A few months back, I was interviewing a candidate (let’s call him C). On paper, C was the perfect candidate - solid academic pedigree, clean coding style and skill sets that matched our needs. So it was more a case of us selling him on the company than the other way around. 

But 15 minutes into my pitch on why Compile was a great fit for him, I realized that he wasn’t particularly interested in what I had to say. I spoke about how we have good traction, satisfied customers and profitable growth. Yet none of that really seemed to appeal to C. He seemed a bit bored.

So I tried to engage him in a conversation and asked him why was he interested in the role. C’s response was simple - “Because my friend works here”. No talk about the job being challenging or the product interesting - not even the pretense.

My first instinct was annoyance. Here I was, talking about all the great things we had planned, but as far as C was concerned, it didn’t even matter. Perhaps, I thought, it’s just a question of maturity - not having worked long enough, C may not know how to evaluate start-ups; he is just naive.

But as I thought about it some more, his approach was perfectly rational. There are many questions you can ask to convince yourself that a particular start-up is right for you. This post by Dharmesh Shah nicely sums up how think beyond compensation, stocks and benefits in evaluating a start-up.  

And yet, despite all your due diligence, your decision to join a start-up is predicated on one thing - trust.

Trust in the founders, trust in the team, trust in the idea. 

Seen in this light, C’s approach made perfect sense. C was recommended for this role by one of our earliest employees - the two went to college together. C naturally put more stock in what his friend thought of the place than anything I could ever say. After all, his friend would not want to jeopardize their relationship by recommending a bad career move. 

And it’s not just from the candidates point of view; referral-based hiring is good for the overall health of an organization as well.

Data from the job posting site, Jobvite, shows that it is a lot quicker and easier to hire a candidate via employee referral. Once hired, 46% of employee referrals stay for three years or more while only 14% of those hired from job boards stay.

Referred workers are also more productive.  Research by Stephen Burks and his colleagues indicates that in certain high-impact tasks, such as original research, referred workers do better than non-referred workers. What’s more, employees tend to refer candidates who are quite similar in ethic to the referrer. Thus your best developers are likely to recommend other top-notch developers. Happily, employees who make a successful referral are also less likely to quit.  

A win-win all round.

The findings above carry even more weight at a start-up where every new hire can affect the team average. 

At Compile, we have grown by hiring friends and friends of friends - almost 60% of our team has come to the company this way. It’s worked well for us and we continue to hire primarily through referrals. And now I don’t feel so bad when a new hire says she joined just because her friend works here. In fact, I take that as a compliment!

Image originally uploaded by Joi Ito