiating his findings. His work can be classified into a series of other papers that dealt with what information companies and job seekers have about each other (Rees, 1966, pp. 559f.). This type of study has its origins in the 1930s, when economists in particular began to wonder why individual groups are more affected by unemployment than others (Granovatter, 1995, p. 5). In recent years in particular, the access of minorities to employee recommendations has been increasingly focused in this context (e.g. Ioannis & Datcher Loury, 2004, p. 1057f .; Lechner, 1998, p. 122f.). In the 1980s, economic research in the field of recruitment methods was intensified. At that time, attempts were made to find out which recruiting method would produce the most suitable applicants. For this purpose, variables such as work performance or fluctuation of the respective applicants were recorded together with the method by which they were recruited. The aim was to identify the recruiting method that could be used to address the most suitable applicants (e.g. Breaugh, 1981, pp. 142ff .; Caldwell & O'Reilly, 1985, pp. 934ff .; Decker & Cornelius, 1979, 463f. ; Krinan et al., 1989, pp. 293ff.). The results of some studies clearly indicated the benefits of employee recommendations. Hypotheses arose with which one tried to explain this. In particular, assumptions were made about the way in which the employee recommendation preselected applicants. The theses were tested empirically, whereby 3

9 State of the art some have been confirmed and others not (e.g. Breaugh & Mann, 1988, p. 261ff .; Tylor & Schmidt, 1983, p. 343ff .; Williams, Labing and Stone, 1993, p. 163ff. ). Sociology has been concerned with the development of personal relationships and networks since the 1950s (McPherson, Smith-Loving & Cook, 2001, p. 417f.). Sociologist Mark Granovetter was one of the first to relate the sociological findings to what was happening in the labor markets. In 1974 he published a comprehensive work called Getting a Job, in which he used empirical studies to show the importance of social contacts for job search (Granovetter, 1995, p. 3ff .; Mencken & Winfield, 1988, p. 135f.). Sociologists also increasingly began to propose theses about the selection effects associated with employee recommendation (e.g. Hanson & Pratt, 1991, p. 229ff; McPherson et al., 2001, p. 415ff .; Reagans, 2005, p. 1374ff.) . Some of the theses from sociology and economics are largely accepted today and have already found their way into textbooks in some cases (e.g. Berthel & Becker, 2007, p. 259; Jetter, 2003, p. 40; Shahidi, 2004 , P.48f.). In contrast, the beneficial effects of the employee recommendation on the aforementioned factors, such as work performance and fluctuation, are controversial. Some studies questioned them critically or even refuted them empirically (e.g. Datcher Loury, 2006, p. 300; Griffeth, Hom, Fink & Cohen, 1997, p. 19ff .; Williams et al., 1993, p. 163ff .). Mencken and Winfield (1998) also criticize the fact that although female employees' job search behavior has often been the subject of research efforts, the employer's perspective has been neglected. It is observed that some companies use the employee recommendation more intensively and others do not, but little is known about why this is so (p. 135f.). Some recent studies take an employer perspective by transferring social capital considerations to employee recommendation (e.g. Fernandez et al., 2000, p. 1298ff .; Mouw, 2006, p. 79f.). With this approach, one compares the investment of the employee recommendation with the return. For this purpose, for example, the bonus payments for successful recommendations can be compared with the saved recruitment costs (Fernandez & Castilla, 2001, p. 84f.). This work is mainly dedicated to the qualitative aspects of employee recommendation and neglects the social capital approach. Especially since there is great agreement that the employee recommendation is one of the most cost-effective recruiting methods (e.g. Mencken & Winfield, 1998, p. 136; Rafaeli, Hadomi & Simons, 2006, p. 356; Robertson, 2005, p. 30; Simon & Warner, 1992, p. 308; Wood, 1985, p. 112). An attempt is made to the extent that 4

