Harvard Business Review: Build a Stronger Employee Referral Program
Harvard Business Review: Build a Stronger Employee Referral Program
Kate Gautier, Lalith Munasinghe (May 26, 2020)
You’ve probably heard that internal referrals result in better hiring outcomes. But not all referrals are equal. The stronger the referrer’s connections to the company and the candidate, the better a matchmaker the referrer should be. And, by extension, the more valuable the employee they are recommending.
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Five things we learned from employees adapting to WFH during COVID-19
Five things we learned from employees adapting to WFH during COVID-19
Lalith Munasinghe, Kate Gautier (July 2020)
The COVID-19 pandemic has upended working arrangements for millions of workers around the globe. There is significant uncertainty surrounding the work-from-home "experiment" and its impact on employee wellbeing, company performance, and long-term business outcomes. We surveyed employees from a large global technology company to gain insight into the experiences of these newly remote workers. Using this survey of over 5,500 full-time employees, we identify five key takeaways that may prove valuable to business leaders as they navigate the pandemic.
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How valuable is HR analytics for your organization? Bridging the gap between HR policies and the bottom-line
How valuable is HR analytics for your organization? Bridging the gap between HR policies and the bottom-line
Lalith Munasinghe, Kate Gautier (March 2018)
Most business leaders have heard about the huge potential of human capital analytics to create value, but how can they assess the potential for bottom-line impact? Using dozens of comprehensive simulations, our Impact tool enables HR leaders to understand the effects of policy changes before implementing new initiatives. And by quantifying financial impacts, it bridges the communication gap between CHROs and CFOs.
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Store talent drives profitability: The value of tenure at a large U.S. retailer
Store talent drives profitability: The value of tenure at a large U.S. retailer
Lalith Munasinghe, Kate Gautier (March 2018)
At a US-based retailer, rising employee turnover rates had directors concerned about profitability. In addition to the obvious hard costs of turnover, they feared a growing proportion of rookies was starting to hurt store-level revenue. Through an analysis of their sales data in conjunction with the people data from their HRIS, they discovered that their fears were indeed justified. In fact, the relationship between job tenure and revenue was even more striking than they had imagined, and the insights launched a larger re-assessment of their talent retention management strategy.
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Predictive analytics identify the best applicants, but no value created unless managers use them
Predictive analytics identify the best applicants, but no value created unless managers use them
Lalith Munasinghe, Kate Gautier (March 2018)
High turnover at a global financial services company was particularly concerning due to the extensive and costly four-week training program provided to all new hires. Smart Data rose to the occasion, building powerful predictive scores that could identify–during the application process–who would leave quickly, and who would stay. Yet the scores didn’t move the needle on turnover, leaving executives scratching their heads. This ultimately unsuccessful case study forms a reminder of the complex chain of technology, data, estimation, and end users that must come together to realize the value of predictive analytics.
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Empowering supervisors to proactively retain the best talent: Predicting employee flight risk at a U.S. call center
Empowering supervisors to proactively retain the best talent: Predicting employee flight risk at a U.S. call center
Lalith Munasinghe, Kate Gautier (March 2018)
Retention efforts at a U.S. call center company was largely a manual process. As the labor market tightened, managers struggled to stay ahead of increasing turnover. Predictive employee flight risk scores became a systematic way of identifying their highest risk team members, so they could take action–before they quit. Providing managers with a targeted, actionable piece of information about their employees freed them from the never-ending catch-up game and empowered them to do what they do best–manage their people.
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The Role of Referrers as Matchmakers: Theory
The Role of Referrers as Matchmakers: Theory
Lalith Munasinghe, Kate Gautier (July 2017)
The accepted wisdom of the day is that employee referrals bring in higher quality applicants and hires. Yet most practitioners don’t know why. This gap in understanding means that many companies have not captured the huge potential trapped in their employees’ networks. This white paper offers a practical introduction to the powerful mechanism behind employee referrals, providing the insight needed to unleash this potential.
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Is Employment Duration a Good Measure of Productivity?
Is Employment Duration a Good Measure of Productivity?
