Employee referrals as a screening device Articles uri icon

authors

  • EKINCI, EMRE

publication date

  • January 2016

start page

  • 688

end page

  • 708

issue

  • 3

volume

  • 47

International Standard Serial Number (ISSN)

  • 0741-6261

Electronic International Standard Serial Number (EISSN)

  • 1756-2171

abstract

  • This article develops a career-concerns model to examine the screening function of employee referrals. First, I show that employees' reputational concerns provide them with an incentive to refer high-ability applicants. This result explains how firms that offer fixed payments, rather than bonuses contingent on the referral's posthire performance, can elicit high-ability referrals from their employees. Second, I consider the promotion competition as a potential mechanism that creates a conflict of interest between a firm and its employees concerning referral hiring. I show that referrals may still serve a screening function even when the promotion competition distorts employees' referral decisions.This article develops a career-concerns model to examine the screening function of employee referrals. First, I show that employees' reputational concerns provide them with an incentive to refer high-ability applicants. This result explains how firms that offer fixed payments, rather than bonuses contingent on the referral's posthire performance, can elicit high-ability referrals from their employees. Second, I consider the promotion competition as a potential mechanism that creates a conflict of interest between a firm and its employees concerning referral hiring. I show that referrals may still serve a screening function even when the promotion competition distorts employees' referral decisions.This article develops a career-concerns model to examine the screening function of employee referrals. First, I show that employees' reputational concerns provide them with an incentive to refer high-ability applicants. This result explains how firms that offer fixed payments, rather than bonuses contingent on the referral's posthire performance, can elicit high-ability referrals from their employees. Second, I consider the promotion competition as a potential mechanism that creates a conflict of interest between a firm and its employees concerning referral hiring.

keywords

  • old boy networks; social networks; call center; job; incentives; performance; promotion; contracts; earnings; tenure