10 employee recommendations to make a research contribution in the recruitment process, rather than making the benefits of the employee recommendation assessable from the employer's perspective. To do this, it is necessary to combine the individual findings of the relevant literature so that an overall picture emerges. The next part of the work begins with creating a comprehensive understanding of the employee recommendation as a basis for the actual research efforts. 3 Employee recommendations in recruiting There are many ways in which companies can recruit new employees (cf. Berthel & Becker, 2007, p. 247ff.). One of them is the employee recommendation. It should now be made comprehensible and assignable as a term. This lays the foundation for further explanations. Specifically, the concept of personnel recruitment is explained in Chapter 2.1 and classified in human resources. Chapter 2.2 deals with the problem of asymmetrical information distribution when searching for applicants. The employee recommendation is introduced and defined in Chapter 2.3. Finally, in Chapter 2.4, their function as a recruiting channel is presented. 3.1 Recruiting in human resources Recruiting, recruiting and recruiting are synonyms for one of the main tasks in human resources. Personnel recruitment includes all activities to provide a company with a sufficient number of employees who have appropriate professional and social qualifications (Stock-Homburg, 2008, p. 104). As a component of human resources, recruiting is one of the areas of business administration that deals with people as employees. Employees play a key role in the company's service creation process because they make their work available as a production factor. The aim of human resources is to ensure that a sufficient number of adequately qualified employees are deployed in the right place at the right time. To achieve this, human resource management must perform six tasks. In addition to personnel recruitment, there are: personnel requirements planning, personnel deployment, personnel motivation, personnel development and personnel lay-offs (see for more information Thommen, 2004, p. 903ff.). The recruitment of personnel can generally take place in-house or on the external labor market. In-house procurement includes, in extracts, career-oriented transfers, overtime and an increase in work intensity (cf.

11 Employee recommendations in recruiting rend Hentze & Kammel, 2001, p. 265ff.). This thesis deals with the procurement of labor on the external labor market.Jetter (2003) divides the recruitment of external personnel into a recruiting process with six phases. In the first phase, the planning, a decision is made based on the findings of the identification of personnel requirements as to how exactly the individual positions should be filled. In the second phase, image promotion, efforts are made to improve or maintain the employer reputation. The third phase is called the applicant search. It uses measures aimed at potential applicants in order to motivate them to actually apply. In the fourth phase, selection, internal tools are used to identify the most suitable candidate from the pool of applicants. The fifth phase, hiring, involves negotiating and concluding the employment contract. And finally in the sixth phase, the retention, an attempt is made to keep the employee in the company through incentives. Whereby the loyalty does not count in the narrower sense of the personnel recruitment. However, Jetter lists it as the sixth phase, as it has a significant impact on recruiting success (p. 20f.). Filling a position with a suitable employee is not a problem. Companies don't see at first glance whether they are qualified for a position or not. It takes an effort to find this out. The next chapter is devoted to this topic. 3.2 The problem of asymmetrical information distribution The entire recruiting process must be geared towards filling vacancies with suitable employees. Wrong decisions in filling vacancies can result in considerable follow-up costs. These include, for example, the cost of replacing an employee or the negative spillover effects of the hired person on the older workforce (Stock-Homburg, 2008, p. 105). The main cause of wrong appointments lies in the asymmetrical distribution of information on the labor market. Job seekers and companies may have private information. An applicant knows his personal and professional strengths and weaknesses as well as his motivation better than the potential future employer. This, on the other hand, has private information in relation to the working conditions, the working atmosphere, the opportunities for advancement, etc. In order for companies to be able to decide which applicant is right for a position, they would need the private information of the applicants 6