Lalith Munasinghe, Kate Gautier (July 2017)
Companies want to hire high productivity people. But how do we define productivity? How do we measure it? Chances are that different companies, even various people within the same company, will have opposing answers to these questions. Unfortunately, in the absence of clear metrics, there is little hope of modeling productivity to support hiring managers in selecting the right people. This white paper explores whether employment duration can be used as a proxy for productivity in order to unlock the potential of predictive analytics. We use evidence from a large customer services company to test the age-old intuition that bad matches don’t last.
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Concepts of Labor Turnover: A Technical Primer for Executives
Concepts of Labor Turnover: A Technical Primer for Executives
Lalith Munasinghe, Cynthia Howells (October 2016)
Turnover, attrition, and tenure are all commonly used buzzwords in human resources and business operations. Phrases like “the costs of high turnover” or “shorter average tenure” are certainly familiar in the corporate vernacular. Yet these terms are often used sloppily, revealing fundamental misunderstandings of labor turnover. These misunderstandings can result in confusing reports, nonsensical analytics, and even serious strategic errors in people management. To make sense of them we must return to the underlying concept–the duration of an employment relationship. This white paper aims to bring clarity to these terms.
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Employers and Employees Need Matchmakers
Employers and Employees Need Matchmakers
Lalith Munasinghe, Cynthia Howells (August 2016)
In a brief introduction to the value of employee referrals, this paper uses data from a large call center company to assess differences between hires who came through internal referrals versus traditional channels.
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Revealing the Hidden Costs of Employee Turnover
Revealing the Hidden Costs of Employee Turnover
Lalith Munasinghe, Rena Rosenberg, Cynthia Howells (June 2016)
Senior executives quantify thousands of costs in their organizations, yet most lack a rigorous methodology for calculating the costs associated with employee turnover. How can leaders manage what they can’t measure? This paper introduces the two distinct components in turnover costs–(1) hard costs of hiring and training and (2) top-line losses due to reduced productivity–providing executives with the rigorous financial framework they’re missing.
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Are Referral Programs Crowding Out Diversity?
Are Referral Programs Crowding Out Diversity?
Working Paper (Hect, 2021)
ABSTRACT. Referred candidates are more likely to both receive and accept offer, stay at the job for longer, and perform better. But, as diversity becomes a key issue throughout the workforce, employees have been asking whether there could be unintended consequences to this historically lauded source of top talent. In this paper, I will attempt to understand this critique and provide a perspective on the tension between employee referrals and diversity. First, I will analyze what diversity and inclusion might mean to a company and to our society at large. Then, I will examine the challenges that referrals pose to diversity efforts and discuss potential ways in which this tension might be resolved. My claim is that in order for referral programs and increased diversity to coexist, companies must be conscious of their hiring efforts and implement ways to encourage their employees to expand their networks beyond their inner circles.
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Good Interviewers Matter
Good Interviewers Matter
Working Paper (Barr, Bojilov, Gautier, Munasinghe, 2019)
ABSTRACT. Interviews present a puzzle: research suggests they are of little value in screening hires, yet they remain pervasive. Using a longitudinal dataset from a large call center company, we find that interviewers vary in quality along three dimensions of performance: making offers, convincing candidates to join the company, and screening for durable and productive hires. The variation in interviewer performance is larger for the first two dimensions than for screening. Furthermore, interviewers improve over tenure on the first two dimensions, while their ability to screen remains stagnant. Interviewers who are good at making offers are also good at convincing the candidate to accept them, and they do so without sacrificing quality of hire. We found that the company could realize cost savings of over 40 percent of its hiring and recruiting budget by reassigning interviews to their best interviewers. Thus, interviewer performance, especially in often-ignored dimensions, can have a major impact on search and matching of employers and employees.
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Referrals and Search Efficiency: Who Learns What and When?
Referrals and Search Efficiency: Who Learns What and When?
Forthcoming in the Journal of Labor Economics (Barr, Bojilov, Munasinghe, 2019)
ABSTRACT. Referrals can impact employment outcomes at various stages of the hiring process. We develop a model to estimate the role of referral information on job offers, acceptances, turnover, and performance. Using rich data from a call center company, we show that referrals generate a superior pool of applicants. Estimates from our multi-stage hiring model reveal that referrals induce positive sorting at the job o¤er stage on hard-to-observe information about performance and thus referred applicants complete much of the sorting during the hiring process.
