Referral-based hiring is gaining traction, with research estimating that recommendations may account for up to 50 percent of new hires. But hiring managers who use such methods may be perceived as unethical by co-workers if they aren’t careful, says a recent post from the LSE Business Review blog from the London School of Economics and Political Science.

Referral practices are cost-effective and often result in more positive consequences for both the new recruit and the hiring organization. Employees hired via referrals have longer tenure, better performance and higher levels of job satisfaction. But are such practices ethical? The authors say the answer may depend on the relative power of the referrer to the hiring manager.

Referrals from high-power employees will most likely carry more weight than those from low-power individuals, but accepting the referral potentially opens the hiring manager up to being perceived as engaging in unethical behavior. Acceptance of the referral can be seen as doing that employee a favor—and therefore opening the door for future benefits such as better job assignments, higher performance evaluations or higher raises.

The authors conducted a series of studies, finding that a hiring manager who accepts a referral from a high-power referrer is more likely to be viewed as acting out of self-interest and be given less support from co-workers for the hiring decision.

The solution: Consider setting up systems with temporary anonymity of referrers and enhanced transparency regarding the reasons for the referral. This shifts the focus to potential employees and how information about them provides a valid cue with regard to their fit and potential performance.

See the full blog post: “The ethical downside of hiring based on internal referrals”