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Employee referrals help with retention when boosting work force

When Vancouver-based accounting firm Manning Elliott LLP was looking for a senior tax manager 18 months ago, a friend who worked there persuaded Sheryne Mecklai to meet a couple of the partners over coffee.

"She had identified me as a good fit for the firm, and the firm was a good fit for me. I think that's why it was so easy," said Ms. Mecklai, a chartered professional accountant who left a senior position at a bigger firm for what she felt was a better opportunity at Manning Elliott.

"She [the friend who provided the referral] was very honest with me. She told me the pros, the cons, the things that are different, the things that are better. It's been good," said Ms. Mecklai, who also works as a tax tutor for Chartered Professional Accountants Canada (drawing attendees from law firms and the Canada Revenue Agency as well as fellow accountants).

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For all the advances in recruitment technology, informal networks still account for roughly 50 per cent of hires, according to a new University of Toronto study on the value of hiring through employee referrals. While what you know definitely matters, whom you know counts for a lot too, as more employers deploy their own employees as talent scouts to fill positions at all levels of their organizations.

Applicants recruited as a result of employee referrals are "substantially more likely to be hired" than non-referred applicants, the U of T researchers found in their examination of nine large U.S. firms in three industries – high tech, trucking and call centres. The study, published earlier this year in the Quarterly Journal of Economics, also found that "high-ability workers are more likely to make referrals" than their less able colleagues, and they tend to refer candidates of similar ability. Furthermore, retention rates are greater for people who join a firm where they already know someone and have a good idea of what they are getting into. Canadian HR experts say smaller Canada-only surveys have provided similar results.

This resonates with Alden Aumann, a managing partner at Manning Elliott. "Our people have a vested interest in making sure we have a good team, because they are going to be working with these guys. … "In terms of longevity, we have some people who come to us through that [employee referral] route who end up being partners," Mr. Aumann said in an interview.

Softchoice Corp., a Toronto-based information technology and services company, relies heavily on employee recommendations to recruit top-quality candidates, said Scott Reid, director of talent management at the rapidly growing firm.

"We are on pretty much every job board, we now have close to 100 jobs that we are hiring for today. Likely 30 or 40 of those will come through this [referral] process. It just takes the heat off us trying to find people who haven't heard of us," Mr. Reid said in an interview.

Jeremy Sherman, recently hired as a sales account manager, was brought in by a friend he had previously worked with at an e-commerce firm. Mr. Sherman, who played quarterback on the University of Guelph football team and graduated with an honours degree in political science in 2013, is still in the early stage of his career. The referral gave him a foot in the door and an edge over other applicants, he said.

"It's definitely hard for others who are just applying on LinkedIn or Googling for a new job or shooting a cold résumé without having the chance to actually speak to somebody and show what they have to offer," Mr. Sherman said in an interview.

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Brian Kreissl, a human resources product development manager at Thomson Reuters and a regular contributor to Canadian HR Reporter, said employee referrals are a good source of candidates. "Since their reputations are at stake, existing employees are unlikely to recommend someone they wouldn't personally vouch for," he said. But if employers rely too heavily on this method, "you can get a work force that is a little too homogeneous," Mr. Kreissl said.

While a large percentage of hires at Canadian Western Bank – 40 per cent or more – come by way of employee referral, the Edmonton-based bank also taps a number of other sources to find diverse candidates with a strong commitment to client service, said Kelly Blackett, executive vice-president of human resources. "We certainly do lots of online recruiting, we have [postings] on our website, we do career fairs, we hire a number of folks through our early pipeline program – we will go out and do campus hiring," she said. "You don't want to do all 'like-me' kind of hiring."

At Canadian Western Bank, employees do not always have a close personal connection with the candidates they are referring, Ms. Blackett added. "Sometimes, when they have had really great service at a restaurant or a retail operation, they will talk to them about applying at the bank."

This is also the case with employee referrals at Ottawa-based Shopify, a booming e-commerce enterprise where everyone on staff is in recruitment mode, said Doug Tetzner, the firm's director of talent acquisition. "We will actually get a lot of referrals from employees for people they have found on the Internet. They read a blog, they read the background and will pass that along, saying 'I don't know this person, but what they are doing at XYZ looks very interesting,'" Mr. Tetzner said.

And – heartening news for people who don't have an in – Shopify reads every application that comes its way.

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