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Algorithmic Bias is Data Bias: How data shapes the predictive power of machine learning algorithms
Algorithmic Bias is Data Bias: How data shapes the predictive power of machine learning algorithms
Working Paper (Carle, 2018)
Over the past decade, machine learning algorithms have reshaped information exchange, prediction, and decision-making. Because of their flexible framework, machine learning techniques have proved widely successful in a number of applications ranging from translation, to medical diagnoses, and résumé screening. However, concerns about bias, privacy, and the overall effectiveness of machine learning algorithms have materialized as well. Academics have uncovered “algorithmic bias” in models used in judicial decision-making, hiring, and targeted advertising. This paper argues that the data used to build machine learning algorithms is the foremost determinant of their predictive power and capacity for mitigating human biases. Thus, it is not algorithmic bias, but data biases that should be of primary concern. This conclusion motivates further research in techniques to generate richer data, alleviate biases in existing data, and produce better-defined guidelines for how the technology should fit into decision-making processes.
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Pay for Performance: Match-Specific Compensation and Turnover
Pay for Performance: Match-Specific Compensation and Turnover
Working Paper (Gautier, 2016)
ABSTRACT. This paper explores the interrelationship between wages, turnover, and performance using payroll and employment data from a call center company. I study how various compensation components evolve over time and how they are related to turnover. I find that the monthly performance-based component of compensation is negatively related to turnover, suggesting that it can be interpreted as reflecting match-specific compensation, broadly defined. I also explore the differences of this match-specific component between referred and non-referred employees. I find that referred employees earn more in the match-specific component of compensation, and that this drives their lower turnover rates. Consistent with literature, this suggests that referred employees are better matched than their non-referred counterparts.
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Social Networks, Employee Selection and Labor Market Outcomes
Social Networks, Employee Selection and Labor Market Outcomes
Journal of Labor Economics (Hensvik, Skans, 2016)
ABSTRACT. The Montgomery (1991) model of employee referrals suggests that it is optimal for firms to select new employees through referrals from their most productive workers, as they are likely to know others with high unobserved productivity. In this paper, we use rich matched employer-employee data with cognitive and non-cognitive test scores to assess the model's ability to explain why firms recruit former coworkers of incumbent employees. Our empirical results support key elements of the model: incumbent workers of high aptitude are more likely to be linked to entering workers.
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Learning About Match Quality and the Use of Referrals
Learning About Match Quality and the Use of Referrals
Review of Economic Dynamics (Galenianos, 2016)
ABSTRACT. The firm’s decision to use referrals as a hiring method is studied in a theoretical model of the labor market. The labor market is characterized by search frictions and uncertain quality of the match between a worker and a job. Using referrals increases the arrival rate of applicants and provides more accurate signals regarding a worker’s suitability for the job. Consistent with the data, referred workers are predicted to have higher wages, higher productivity, and lower separation rates and these differentials decline with tenure.
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Matchmaking and Marriage Intermediaries
Matchmaking and Marriage Intermediaries
Working Paper (Wollburg, 2016)
Market intermediaries are individuals, organizations, or platforms that facilitate transactions between two or more parties, performing “work that otherwise would be performed by the provider or consumer of a good.” Typically, market intermediaries assist with or execute one or more of three essential market functions: (1) searching: the gathering of information relevant for the transaction, (2) matching: bringing together parties compatible as transaction partners, and (3) transaction: the negotiation of the transaction and finalizing of the transaction agreement.
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With a Little Help from My...Parents?
With a Little Help from My...Parents?
Review of Economic Studies (Kramarz, Skans, 2015)
ABSTRACT. The paper studies the importance of family networks and the way these networks affect the transition from school to work. We use a Swedish population-wide linked employer-employee data set that also includes detailed information on family ties, schools, and class composition. Analyzing parental characteristics (wage and seniority, in particular), job characteristics (type of occupation, wage, stability), the economic environment (unemployment, job structure in the municipality) at hiring, as well as employing firm characteristics, we find that family networks reduce the uncertainty inherent in the transition between school and work and that children in “weak” positions tend to get their first jobs with a little help from their “strong” parents.