Knowing 12 employee recommendations in recruiting. The same applies to job seekers considering the decision to which company they should apply to. However, the information asymmetries are never completely overcome. Because the disclosure of private information is associated with efforts that result in costs. Provided that one assumes self-serving, rationally acting companies, these costs are compared with the expected value of the costs of an incorrect staffing. At a certain point, exposing private information is no longer worthwhile. A person's attitude can therefore be equated with an investment under uncertainty. The same applies, of course, from the applicant's point of view, because in the event of a wrong decision she also has to bear follow-up costs (Varian, 1999, p. 617ff .; see also Spence, 1973, p. 356ff .; Staloner, 1985, p. 255f. ). The employee recommendation is an element of personnel recruitment and must therefore also be viewed in its context. The term employee recommendation is explained below. 3.3 Conceptual understanding of the employee recommendation The employee recommendation gives employees the opportunity to recommend someone from their circle of friends for an open vacancy. As a result, employees act as intermediaries between job seekers and employers. Individual employees look for suitable applicants within their private network of acquaintances, friends and relatives. On the one hand, he takes on an information function by informing the potential applicant of an open vacancy. On the other hand, he also makes an initial preselection. He only informs those people about the vacancy that he would be willing to recommend if they would be interested in the position. The employee vouches for the suitability of a recommended applicant to the employer with his name (Haulman, Raffa & Rungeling; p. 66f .; Shahidi, 2004, p. 48f .; Yakubovich & Lup, 2006, p. 710f.). When looking for possible applicants, the employee uses his knowledge of the behavior and character of his acquaintances. The company can benefit indirectly from information to which it would otherwise have no or only difficult access (Kirnan et. Al., 1989, p. 295f; Mencken & Winfield, 1998, p. 136f .; Rees, 1966, p. 561ff .). However, the potential applicant may also gain knowledge about the company through the employee that would otherwise have been denied her (Breaugh & Mann, 1984, p. 261; Taylor & Schmidt, 1983, p. 344) If the recommendation is successful, the recommending employee receives a bonus. With successful usually the actual setting of the 7th

13 employee recommendations in the recruitment recommended candidate is understood (e.g. Fernandez et al., 2000, p. 1291; Tylor & Schmidt, 1983, p. 344). In order to qualify an employee referral as such, however, bonuses are not a prerequisite. Therefore, in this thesis we refrain from dealing with them intensively. It has now been clarified what is meant by the term employee recommendation. The following chapter shows which role she has in recruiting. 3.4 Employee recommendation as a recruiting channel When recommending employees, employees inform selected people from their circle of acquaintances about vacancies. These people are potential applicants. If they decide to apply, they become an actual applicant. The employee recommendation is therefore classified in the applicant search phase of the recruitment process (Jetter, 2003, p. 20f.). The intermediaries between companies and possible future employees used during the search for applicants are also referred to as procurement channels or recruitment channels. In addition to employee recommendations, they also include employment agencies, job advertisements, headhunters, etc. It is in the nature of the recruitment channels that they have a specific selective effect. You only ever reach a certain group from the population of job seekers. Only this group finds out about the open vacancy (Berthel & Becker, 2007, pp. 247ff.). There are several procurement channels through which potential applicants can be approached on the external labor market. The recruiting channels are divided into two groups, the formal and the informal channels (Mencken & Winfield, 1998, p. 126ff .; Stock-Homburg, 2008, p. 128f .; Rees, 1966, p. 339). The formal channels include, on the one hand, those channels through which the job seeker does not make any direct contact with a person. This is the case, for example, with job advertisements. On the other hand, headhunters and employment agencies are also formal channels. Because between these institutions and the employer there is a contractual relationship which they specifically provide for the role of the intermediary. Job seekers maintain impersonal contact with these institutions. For informal channels, on the other hand, it is characteristic that personal relationships between job seekers and intermediaries play a role. The employee recommendation is therefore a classic informal channel (Granovetter, 1995, p. 10ff.). 8th

