Referral-only hiring is stupid. But it is particularly stupid for senior roles.

The more senior the role, the fewer the candidates, and thus the less it makes sense to restrict the pipeline.

Last week, a friend posted on LinkedIn about a role: $1.5m-$2.3m comp (base + equity), only hiring via referral. As someone who has publicly pledged never to accept more than $1m a year in comp, I suggested that the salary range was an immediate red flag. But it is the referral-only that really bothers me.

Broadly speaking, workers are a combination of two things: skills (things they can do) and temperament (the way they do those things). Most companies require large numbers of lower-skill employees, with successively smaller numbers of higher-skill employees at each level above them. Temperament matters at all levels, because companies aren’t just giant skill machines and you actually need the gears to want to work together. 

The problem is that skills are relatively easy to assess through the hiring process but temperament is much harder; the short, artificial nature of interviews means you don’t really know much about how someone actually does the work until six months or more into working with them.

This is why employers often rely on referrals. Because of homophily (the tendency of likes to attract), it is generally true that if you enjoy working with a referrer, you’ll enjoy working with the referral.

Here is where it gets tricky. Because you will always have a larger supply of lower-skill talent (most people can do most things at the absolute bottom of the skill pyramid), the primary differentiating factor for lower-skill roles is temperament. Which means referrals should be far more important in low-skill roles.

But that is the precise opposite of what happens. Instead, higher-skill roles are much more likely to be referral-only, despite the fact that the relative rarity of high-skill/good-temperament creates a much smaller hiring pool. Temperament is a much smaller differentiator when only a few people have the necessary skills.

In some ways, all of this is moot because in reality, no role should be referral-only. There is overwhelming evidence that relying on referrals alone increases systemic barriers related to gender, ethnicity, credential, etc. Remember that homophile? It applies to more than just temperament. Referral-only recruiting is anti-science and pro-bias.

But if you insist on referral-only, it should be primarily used for lower-skill roles, where it is a better differentiator. This also avoids magnifying the bias problem by conflating it with higher-skill roles that typically come with higher compensation. If you’re using referral-only and then paying those candidates millions of dollars, you’re being sexist, racist, etc. at the highest possible scale of wealth-gap creation.