Ariza Joyce S Villareal

Network Effects

“No man is an island”. A very famous quote which reminds us that one cannot live by

themselves. We are designed to look for people or networks who can offer us companionship

and can satisfy our needs based on Maslow’s Hierarchy of Needs which revolves around love

and belongingness. In our journey to socialization, we have been exposed and have been

building networks since our developing days. The moment we start our first interaction at

home, we are already building our ‘network’.

In our educational life, we encounter people who we can relate to on different levels and tend

to call them peers at school. We join groups that speaks to our personalities, hobbies, and

interests and interact with peers that tends to share the same sentiments. More so, the

professionals we encounter at school and in our internship can also be considered as a good

network. As we graduate and in the course of our employment, we will meet people at work

that we will share a common interest with and/or we foster a good relationship with, these

networks are considered as our peers at work.

In our journey to finding employment, if we were able to build a strong relationship with the

aforementioned networks, they can be a huge advantage for us in finding jobs in the course of

our career. Those networks would be involved in different organizations that you could

potentially be a part of. In here, we highlight the advantages and disadvantages of networks

in relation to referrals especially in the workplace.

 More than the career sites and other sourcing avenue that Recruiters are using in finding

talents, referrals are what most companies consider as one of the most effective and reliable

ways of finding good talents. Labor economists have long recognized that employee referrals

is a great sourcing device in screening the pipeline which also have an impact in hiring

decisions.

As a former Recruiter and a present Hiring Manager myself, I can attest that those head-

hunters and hiring leaders who make hiring decisions have developed such a high level of

trust to candidates sourced from employee referrals because they believe that employees tend

to refer applicants similar to themselves. When a Recruiter receive a referral from a highly

skilled and highly productive employee, they are under the assumption that the said employee

would refer an equally skilled and productive applicant.

Moreover, most organizations believe that employee referrals is a trustworthy tool in hiring

applicants that shares the same values and goals with their current employee who’s referring

them. Since values and goals are important factors in ensuring a harmonious organizational

culture, it is a positive factor for hiring leaders in their hiring decisions to employ an

applicant that shares the same sentiments with them.

In the context of a certain international RPO workplace named Cielo, the company where I

am currently employed at, is big on employee referrals. In our 2021 data, 60% of employees

that were employed on the said year came from employee referrals. This candidate seeking

tool proves to be highly effective, at least for Cielo, due to the fact that it has maintained its

high referral fee to encourage employees to refer more individuals in their networks. The

value of its referral fee up to date is at Php 17,000 wherein the first half would be given on

the 1st month of the referred employee and the second half would be given on their 3rd month

of employment.
Though this referral scheme has been useful in the Cielo side of the business, our competitors

were alarmed with the sudden increase of their turnover rate. To address the alarming level of

their attrition due to the fact that majority of their leavers are moving to our organization due

to employee referrals, our direct competitor, specifically Alexander Mann Solutions (AMS)

decided to implement a non-compete agreement. They made their employees sign this

agreement wherein it states that they are not allowed to work with direct competitors within 6

months after they leave the company.

A network through referrals is a good source of applicants but is also a risky one. Recruiters

need to be mindful and get rid of their biases and judge the employee in the context of skills

and potential more than the characteristics of the applicants being peers with the employee

referring them. Although the assumption that an employee would refer an applicant similar to

them is strong, still, we cannot holistically rely on it. We must be wary of the possibility (and

the fact) that employees tend to refer applicants on the basis of financial rewards. There’s a

huge probability that employees just refer applicants in hopes that one of them would hit the

ball and actually get through the hiring process for their own financial benefit and not for the

betterment of company culture and human capital. Further studies in this argument are

strongly recommended.