14 Selection effects of the employee recommendation The employee recommendation is not only used as a recruiting channel. The HR manager can question the recommending employee in detail about the recommended applicant and thus obtain additional information. In this sense, the employee recommendation is understood as a selection tool. However, the recommending employee may have reasons not to disclose private information about the recommended candidate. Perhaps this is why HR managers often do not know how to use the option of more detailed reference information (Fernandez & Castilla, 2001, p. 90). Many companies prefer to rely on their traditional selection tools and let the recommended applicants go through the same selection process as those not recommended (Wood, 1985, p. 110ff.). Furthermore, in most research, employee recommendation is only viewed as a recruiting channel (e.g. Breaugh & Mann, 1984, p. 261ff .; Kirnan, Farley & Geisinger, 1989, p. 293ff; Mencken & Winfield, 1998, p. 135ff .; Saks, 1994, p. 225ff .; Taylor & Schmidt, 1983, p.343; Williams, Labing & Stone, 1993, p. 163ff.). For these reasons, the possibility of reference information from the recommending staff is neglected in this thesis. Since the employee recommendation was made tangible and assignable as such, its suitability as a recruiting channel can now be examined. In the next part of the thesis, the selection effects associated with the employee recommendation are first considered. 4 Selection effects of employee recommendation Employees neither inform someone by chance about an open vacancy, nor do they accidentally make a recommendation to someone. By the time a candidate is proposed to the relevant HR manager, certain selection processes have already taken place (Shahidi, 2004, p. 48f.). If the employee recommendation is assumed to have specific selection effects, then it is assumed that the pool of recommended job candidates is characterized by special characteristics. This chapter therefore tries to answer the question of the extent to which a pre-selection of applicants takes place through employee recommendations. For this purpose, the term selection is first defined more precisely in 4.1. Then four theses are presented that make assumptions about the selection effects of the employee recommendation. Specifically, there are the information advantage thesis in 4.2, the thesis of different accessibility in 4.3, the homophilia thesis in 4.4 and the reciprocity thesis in 4.5. The evidence of the respective theses is discussed individually as well as the selection effects that follow from them. 9

15 Selection effects of the employee recommendation Finally, the implications for the applicant pool are summarized in 4.6. 4.1 Concept of selection Selection is the process in which, from a certain number of objects, those are selected which, due to their specific characteristics, are particularly suitable for a given purpose (Duden Fremdwörterbuch, 1997, p. 736). Companies therefore select those candidates from their pool of applicants who they believe are particularly suitable for filling the advertised position. But even job seekers only consider those vacancies that they think will meet their needs. So companies select applicants and applicants select companies. If you take the company perspective, the term selection only includes the efforts of the company to select applicants. If, on the other hand, a job seeker makes an effort to filter out the offers that are suitable for them, this is referred to as self-selection (Ryan, Sacco, McFarland & Kriska, 2000, p. 163f.). Self-selection can take place during different phases of the application process. In the first phase, a potential candidate decides whether she wants to apply for an advertised position or not. But she can also leave the pool of applicants in the last phase by not signing the employment contract (Bretz & Judge, 1998, p. 330). The filling of an open position therefore always comes about through selection efforts on the supply and demand side (Herriot, 2002, p. 385). As a rule, there are also certain difficulties associated with selection and self-selection, as there is an asymmetrical distribution of information on the labor market (Varian, 1999, p. 617f.). Companies are usually not aware of all the relevant characteristics of an applicant. On the other hand, the applicant does not have extensive knowledge of all the essential circumstances relating to the position and the company. This asymmetrical distribution of information can lead to adverse selection effects on both sides. An adverse selection is understood to be a selection that is undesirable from the company's point of view. Here, the company systematically fills positions with unsuitable applicants due to deficiencies in the selection process. In contrast, adverse self-selection occurs when qualified candidates systematically decide to drop out of the pool of applicants or not to apply in the first place (Ryan et al., 2000, p. 163). 10