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The Value of Hiring Through Employee Referrals
The Value of Hiring Through Employee Referrals
Quarterly Journal of Economics (Burks, Cowgill, Hoffman, Housman, 2015)
ABSTRACT. Using personnel data from nine large firms in three industries (call centers, trucking, and high-tech), we empirically assess the benefit to firms of hiring through employee referrals. Compared to nonreferred applicants, referred applicants are more likely to be hired and more likely to accept offers, even though referrals and nonreferrals have similar skill characteristics. In call centers and trucking, the two industries for which we can calculate worker-level profits, referred workers yield substantially higher profits per worker than nonreferred workers. These profit differences are driven by lower turnover and lower recruiting costs for referrals.
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Happiness and Productivity
Happiness and Productivity
Journal of Labor Economics (Oswald, Proto, Sgroi, 2015)
ABSTRACT. Some firms say they care about the well-being and “happiness” of their employees. But are such claims hype or scientific good sense? We provide evidence, for a classic piece rate setting, that happiness makes people more productive. In three different styles of experiment, randomly selected individuals are made happier. The treated individuals have approximately 12% greater productivity. A fourth experiment studies major real-world shocks (bereavement and family illness). Lower happiness is systematically associated with lower productivity. These different forms of evidence, with complementary strengths and weaknesses, are consistent with the existence of a causal link between human well-being and human performance.
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The Value of Bosses
The Value of Bosses
Journal of Labor Economics (Lazear, Shaw, Stanton, 2015)
ABSTRACT. How and by how much do supervisors enhance worker productivity? Using a company-based data set on the productivity of technology-based services workers, we estimate supervisor effects and find them to be large. Replacing a boss who is in the lower 10% of boss quality with one who is in the upper 10% of boss quality increases a team’s total output by more than adding one worker to a nine-member team would. Workers assigned to better bosses are less likely to leave the firm. A separate normalization implies that the average boss is about 1.75 times as productive as the average worker.
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Do Informal Referrals Lead to Better Matches?
Do Informal Referrals Lead to Better Matches?
Federal Reserve Staff Report (Brown, Setren, Topa, 2013)
ABSTRACT. The limited nature of data on employment referrals in large business and household surveys has so far limited our understanding of the relationships among employment referrals, match quality, wage trajectories, and turnover. Using a new, firm-level data, we are able to provide rich detail on these empirical relationships for a single U.S. corporation. Predictions with which our results align include: 1) referred candidates are more likely to be hired, 2) referred workers experience an initial wage advantage, 3) the wage advantage dissipates over time, 4) referred workers have longer tenure in the firm, and 5) the variances of the referred and nonreferred wage distributions converge over time.
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Hiring Through Referrals
Hiring Through Referrals
Penn State University (Galenianos, 2012)
ABSTRACT. An equilibrium search model of thelabor market is combined with a social network. The key features are that the workers’ network transmits information about jobs and that wages and firm entry are determined endogenously. Empirically, the inter-industry variation in aggregate matching efficiency is attributed to variation in referral use. The model predicts that the efficiency of the aggregate matching function is pro-cyclical, which is consistent with empirical evidence.
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Firm/Employee Matching: An Industry Study of American Lawyers
Firm/Employee Matching: An Industry Study of American Lawyers
Review of Economic Dynamics (Oyer, Schaefer, 2012)
ABSTRACT. We study the sources of match-specific value at large American law firms by analyzing how graduates of law schools group into law firms. We measure the degree to which lawyers from certain schools concentrate within firms and then analyze how this agglomeration can be explained by "natural advantage factors" (such as geographic proximity) and by productive spillovers across graduates of a given school. We show that large law firms tend to be concentrated with regard to the law schools they hire from and that individual offices within these firms are substantially more concentrated.
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Why do Firms Hire Using Referrals?
Why do Firms Hire Using Referrals?
University of Washington (Heath, 2011)
ABSTRACT. This paper argues that firms use referrals from current workers to mitigate a moral hazard problem. I develop a model in which referrals relax a limited liability constraint by allowing the firm to punish both the referral recipient and referral provider if the recipient has low output. This punishment implies that there is positive correlation between the provider’s and recipient’s wages at a given time and that the wage variance of providers is higher than that of observably similar non-providers. The model also predicts that providers are observably higher-skilled than other workers, since their wages are higher relative to a fixed limited liability constraint.
