Your Referral Program is Killing Diversity Efforts

Employee Referral Programs have long been hyped as the number one means to recruit great employees. Among the many reasons include:

  • Referred employees onboard quicker than other new employees
  • Referred employees’ retention is high
  • Referral programs are cost-effective means to get good candidates
  • Referral programs turn every employee into a recruiter thus widening HR’s reach

Bigger Bonuses for Diversity Referrals
Last summer, Intel doubled its employee referral bonus for diversity hires. This sounds like referral programs can improve diversity efforts, yet it highlights that referral programs are not bringing in a diverse crowd.  As Kara Yarnot of Meritage Talent Solutions wrote, “By putting a higher ‘bounty’ on a minority candidate, you are essentially saying that only money will drive employees to refer these people.”

Referrals Equal More of the Same
That is just one problem with Intel’s new bonus and it highlights an overarching problem with Employee Referral Programs in general. You get more of the same with Employee Referral Programs. More of the same was great when it was cool to have a lot of white men running everything. Those days have passed. Research shows time and again that more diverse organization are more successful, with success being defined as profitable.

Candidates referred by director level and higher employers almost always get hired. It happens 91% of the time. So 9 out of 10 candidates referred by upper management are hired. I imagine the 1 out of 10 who is not hired is presented in a manner to ensure the referral is not hired.

“Hey, this is my sister-in-law’s brother. I need to refer him so I continue to be welcome at Thanksgiving dinners. He’s a mess. Can you do me a solid and phone screen him but then not move him forward? I’ll owe you one.”

Leadership in business is overwhelmingly white men. According to McKinsey & Company, 97 percent of US companies have leadership that DOES NOT reflect the demographics of the US workforce. As the EEOC wrote back in 2006,

“Unless the workforce is racially and ethnically diverse, exclusive reliance on word-of-mouth should be avoided because it is likely to create a barrier to equal employment opportunity for racial or ethnic groups that are not already represented in the employer’s workforce.”

I’d like to add gender diverse to the EEOC’s comment. Hiring nine of 10 referrals from leadership is not an exclusive means of hiring but it is highly preferential. It highlights that such referrals trump other candidates including the candidates found and charmed through diversity programs. Diversity programs that have costs, efforts, and time associated to them.

Referrals and Diversity Recruiting Working Together
At its core, this preference of leadership referrals highlights how impossible it is to say no to the boss.  Put a process in place that acknowledges leadership referrals while not completely railroading every other recruitment method and no one will have to say no to the boss. I recommend:

  • Anonymous reviews of candidates’ resumes or applications by interviewers will enable all involved to give honest feedback on credentials.
  • Grading systems that give points for referrals and more points for referrals from leadership keep the “juice” of such referrals with candidates but does not squash all competition.
  • Provide the feedback and grades to referring leadership on their candidate, the winning candidate, and other finalists so they can accept or overrule hiring decisions not in the favor of their referral.

Having such a process takes the onus off  recruiters and hiring managers. Having such a process shines a light on the lost opportunity of hiring the referred candidate instead of the winning candidate. Then again, the referred candidate and the winning candidate could be one and the same.  Just not 91% of the time.


Women: Victims, Perpetrators, and Heroes of the Gender Pay Gap

Super BusinesswomanThe common misconception of the gender pay gap is that blatant discrimination is to blame. Since the Equal Pay Act was signed in 1963 the gender gap has gone from 59% to 77%, an improvement of less than 20 percentage points in 50 years. Even worse, the gap has stalled since 2004 at 77%. I’m not sure how predictions of it ending in 2058 can exist if it has stalled for a decade. Unless something changes 77 cents on the dollar is where we are and where we will stay.

Not only are women the victims of the gender pay gap but also knowingly or unknowingly its perpetrators. 40% of women who work are employed in management, professional, and related occupations. 70% of human resource personnel are women. Women-owned companies are one of only two sectors that have provided net increase in hiring since the recession. With so many women involved in hiring and pay decisions, how does the gender pay gap persist?   It’s probably not blatant discrimination.

Women business owners, managers, and human resource professionals need to make the decision to review hiring practices from a different perspective and change the situation. Each of these players has the power to impact her small queendom whether a company, department, or process. Granted for most companies, employees are the biggest cost of doing business. Finding even a small percentage savings in labor costs can have big impact on the company. I’m suggesting actively looking for the opposite but my suggestions will allow for a manageable hire by hire impact instead of a huge one time hit to labor costs.