16 Selection Effects of Employee Recommendation Now that the terms selection, self-selection, adverse selection and adverse self-selection have been clarified, the specific selection effects of employee recommendation can be discussed. 4.2 Information advantages thesis In the 1980s, many researchers examined the employee recommendation in relation to the flow of information that takes place between the recommended candidate and the recommending employee. This gave rise to the information advantage thesis, which is known in English under the names Realism-Hypothesis and Met-Expectation-Hypothesis (e.g. Breaugh & Mann, 1984, p. 261; Caldwell & O Reilly, 1985, p. 934; Griffeth, Hom, Fink & Cohen, 1997, p. 19f .; Mencken & Winfield, 1996, p. 137; Taylor & Schmidt, 1983, p. 344). Employees who would like to propose a candidate get in touch with him and inform him about the open position. As part of this personal contact, the potential candidate has access to in-house knowledge. For example, he can find out peculiarities about future supervisors. This internal company knowledge is generally not passed on via formal recruiting channels (Mencken & Winfield, 1996, p. 137). This in-house knowledge means that applicants can have relatively precise ideas about what to expect at the new job. The employee recommendation is therefore a recruiting channel that can provide a job seeker with a lot of relevant information about the open position and the future company. This information ultimately serves as the basis for deciding whether or not the position is suitable for her (Breaugh & Mann, 1984, p. 261; Taylor & Schmidt, 1983, p. 344). Fisher, Illigen and Hoyer (1979) also point out that the credibility of the individual recruitment channels varies. More weight is given to information from credible sources, with acquaintances being particularly credible with regard to job information. Accordingly, the applicant takes this information into account when making a decision for or against an application (p. 94f.). In summary, the information advantage thesis predicts that applicants acquired through employee recommendation will have an advantageous basis for making a decision for or against an application. If a job seeker decides to apply and, in connection with this, to take advantage of the recommendation, the position to be filled will actually appeal to her with a certain degree of certainty. 11

17 Selection Effects of Employee Recommendation Evidence Breaugh and Mann (1984) found in a study with social workers that the applicants recommended by employees started their job with more realistic ideas than the others (p. 262ff.). The same result was obtained by Caldwell and O Reilly (1985) in a survey among students in the last semester (pp. 936ff.). As well as Saks (1994), who carried out a study with amusement park employees (p. 231ff.). Furthermore, Fisher et al. (1979) in a survey among students that the probability of considering a company as a future employer is different for the individual recruitment channels. This was comparatively high for the employee recommendation. Because in general, acquaintances who are already working in the relevant company are considered trustworthy. Job seekers therefore like to base their decisions on their information (p. 96ff.). Gatewood, Gwoan and Lautenschlager (1993), who also carried out a survey among students in the last semester, came to the same conclusion (p. 461ff.). Taylor and Schmidt (1983) evaluated the data that they had collected during three hundred vacancies in a packaging company. They came across only little evidence for a comparatively more accurate information base through employee recommendations. The researchers justified this by saying that employees were offered bonus payments for successfully recommended candidates. This is said to have moved them to conceal decision-relevant negative aspects about their future position from job seekers so that an application can be made (p. 352). Fernandez et al. (2000) stated: Referrals have no better information about the job than do nonreferrals (S 1351). The authors came to this conclusion in the course of a study on personnel recruitment in a call center. However, bonuses were also paid here for successfully recommended candidates (Fernandez et al., 2000, p. 1298ff.). All in all, the recommending employees are generally seen as a credible and important source of information for in-house knowledge.However, the recommending employees can control the information that is sent to the job seekers. Especially in connection with bonus payments, this leads to information being falsified. Otherwise, however, the information advantage thesis seems to be confirmed and job seekers have an advantageous decision-making basis for or against an application thanks to access to in-house knowledge. 12th

18 Selection Effects of Employee Recommendation Selection Effect Assuming the information advantage thesis proves to be true, a recommended applicant has a more advantageous information base than a non-recommended one. Taylor and Schmidt (1983) therefore assume that the recommended applicants were more effective in self-selection than those not recommended (p. 344). Because recommended job seekers are better able to judge whether the open position meets their requirements or not due to the more advantageous decision-making basis (Bretz & Judge, 1998, p. 330). This gives the company a certain certainty that the recommended candidate will ultimately accept the job offer and not terminate it shortly after starting the job due to unfulfilled expectations (Saks, 1994, p. 288). Alternatively, Bretz and Judge (1988) put forward the thesis that when particularly well-qualified candidates are confronted with negative job information, they are more willing to leave the pool of applicants and look elsewhere. They justified this with the fact that well-qualified candidates can choose between several offers and therefore do not have to take into account those that appear bad. Whereby they assumed that more and more unfavorable information reaches the job seeker via the employee recommendation, since the flow of information via this channel cannot be controlled by the companies themselves. Therefore, they feared an adverse self-selection in the presence of disadvantageous information. However, they were unable to provide evidence of this (p. 331ff.). In principle, it can therefore be assumed that recommended applicants have more information relevant to decision-making than those not recommended. As a result, more effective self-selection has taken place among them. But not only the flow of information itself plays a role in the selection effects of the employee recommendation. The question must also be asked which people can be reached as recipients via the employee recommendation. This is where the next chapter picks up. 4.3 Different accessibility thesis The thesis of different accessibility is known in English under the name Individual-Differce-Hypothesis. It was created at the same time as the Realism Hypothesis in the 1980s. Specifically, the proponents of this thesis assume that the employee recommendation, like any other recruitment channel, addresses a specific target group of job seekers (Braugh & Mann, 1984, p. 262; Griffeth et al, 1997, p. 19f .; Taylor & Schmidt, 1983 , P. 345; Williams et al., 1993, p. 163). 13th