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Referral-based job search networks
Referral-based job search networks
University College London (Dustmann, Glitz, Schönberg, 2011)
ABSTRACT. This paper develops a model and derives novel testable implications of referral-based job search networks in which employees provide employers with information about potential job market candidates that they otherwise would not have. Using unique matched employer-employee data that cover the entire workforce in one large metropolitan labor market over a 20 year period, we find strong support for the predictions of our model. We first show that firms are more likely to hire minority workers from a particular group if the existing share of workers from that group employed in the firm is higher. We then provide evidence that workers earn higher wages, and are less likely to leave their firms, if they were hired by a firm with a larger share of minority workers from their own group and are therefore more likely to have obtained the job through a referral.
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Does Wage Volatility Matter in Labor
Markets? Theory and Evidence on Labor Mobility
Does Wage Volatility Matter in Labor
Markets? Theory and Evidence on Labor Mobility
Working Paper (Jung, Munasinghe, 2010)
ABSTRACT. We present theory and evidence on the effects of wage volatility on labor mobility. Our model of job turnover explicitly incorporates variance of within-job wages by assuming that wages evolve as random walk processes. With the additional assumption that job changes entail “switching” costs, the key theoretical result is that the optimal threshold of turnover—the minimum wage difference between outside and inside jobs necessary for a job change—is positively related to wage volatility. Data from the National Longitudinal Surveys of Youth show that workers who hold more volatile jobs get bigger wage gains when they quit and move to a new job and that they quit less frequently especially if their jobs are also characterized by high within-job wage growth rates. These findings are consistent with the implications of our theoretical model.
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The Gender Gap in Wage Returns on Job Tenure and Experience
The Gender Gap in Wage Returns on Job Tenure and Experience
Labour Economics (Munasinghe, Reif, Henriques, 2007)
ABSTRACT. We present empirical evidence on gender differences in wage returns on firm-specific experience (job tenure) and general experience. We find that overall returns on an extra year of labor market experience are lower for women than men. However, a decomposition analysis shows that the return on job tenure is substantially lower for women than it is for men, and that the return on general experience is higher for women than it is for men. These findings are consistent with the hypothesis that despite their growing attachment to the labor market, women are less likely to invest in job-specific skills or to self-select into jobs with backloaded compensation because women are more prone to job separations than their male counterparts.
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A Theory of Wage and Turnover Dynamics
A Theory of Wage and Turnover Dynamics
Working Paper (Munasinghe, 2006)
ABSTRACT. The paper presents a theory of compensation— built on search and matching, firm-specific human capital, and self-enforcing wage contracts—that provides a unified explanation for a broad range of empirical observations on wage and turnover dynamics. For example, the model resolves the apparent puzzle posed by the lack of evidence of wage growth heterogeneity among jobs despite the fact that the same data show past wage growth on the job reduces turnover. The key implications of the model are as follows. First, wages increase and turnover rates decrease over the duration of an employment relationship, but the positive tenure effect on wages is predicted to be quantitatively weaker than the negative tenure effect on turnover. Second, within-job wage growth is higher and turnover is lower in high productivity growth jobs than in low productivity growth jobs. Third, serial correlation of within-job wage increases is indeterminate in spite of the assumed serial correlation of the underlying productivity increases on the job.
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Why Do Dancers Smoke? Smoking, Time Preference, and Wage Dynamics
Why Do Dancers Smoke? Smoking, Time Preference, and Wage Dynamics
Eastern Economic Journal (Munasinghe, Sicherman, 2006)
ABSTRACT. The title of our paper “Why Do Dancers Smoke?” suggests a paradox. Dancers place great importance on physical health, strength, and fitness; and yet, smoking leads to untoward health, loss of strength, and diminished fitness. We contend that the concept of time preference, or, in the economic parlance, of individual discount rates–i.e. the variation in individual valuations of present versus future consumption–resolves this apparent paradox. Both activities sacrifi ce some distant benefit for a more present-oriented gratification. Dancers are passionate, if not obsessed, with their work; but their careers are short with dim, if not non-existent, prospects of future earnings. Even more obvious is the fact that smokers sacrifice future health for an immediate source of pleasure. Hence the answer we consider is that dancers smoke because they are more present-oriented.
