In Search of the "Right Stuff": The Advantages and Disadvantages of Informal and Formal Recruiting Practices in External Labor Markets

Article excerpt

I

Introduction

OVER TWENTY YEARS OF RESEARCH on job matching and organizational behavior in external labor markets has produced valuable information about how workers search for jobs. We know much less, however, about why organizations recruit the way that they do (see Granovetter 1995, "Afterword" for a comprehensive review). As Granovetter (1995: 155) points out, "while people are finding jobs, employers are finding people to fill them, and their behaviors, strategies, and purposes play a central but often neglected role in the process of matching people to jobs."

The way employers rate and choose recruiting techniques has important theoretical and empirical implications for understanding labor markets and inequality. The choice of recruiting techniques affects the visibility of job information (Fevre 1989; Haulman et al. 1987; Windolf 1986). The visibility of job information, in turn, contributes to structured social inequality. Access to jobs is not always equal (Braddock and McPartland 1987; Neckerman and Kirschenman 1991; Reskin and Roos 1990; Windolf 1986).

This paper explores a topic of much speculation but relatively little empirical investigation or theoretical conceptualization: How those in charge of recruiting and hiring new employees assess the advantages and disadvantages of various recruiting techniques. We also examine how organizational characteristics shape hiring managers' perceptions of the primary advantages and disadvantages of recruiting techniques.

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Advantages and Disadvantages of Recruiting Techniques

Organizations can use two broad types of recruiting techniques. Formal techniques employ a formal market intermediary between the firm and the prospective employee. That intermediary may be an advertisement, public or private employment agency, or even a "help wanted" sign in front of the business (Marsden and Campbell 1990). To search for new employees, informal techniques use individuals who may include current employees, colleagues/associates at other firms, or colleagues in professional associations.

Advantages of Informal Recruiting: Cost and Quality

Studies in sociology and economics often assume that low financial cost (relative to recruiting through formal techniques) is the primary reason that organizations use informal recruiting (Corcoran et al. 1980; Granovetter 1995; Maim 1974; Marsden and Campbell 1990; Pissarides 1984; Rees 1966; Rees and Schultz 1970). Informal recruiting techniques do not cost companies advertising expenses, finders fees, and other search-related expenses. The cost of recruiting, however, also includes the cost of the time it takes to recruit. New forms of business organization, such as joint ventures and strategic alliances, which Acs and Gerlowski (1996:22) refer to as "virtual corporations," and the shift to "lean and mean" (Harrison 1994) structures and processes, reflect the realities of a new environment driven by global competition, technological innovation, and a faster pace. At the heart of the matter is the duration cost of recruiting (i.e., the speed with which a vacancy is filled). As one of the reviewers of this article aptly stated, "I could put a notice up on the www.monster.com board and probably get results in three days. How long would it take for my employees to network with their friends?"(1) This raises two empirical questions: First, do hiring managers cite recruiting cost as an advantage or a disadvantage of informal recruiting? Second, are hiring managers in the private competitive sector of the economy most likely to cite cost as a disadvantage of informal recruiting?

The quality of information acquired by organizations and job searchers is another advantage of informal recruiting (Granovetter 1995). Informal recruiting provides job seekers with access to details about a position and prospective employer that an agency would not know, such as information about the fairness and attitudes of supervisors, the informal working environment, or the direction the organization is heading. …