More companies hiring through internal referrals, online applications carry a stigma

This might help explain why the ranks of long-term unemployed have risen: more companies are finding new employees through referrals from current employees.

The trend, experts say, has been amplified since the end of the recession by a tight job market and by employee networks on LinkedIn and Facebook, which can help employers find candidates more quickly and bypass reams of applications from job search sites like

Some, like Ernst & Young, the accounting firm, have set ambitious internal goals to increase the proportion of hirings that come from internal referrals. As a result, employee recommendations now account for 45 percent of nonentry-level placements at the firm, up from 28 percent in 2010…

The company’s goal is 50 percent. Others, such as Deloitte and Enterprise Rent-A-Car, have begun offering prizes like iPads and large-screen TVs in addition to traditional cash incentives for employees who refer new hires.

This sounds like a sort of Granovetter social network job hunt run amok: companies are looking for ways to minimize bad hires but in doing so, they are relying more and more on their current employees which freezes out people outside these social networks. But, it also suggests a job hunting strategy beyond Internet sites: people looking for work should look to impress their contacts who are currently working. This could be helpful to a lot of job searchers as it would cut down on online applications, cover letters, and the “black hole” (as it is called in the article) where applicants get very little feedback.

Here is a little bit about the advantages of companies hiring referred employees:

Referral programs carry important benefits for big companies. Besides avoiding hefty payouts to recruiters, referred employees are 15 percent less likely to quit, according to Giorgio Topa, one of the authors of the Federal Reserve Bank of New York study.

Social networks improve business efficiency…but might also leave certain people out in the cold.

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