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Referrals

A referral candidate is a candidate brought to a company’s attention by an individual who has an existing relationship with the company. Founders, employees, investors, advisors, and even other candidates may refer candidates. Referrals, and particularly referrals from employees, are the most common source of hires across industries and stage of company.*

Advantages and Risks

Key advantages of referrals, particularly those referred by a current team member, include:

  • Knowledge of their abilities. Years of working together are far better signal of skills than an interview process can give.

  • Knowledge of their ability to work with the existing team. There is always risk when hiring people with no previous relationship with anyone on a team that trust is lower, or hard-to-predict interpersonal dynamics make a hire less effective. This is why it’s a common pattern in startups for one senior hire to bring with them one or two people from a previous team.

  • Team coherence and commitment. When joining a company where a person has long-term relationships, people may be more committed and unwilling to depart unexpectedly or in an unprofessional way.

  • Cost savings. Sourcing through referrals means you don’t have to hire a recruiter or spend time and money marketing your company and the position to the general public.

Focus on the right ways to source candidates. Basically, this boils down to ‘use your personal networks more.’ By at least a 10x margin, the best candidate sources I’ve ever seen are friends and friends of friends.Sam Altman, chairman, Y Combinator*

danger While Altman’s advice is very common in technical hiring and across fields, prioritizing hiring through referrals over all other sourcing and recruiting efforts can lead to a highly homogenous team that lacks the ability to challenge and question its decisions, directions, and tactics. Especially in early-stage companies, it can lead to diversity debt, which is difficult to remedy. Lack of diversity is an egregious problem in technical teams; Aline Lerner talks more about the relationship between referrals and diversity in a Software Engineering Daily podcast.

danger There are other risks from relying too heavily on referrals:

  • Lack of fairness. Heavy use of referral recommendations can lead to lack of fair hiring decisions because they may not prioritize an equitable assessment of abilities. Especially for early-stage startups, where networks might be limited to those of two or three people, referral-dependent sourcing can lead to hiring friends and family over the most qualified candidates.

  • Poor team dynamics. It can encourage the formation of cliques of people who know each other better than others on a team, which can lead to resentment.

These risks don’t mean that you should ignore your network entirely, but that you should approach your network with an eye for its gaps and blindspots. If the majority of candidates sourced through your network look the same, have similar backgrounds, and bring similar ideas and experiences to the table, make a careful assessment of who you’re asking for help and how you can widen your own network—you’ll want to explore the other methods for finding candidates in this section as well. As we discuss in Diversity and Inclusion in Tech, diverse teams, especially at the early stage where they set a hiring precedent, are highly influential to companies’ success and ability to innovate.

Startups: Working Your Network

startup Given that referrals remain the most common source of hires, it’s important to put effort into expanding the candidate source that is your network. When you do so with an understanding of the risks of referral reliance, you’ll have a better chance of hiring qualified people who might otherwise not have the chance to meet, rather than clones of current employees.

At some point, a purely referral-based candidate generation strategy might start hitting diminishing returns. You and your team might “max out” your networks, or your networks may not have the diversity or skill sets you need. Exactly when this happens can vary from team to team. Many teams might start maxing out their networks at or below 10 engineers, but one of this Guide’s well-connected contributors was able to grow to almost 100 engineers almost solely using referrals.

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As a general rule of thumb, most people end up realizing that with a little persistence they can push their network further than they initially thought. Peter Kazanjy, co-founder of TalentBin, details his process for treating recruiting like a sales pipeline to maximize the potential of employee referrals. He even includes his outreach templates that you can use when you need to start sending emails to prospective candidates.

TripleByte co-founder Harj Taggar suggests asking referred candidates who they would refer as well–even if they’re not interested.* This is a second-order option that can expand the reach of your network but still originates from closely trusted sources.

Curious about how two early engineers at Facebook had to adjust when they created their own business? Read Aditya Agarwal’s story on his and Ruchi Sanghvi’s experience in “Hiring at Startups Vs. Big Companies: Hiring at a startup was drastically different than at Facebook,” on the Holloway blog.

Early on, the best approach to recruiting is to have people on your team actively refer in people from their network.Elad Gil, entrepreneur, author, and investor*

startup Founders or hiring managers at early-stage companies should allocate a chunk of time to working their network. Some approaches:

  • Perform systematic scans of your network. Browse your entire list of connections on LinkedIn to jog your memory. Ask investors, advisors, friends, and former coworkers for referrals, giving them enough context to allow them to make good referrals.

  • Nurture mutually trusting relationships with others who are well-connected and a good judge of talent. When the time is right, reach out to friends and explain what you’re trying to hire for and why.

  • Whenever you can, offer to help others with referrals, too. This may not immediately solve your recruiting needs, but being helpful to others helps everyone, including yourself, in the long run.

  • Identify candidates who are known by your existing connections, and ask if they’re willing to make an intro, taking care to make the introduction both optional and easy.

  • Ask your referrals for referrals.

People are often glad to make referrals, as a good referral is a positive thing for all three people involved.

dangerA common pitfall for those looking to get referrals is to be too transactional or thoughtless when asking for help. Unfortunately, it is common for people to reach out wildly to hundreds of connections in a way that inconveniences or annoys. Referrals take time, thought, and social capital from the person making the referral. Don’t ask for them lightly, or act like you value your time more than the person you’re asking a referral from. Explain the real value of what your company does, or what’s interesting about the role. Try to reciprocate with help. Don’t expect to reach out to someone you’ve not bothered to talk to in years, only to ask them to enthusiastically introduce you to their most talented friends.