19 Selection effects of employee recommendation Job seekers differ in their search behavior. If one assumes similar search behavior to individuals of the same type, a recruiting channel reaches a certain type of candidate. This means that the target group that is addressed via the employee recommendation can be characterized on the basis of certain features that distinguish them from target groups of other recruitment channels (Taylor & Schmidt, 1998, p. 345; Williams et al., 1992, p. 163 ). These characteristics can relate to character characteristics, qualifications or demographic characteristics of applicants (Griffeth et al., 1997, p. 19f.). As a result, a different recruitment channel must be selected depending on the desired characteristics of an applicant. Which type of applicants the employee recommendation specifically addresses is not answered by the thesis of different accessibility. The original idea was that recommended candidates were more motivated to achieve than not recommended (Breaugh & Mann, 1984, p. 262). However, it was not possible to prove this (Taylor & Schmidt, 1983, p. 346ff.). Most of the more recent studies that are taken up below, on the other hand, relate to characteristics of a demographic nature, such as age, gender, ethnicity, education, etc. Findings about the demographic characteristics of the target group addressed by the employee recommendation can be of particular interest in terms of diversity. Diversity is understood to mean the composition of work groups or entire workforces made up of women employees who have very different demographic characteristics. Since people of different ages, genders, ethnicities, etc. often have different backgrounds and values, it is hoped that these working groups will provide particularly creative solutions to complex problems (see further Eyl & Thomas, 2001, p. 163) Evidenz Ioannides and Datcher Loury ( 2004) summarize in a comparison of several studies that men get a new job somewhat more through personal contacts than women. Regardless of gender, younger and well-educated people use their circle of acquaintances less when looking for a job than other sections of the population (p. 1057f.). Hanson and Pratt (1991) evaluated a total of 620 surveys of households in Worcester, America. They found that women are more likely to use contacts from their local geographic area and their social life when looking for a job, while men more often bring in acquaintances from working life, and their contacts are more geographically diversified. The authors therefore come to the conclusion that the positions - 14

20 Selection effects of the employee recommendation search of women via networks often results in a more restricted offer than is the case with men (p. 230ff.). Such limited knowledge of open vacancies can be seen as one of the causes of structural discrimination against individual population groups (Lechner, 1998, p. 122f.). Peterson, Saporta and Seidel (2000), on the other hand, found no evidence that women were disadvantaged when looking for jobs through private contacts. The scientists analyzed employee recommendations in an American high-tech company and said: What we observe is an overwhelmingly white young girls and boys network to which especially blacks but also other minorities have less access, men and women alike (p. 810). Green, Tigges, and Diaz (1999) also examined the issue of limited minority access to job vacancies through private networks in the cities of Atlanta, Boston, and Los Angeles. Most frequently the Latin American population group found a job through acquaintances, with 72.4%, with the Asian population group it was 50.5%, closely followed by the white population group with 47.9% and the Afro-American population group with 44.5% (p. 267ff.). However, this frequency distribution does not say anything about the quality of the position obtained through contacts. Marmaros and Sacerdote (2002) surveyed students at Dartmouth College in America on this topic and found that white, male students most often have contacts that help them to find a respected and well-paid job (p. 872ff.). It can be stated that the employee recommendation apparently appeals to certain groups of people more than others. This is particularly sensitive from the point of view of diversity, provided that vacant positions are only filled through this channel. A precise statement as to how the target group of the employee recommendation can be characterized cannot be made, neither in relation to demographic characteristics nor in relation to others. Who the employee recommendation actually reaches seems to be partly determined by factors such as the geographical area or the industry, which would explain the sometimes different results of the individual studies.Selection effect If the thesis of the different accessibility holds up to reality, it is determined by the choice of the employee recommendation come to a preselection as a recruiting channel. Because mainly relatives, the target group addressed by the employee recommendation, are informed about an open position. Only they can decide whether they want to apply for a position or not (Rafaeli et al., 2005, p. 357ff.). 15th