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Specific Training Sometimes Cuts Wages and Always Cuts Turnover
Specific Training Sometimes Cuts Wages and Always Cuts Turnover
Journal of Labor Economics (Munasinghe, O'Flaherty, 2005)
ABSTRACT. Turnover falls with tenure, but wages do not always rise (and sometimes fall) with tenure. We reconcile these findings by revisiting an old issue: how gains from firm-specific training are split between workers and firms. The division is determined by a stationary distribution of outside offers. The lower the wage a firm pays to a specifically trained worker, the more profit it makes but the more likely the employee is to leave. The optimal time paths of wages and turnover show that, if marginal product is increasing, wages need not be increasing but it always implies a falling turnover rate.
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Expectations matter: Job prospects and turnover dynamics
Expectations matter: Job prospects and turnover dynamics
Labour Economics (Munasinghe, 2005)
ABSTRACT. This paper presents evidence on the effects of worker expectations on labor turnover, a topic largely ignored in the voluminous literature on labor mobility. Two survey instruments related to expected job duration and chances of promotion in the National Longitudinal Surveys of Youth are used to analyze the role of job prospects in predicting turnover dynamics. The key empirical finding is that workers with favorable job assessments have a lower and flatter tenure-turnover profile—i.e. the well-known negative structural relationship between the turnover rate and job tenure-than their counterparts with less favorable job assessments. This finding is consistent with search and matching theories that explicitly incorporate heterogeneity of prior beliefs about match quality.
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Social Networks and Employee Performance in a Call Center
Social Networks and Employee Performance in a Call Center
American Journal of Sociology (Castilla, 2005)
ABSTRACT. Much research in sociology and labor economics studies proxies for productivity; consequently, little is known about the relationship between personal contacts and worker performance. This study addresses, for the first time, the role of referral contacts on workers’ performance. Using employees’ hiring and performance data in a call center, the author examines the performance implications over time of hiring new workers via employee referrals. This study finds that referrals are initially more productive than nonreferrals, but longitudinal analyses emphasize posthire social processes among socially connected employees.
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Social Network Structure, Segregation, and Equality in a Labor Market with Referral Hiring
Social Network Structure, Segregation, and Equality in a Labor Market with Referral Hiring
Journal of Economic Behavior & Organization (Tassier, Menczer, 2005)
ABSTRACT. We construct a model of referral hiring to examine the effects of social network structure on group level inequality. Our study departs from many studies of social networks and labor market outcomes in that we focus on groups and not on individuals. We find that more random social networks yield higher employment rates than less random social networks if the population is integrated or information flows about job vacancies are random. However if the population is highly segregated and information flows about job vacancies are non-random then less random social networks have higher employment rates than more random social networks.
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Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes
Place of Work and Place of Residence: Informal Hiring Networks and Labor Market Outcomes
University of Connecticut (Bayer, Ross, Topa, 2004)
ABSTRACT. We use a novel dataset and research design to empirically detect the effect of social interactions among neighbors on labor market outcomes. Specifically, using Census data that characterize residential and employment locations down to the city block, we examine whether individuals residing in the same block are more likely to work together than individuals in nearby but not identical blocks. We find significant evidence that social interactions operating at the block level (residing on the same versus nearby blocks) increases the probability of working together by over 33 percent. We provide evidence that the increased availability of neighborhood referrals has a significant impact on a wide range of labor market outcomes including employment and wages.
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A hobo syndrome? Mobility, Wages, and Job Turnover
A hobo syndrome? Mobility, Wages, and Job Turnover
Labour Economics (Munasinghe, Sigman, 2003)
ABSTRACT. We present an analysis of labor mobility as a predictor of wages and job turnover. Data from the National Longitudinal Surveys of Youth show that workers with a history of less frequent job changes (stayers) earn higher wages and change jobs less frequently in the future than their more mobile counterparts (movers). These mobility effects on wages and turnover are stronger among more experienced workers, are highly robust across various model specifications, and persist despite corrections for unobserved individual fixed effects. In the second half of the paper we present a simple two period stochastic model of job mobility to study wages across movers and stayers.