Always remember, you’re asking for a favor. It’s important to make it easy to say yes:

  • Be specific. Ask for what you need and explain why. Don’t be vague in the hopes that the person will make an offer to help you with exactly what you’re looking for. If the person you’re asking for help can’t figure out what their role is supposed to be, it’s going to create more work for them to go back and forth with you until they can pull it out. But specificity does not mean over-explaining. You also want to keep it short. You can (and should) include a line like, “Please let me know if there’s any more information I can provide.”

  • Be complimentary. It never hurts to pump the person up a little. Are they uniquely positioned to help you because they’ve been really successful at hiring fullstack engineers in the past? Do you completely trust their opinion and ability to judge the quality of someone’s work because so-and-so in your circle speaks highly of them? Maybe you read a recent blog post of theirs that blew you out of the water. Let them know.

  • Don’t be selfish. Yes, many people in the startup community are eager to help others. But you are not entitled to other people’s time or to a connection. Don’t use language like “I need,” or anything that sounds like “It’s really important that you do this for me.” Don’t demand anything, and be sensitive of their time even if you’re running on a deadline.

  • Encourage the double opt-in introduction. This strategy is for the person making the connection for you, but it’s good for you to know, because with a forwardable introduction email (below), you can help. The double opt-in introduction is a mouthful but pretty straightforward. When you ask someone for an introduction, that person should double check that the person you want to meet is actually interested in being introduced. If they say yes, your contact is free to make the connection. People are busy and this is a gesture of respect. So in the future if someone asks you to connect them to another person, you’ll want to check and see if that person is interested and if they have the time.

  • Use the forwardable introduction email. The forwardable introduction email is a way to maximize your chances of success with double opt-in introductions and make it easy for the people you’re asking for help to say yes. This is a big one.

    • The problem with most double opt-in introduction requests is that they create work for the person connecting the two parties. To check whether the person you want to meet is interested, they have to write an email that lays out why you want to be connected and why they should speak with you. For most people, writing an email about someone else’s company isn’t the biggest priority in the work day. As a result, doing so gets deprioritized and may never happen.

    • To get around this, when you’re asking for an introduction, you should write an email to the connector that they can simply forward to the person you’re asking to meet. This email should contain a bit about you and why you want to be introduced. This way, the connector can simply press “forward,” and add a short note along the lines of, “So-and-so is terrific; I think you should meet them.” It only takes a few seconds. If the person says they’re interested, then all the connector has to do is add you on a new reply on the same email thread and the connection is made.

    • importantWhen you get this far, make sure to Bcc your connector when you thank them in your reply.

  • Say thank you. In addition to thanking the person and Bcc’ing them, it’s always nice to send them a follow-up email letting them know that the connection was successful and you really appreciate their involvement. If the connection turns out to be huge for you—if you end up hiring the person—you can even send a handwritten note or a small token of appreciation. When you’re the person being asked for help, what would you like to hear?

For more tips on building a great network, visit Networking for Startup Founders, a free excerpt from the Holloway Guide to Raising Venture Capital, from which this list was adapted.

Larger Company Strategies

For mid-sized and large companies with multiple sources of candidates, referrals usually remain one of the most important channels. After all, every new member of the team has their own network just waiting to be tapped into. Some mid-sized or large companies invest in systemizing the referral process by:

  • Offering incentives. Incentives for employees who successfully refer candidates can range from simple recognition to a cash bonus to stock (from 2013-2017, Uber gave out 500 shares to employees who successfully referred new hires in software engineering, even for the recruiting team).* At some companies, this cash bonus can be in the thousands of dollars (as high as $5K for some roles). But don’t make it just about the cash. Your team should be convinced that referring a friend or acquaintance is a win for both their referral and for the company; you want them to be intrinsically motivated to help make that happen. Digital Ocean overhauled their referral program to include charitable donations along with cash for referrals, and saw a significant bump in the number of employee referrals.

  • Regular network reviews. Creating a regular cadence for recruiters or hiring managers to meet with employees to scan and tap into their networks can be a great strategy. Some companies conduct “sourcing jams” where groups of employees meet to go through their networks together. These can also be one-on-one meetings between a recruiter or hiring manager and each employee.

  • Memory-jogging techniques. Most people can’t keep their entire network top of mind. Sequoia’s Human Capital Team uses the memory palace to help employees dig deep into their memories for possible referrals, a technique they describe in a blog post, “3X Your Referral Rates.” Google found that aided recall using specific prompts helped significantly, while referral incentives did not.*

  • Involving the referrer. Giving employees regular updates on the progress of candidates they referred can encourage future referrals (as opposed to letting them feel like their referrals are going into a black hole). In addition, you can use the referrer to help build the candidate’s excitement throughout the process (and especially at the offer stage). Some companies give special attention to referral candidates by fast-tracking them through the process, but this can affect the fairness of your process.

candidate If you’re applying to a company, a referral from an existing employee is a great way to get your foot in the door. We’ve seen some candidates feel uncomfortable asking their connections for a referral into a company, but you shouldn’t feel like you’re pulling any favors. After all, if a referral works out, it’s a win for you, a win for your referrer, and a win for the company you’re joining.

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Holloway Guide ToTechnical Recruiting and Hiring

Align your team to avoid expensive hiring mistakes.

A practical, expert-reviewed Guide to growing software engineering teams effectively, written by and for hiring managers, recruiters, interviewers, and candidates.

  • 440-page online book
  • 838+links and references
  • Digital access to this title in the Holloway Reader
  • Downloadable PDF for personal offline use
Length: 440 pages
Edition: e1.0.6
Last Updated: 2020-11-20
Language: English
ISBN (Holloway.com):
978-1-952120-06-0
ISBN (print):
978-1-952120-00-8