Oh, and I’m as guilty as everyone else who has ever hired a person but I know I will no longer be. What I (and most employers) have viewed as a case-by-case situations are injustices that get compounded if I continue to hire by the currently acceptable hiring processes.  Here’s what I will do differently:

  1. I will no longer ask about current or previous pay because I know that the women and minority candidates have not been paid on par with white men. Considering pay as objective criteria not only hurts future pay but also the candidacy itself for women and minorities.
  2. I will no longer ask about the desired pay because I know women state 30% less than men on average.
  3. I will include the minimum pay for the job when I advertise it on a web site, a job site, or anywhere else because I know the first two elements of determining pay are 1) the market value of the job and 2) the company’s ability to pay. If a candidate is good enough to get the job then I should know what the absolute rock bottom pay is for that job. Also, pay transparency should start during the hiring process not after employment.
  4. I will no longer run credit checks on candidates because I know 1) 26% of credit checks have inaccuracies and 2) there is no correlation between a credit check and a good employee.
  5. I will never ask employees to keep their pay a secret for risk of getting fired because I know it is my responsibility to discuss the factors that determined an employee’s pay and not the employees’ responsibility to protect me from such conversations.

It costs nothing to implement these changes yet the positive impact can be immense from equal pay to improved employee loyalty to the improved bottom line of your company to the improved economy of the country.

We do not need to wait for congress to act or for the president to sign an executive order. Every woman who is involved in hiring can be a hero to all women by committing to changing the process every time there is a new job opening.   Will you dare to be such a hero? Will you commit to making change? Please leave a comment if you will.

Write Your Resume with Your Salary Negotiation in Mind

iStock_000019475455XSmallMost people do not negotiate their salary.  At least that’s what people think but the salary negotiation process actually starts in the job post.  Employers have the goal of getting the best candidate at the lowest acceptable pay so they begin the process by not including the salary range or minimum salary in the advertisements of a job opening.  I know one woman who looked at 189 job openings and only 4 had any reference to the pay.  Employers continue the process by getting your salary history and desired salary before they bring candidates in for an interview.  They refer back to this information after deciding whom to hire.  Often job offers will be 10% higher than the current salary or the stated desired salary regardless of where accomplishments, experience, and education put a person in the salary range for the job.

Salary Negotiation is Part of the Entire Hiring Process

Typically, candidates don’t think about salary negotiation until the job is offered to them.  At that point two-thirds of the negotiation has occurred.  Would a marathoner end the Boston Marathon after completing Heartbreak Hill? No! Heartbreak Hill is the climax of the race.  As the saying goes, it’s all-downhill from there but the finish line still needs to be crossed.  Similarly the job offer is the climax of the job search but we still need to finish the race by ensuring we get the market value for the job by making the business argument for higher pay.

Rewrite Your Resume Highlighting Financial Contributions

I recommend candidates incorporate salary negotiation throughout the entire process since the employer does.  Let’s start with the resume.  A good resume will be results oriented; include “action” words such as lead, initiated, designed, and completed; and will put some quantification to the results, i.e. 8% conversion rate, designed 10 new products, and processed 10% more.  These are great starts but one more element is needed to work towards the end goal of market value for the job – the money.

All employees are either part of a cost or revenue center.  To truly negotiate more pay one needs to show how s/he saves costs or adds revenue to the company.  Unfortunately, the resume rarely drills down to the dollars and cents of the candidate’s accomplishments.  The candidate should take the 8% conversion rate from the example above one step further and calculate the revenue generated with that 8% conversion rate.  For example, this conversion rate could mean 2000 sales at an average price of $1,000 per sale. The 8% conversion rate would equal $2,000,000 in sales.  Do you think $2,000,000 will resonate more than 8%?

Incremental Cost Savings and Revenue Growth are Important

Use some comparisons to add to the impact of the 8% conversion rate.  Is 8% higher than the company norm?  Is 8% higher than the industry average?  If so, what is the dollar amount of the unexpected incremental revenue from the 8% conversion rate? Let’s say the company average is a 4% conversion rate.  That means half of the revenue was expected and the other half  – $1,000,000 – was your amazing above-and-beyond contribution.

Resumes that Highlight Value Support Higher Salaries

Rewriting the resume will take some time and effort but the impact of such changes will be three-fold.  Firstly, you will stand out even more from the rest of the candidates helping you to get the next job sooner.  Secondly, you will be talking in the true language of business – money.  For a business, any business, to stay viable the profitability of the organization is tantamount thus money is always part of every business decision.  Hiring is a business decision and money is part of the decision so let’s talk money. Finally, you are laying the groundwork for the last stage of your salary negotiation.  The salary included in the job offer will be lower than the best salary available for the job and you will be ready for it.  You will simply emphasize what was in your resume instead of needing to start a new argument at this stage of the hiring process.   Stating you know the salary offered is lower than the market value PLUS you will give your new company the same kind of results as the extra $1,000,000 you provided your current employer will be a breeze. I bet the hiring manager can find $10,000, $20,000 or more in salary to gain $1,000,000 more in revenue.

© 2013 by Katie Donovan