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Business-Unit-Level Relationship Between Employee Satisfaction, Employee Engagement, and Business Outcomes: A Meta-Analysis
Business-Unit-Level Relationship Between Employee Satisfaction, Employee Engagement, and Business Outcomes: A Meta-Analysis
Journal of Applied Psychology (Harter, Schmidt, Hayes, 2002)
ABSTRACT. Based on 7,939 business units in 36 companies, this study used meta-analysis to examine the relationship at the business-unit level between employee satisfaction-engagement and the business-unit outcomes of customer satisfaction, productivity, profit, employee turnover, and accidents. Generalizable relationships large enough to have substantial practical value were found between unit-level employee satisfaction-engagement and these business-unit outcomes. One implication is that changes in management practices that increase employee satisfaction may increase business-unit outcomes, including profit.
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Employer Learning and Statistical Discrimination
Employer Learning and Statistical Discrimination
Quarterly Journal of Economics (Altonji, Pierret, 2001)
ABSTRACT. We show that if firms statistically discriminate among young workers on the basis of easily observable characteristics such as education, then as firms learn about productivity, the coefficients on the easily observed variables should fall, and the coefficients on hard-to-observe correlates of productivity should rise. We find support for this proposition using NLSY79 data on education, the AFQT test, father's education, and wages for young men and their siblings. We find little evidence for statistical discrimination in wages on the basis of race. Our analysis has a wide range of applications in the labor market and elsewhere.
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Globalization and the Rate of Technological Progress: What Track and Field Records Show
Globalization and the Rate of Technological Progress: What Track and Field Records Show
Journal of Political Economy (Munasinghe, O'Flaherty, Danninger, 2001)
ABSTRACT. The past century and a quarter has seen frequent improvements intrack and field records. We attempt to estimate what proportion of the speed of record breaking is due to globalization (competitors from more countries) and what proportion is due to technological progress (better equipment and training techniques). It appears that technological change is the chief driving force but that technological progress is improving the performance of seasoned elite athletes faster than it is improving the performance of adolescents. Both our results and our methods may have wider application.
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Referral Hiring and Ethnically Homogenous Job: How Prevalent is the Connection and for Whom?
Referral Hiring and Ethnically Homogenous Job: How Prevalent is the Connection and for Whom?
Social Science Research (Elliott, 2001)
ABSTRACT. Research on organizations and labor markets has rekindled interest in the role of insider referrals in matching workers to jobs, emphasizing the contribution this process makes to the reproduction of ethnic segregation in local labor markets. Three key findings emerged. First, evidence showed that insider referrals account for nearly all ethnic/immigrant variation in informal job matching. Second, Latinos, especially newly arrived immigrants, are more likely than native-born Whites to enter jobs through insider referrals. Third, the correlation between insider referrals and ethnically homogeneous jobs is positive and significant only for native-born Blacks.
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Wage Growth and the Theory of Turnover
Wage Growth and the Theory of Turnover
Journal of Labor Economics (Munasinghe, 2000)
ABSTRACT. Theories of turnover and wage dynamics have studied the impact of wage levels on turnover, but they have failed explicitly to model the role of wage growth in predicting turnover. This article presents a theory of turnover that explains why within-job wage growth reduces the likelihood of worker-firm separations. The model determines the evolution of value among jobs that differ systematically in permanent rates of wage growth and shows that the value of high wage-growth jobs increases faster. With additional assumptions about the search process, this proposition implies that high wage-growth jobs are less likely to end.
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Social Capital at Work: Networks and Employment at a Phone Center
Social Capital at Work: Networks and Employment at a Phone Center
American Journal of Sociology (Fernandez, Castilla, Moore, 2000)
ABSTRACT. This article argues that a common organizational practice-the hiring of new workers via employee referrals-provides key insights into the notion of social capital. Employers who use such hiring methods are quintessential "social capitalists," viewing workers' social connections as resources in which they can invest in order to gain economic returns in the form of better hiring outcomes. Using unique company data on the dollar costs of screening, hiring, and training, this article finds that the firm's investment in the social capital of its employees yields significant economic returns.
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Sifting and Sorting: Personal Contacts and Hiring in a Retail Bank
Sifting and Sorting: Personal Contacts and Hiring in a Retail Bank
American Sociological Review (Fernandez, Weinberg, 1997)
ABSTRACT. Using unique data from a large retail bank, we investigate the theoretical mechanisms by which preexisting social ties affect the hiring process. We study how employee referral (i.e., being recommended by a current bank employee) affects an applicant's success at multiple stages of the recruitment process, and we examine the cumulative effects of referral status on the chance of being offered a job. Results of probit models indicate that, controlling for other factors, referrals have advantages at both the interview and job-offer stages compared to external nonreferral applicants.