21 Selection effects of employee recommendation The company selects the job seekers here by only giving certain groups the opportunity to get into the pool of applicants at all. The applicant pool therefore only consists of candidates who have the characteristics specific to the target group. If the company uses the employee recommendation to address precisely those groups of people who are actually unsuitable for the vacancy, there is an adverse selection. Another thesis that deals with the recipients of employee referrals is the homophilia thesis. It will then be discussed. 4.4 Homophilia thesis The homophilia thesis found its way into sociology as early as the 1950s, when the development of friendships was examined. However, only more recent research has brought homophilia into connection with career-related contacts (McPherson et al., 2001, p. 417f.). The homophile thesis states that the more similar people are, the greater the likelihood that they will make and maintain contacts with one another. This similarity usually relates to demographic criteria (McPherson et al., 2001, p. 416; Reagans, 2005, p. 1374f .; Torres, 2007, p. 198). It is assumed that people with the same demographic characteristics often have the same attitudes and experiences. Since demographic characteristics are easier to measure, they therefore often serve as a surrogate for value settings. Different demographic characteristics therefore represent different values. The homophilia recorded using demographic criteria is therefore sometimes also referred to in English as value homophily (Ingram & Morris, 2007, p. 562). Employees recommend applicants from their circle of friends. According to the homophilia thesis, this circle of acquaintances consists of people with the same demographic characteristics and, accordingly, with the same values. Rees emphasized as early as 1966: Present employees tend to refer people like themselves (p. 562) Evidenz Cohen (1977) analyzed the behavior of clique formation among schoolchildren and discovered that the members within a clique have more demographic similarities with each other than with people outside (p . 227ff.). Members of cliques or groups of friends 16

22 Selection effects of the employee recommendation therefore show similarities which, according to the homophilia thesis, can be linked to demographic criteria. In a household survey in Worcester, Hanson and Pratt (1991) found evidence that women are more likely to obtain job-relevant information from other women and men more from other men (p. 234ff.). McPherson et al. (2001) also recognized that work-related relationships often arise between people of the same sex and the same education. He also pointed out that the younger and better educated the female employees, the greater the gender mix in their networks (p. 423ff.). Olk and Gibbons (1999) carried out a study in a course for the Master of Business Administration and found that the same ethnicity plays a role in the development of friendly relationships, but not the gender (p. M3f.). The group of acquaintances of employees who live in urban areas is generally considered to be better mixed in terms of ethnicity than among employees who live in rural areas (McPherson et al., 2001, p. 430). Basically, it can be stated that there seem to be certain preferences that make people more likely to maintain contact with people of the same sex, the same race and the same education. However, Reagans (2005) also points out that employees with the same demographic characteristics are more often compared with one another and are therefore more in competition with one another (p. 1375). This tends to hinder the establishment of contacts among similar individuals, but it can partly explain the contradicting results with regard to gender and race. Selection effect Female employees suggest applicants from their private circle of acquaintances. According to the homophilia thesis, this circle of acquaintances did not come about by chance. It is an association of people with the same value systems and thus with similar demographic characteristics. A selection of the candidates does not take place here in the traditional sense. Rather, the employees think about who they want to be friends with and who they don't. In this respect, the possible recommended candidates are limited to this circle of acquaintances (Mouw, 2003, p. 872). The recommended applicants accordingly have the same demographic characteristics and therefore the same values ​​as the recommending employee. Therefore, when recruiting staff using employee recommendation, it becomes a reproducibility 17