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Matchmaker, Matchmaker: the Effect of Old Boy Networks on Job Match Quality, Earnings, and Tenure
Matchmaker, Matchmaker: the Effect of Old Boy Networks on Job Match Quality, Earnings, and Tenure
Journal of Labor Economics (Simon, Warner, 1992)
ABSTRACT. Firms often view job applicant referrals from current employees as more informative than direct applications or referrals through formal labor market intermediaries such as placement firms. We argue that old boy networks reduce employers' uncertainty about worker productivity. Using Jovanovic's job matching model, we show that workers hired through the old boy network should (1) earn higher initial salaries, (2) experience lower subsequent wage growth on the job, and (3) stay on the job longer than otherwise comparable workers hired from outside the network. We find considerable support for this theory using data from the 1972 Survey of Natural and Social Scientists and Engineers.
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Social Networks and Labor-Market Outcomes: Toward an Economic Analysis
Social Networks and Labor-Market Outcomes: Toward an Economic Analysis
The American Economic Review (Montgomery, 1991)
ABSTRACT. Labor economists have long recognized that many workers find jobs through friends and relatives; personnel researchers argue that employee referrals are a useful device for screening job applicants. Because the use of employee referrals is both widespread and purposive, social structure—the pattern of social ties between individuals—may play an important role in determining labormarket outcomes. In this paper, I attempt to embed social structure in a stylized economic model of the labor market.
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Psychological Conditions of Personal Engagement and Disengagement at Work
Psychological Conditions of Personal Engagement and Disengagement at Work
The Academy of Management Journal (Kahn, 1990)
ABSTRACT. This study began with the premise that people can use varying degrees of their selves, physically, cognitively, and emotionally, in work role performances, which has implications for both their work and experiences. Two qualitative, theory-generating studies of summer camp counselors and members of an architecture firm were conducted to explore the conditions at work in which people personally engage, or express and employ their personal selves, and disengage, or withdraw and defend their personal selves. This article describes and illustrates three psychological conditions—meaningfulness, safety, and availability— and their individual and contextual sources. These psychological conditions are linked to existing theoretical concepts, and directions for future research are described.
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Multiple Discrepancies Theory (MDT)
Multiple Discrepancies Theory (MDT)
Social Indicators Research (Michalos, 1985)
ABSTRACT. A fairly thorough account of multiple discrepancies theory (MDT) is presented, with a review of its historical antecedents and an examination of its strength in accounting for the happiness (H) and satisfaction (S) of nearly 700 university undergraduates. Basically, MDT asserts that H and S are functions of perceived gaps between what one has and wants, relevant others have, the best one has had in the past, expected to have 3 years ago, expects to have after 5 years, deserves and needs. MDT explained 49% of the variance in H, 53% in global S and 50% or more in 7 out of 12 domain S scores. The domains studied were health, finances, family, job, friendships, housing, area, recreation, religion, self-esteem, transportation and education.
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Lottery Winners and Accident Victims: Is Happiness Relative?
Lottery Winners and Accident Victims: Is Happiness Relative?
Journal of Personality and Social Psychology (Brickman, Coates, Janoff-Bulman, 1978)
ABSTRACT. Adaptation level theory suggests that both contrast and habituation will operate to prevent the winning of a fortune from elevating happiness as much as might be expected. Contrast with the peak experience of winning should lessen the impact of ordinary pleasures, while habituation should eventually reduce the value of new pleasures made possible by winning. Study 1 compared a sample of 22 major lottery winners with 22 controls and also with a group of 29 paralyzed accident victims who had been interviewed previously. As predicted, lottery winners were not happier than controls and took significantly less pleasure from a series of mundane events. Study 2 indicated that these effects were not due to preexisting differences between people who buy or do not buy lottery tickets or between interviews that made or did not make the lottery salient. Paraplegics also demonstrated a contrast effect, not by enhancing minor pleasures but by idealizing their past, which did not help their present happiness.
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