Referrals.  You know them as the best type of hire to make, and there’s a lot of reasons for that.  Referrals are great because someone is usually vouching for the fact that the candidate is a) known to do good work, and b) not a serial killer.  Both are things you look for in new hire once the knowledge, skills and ability to do the job in question are confirmed.  Referrals also tend to stick around longer than other sources of hire.  With all that in mind, who could argue that employee referrals are bad?

Me.  That’s who.

Too much of a good thing is generally not the best way to go, right?  If you’re in a situation where you get more than 25% of your hires via employee referral, you might want to check yourself before you wreck yourself – employee referrals might be bad for your organizational heath.  Here are 5 reasons that 25% threshold is the key where employee referrals start causing problems:

1.  Referrals generally are from people who look like us - I’m white, so most of my referrals are going to be other white people.  White people are great.  Note that I didn’t say all of my referrals are white – but most of the people in my network are white.  Whether you’re white, black or brown, the same holds true for you.

2.  We usually refer people who went to the same school we did.  I once joined a great company with about 150 employees.  I started digging into the workforce and 70% of the workforce was from the same university.  A great university and it made it seem like a family, but not exactly setting the stage for creative and constructive dissent.

3.  We love people who think like us.  We live in an age of extreme media/political views, with outlets like Fox News and MSNBC feeding us a reality that the only truth is in the polar opposites.  That holds true with the referrals we make, both on the political front and in other areas.  We love to refer people who think like us.  They’ve got to be good if they agree with us, right?

4.  We love to refer people who won’t threaten us, especially in our own functional area.  Human nature 101.  Sure you want the best for your company, but let’s face it – the best referral in a lot of professional eyes is the one that’s a good worker, but not a superstar.  After all, we don’t need them stealing our oxygen related to visibility, access and all the other things that build careers.  So we refer those who are good, but not too good.

5.  We love to refer people slightly less attractive than us.  The uglier the better.  Makes us look like supermodels.  Advantage:  The smart employee giving the referral.

OK – I’m joking about #5 – maybe.  But, the other factors on the list are real.  We generally refer people like us in a variety of ways, not just in skin color.  The cumulative effect is we end up weakening the gene pool present in our company because we don’t have enough people who think differently and can challenge the status quo.  The ability to do that is the true source of innovation.

Employee referrals are good.  But if you’re in a small company where referrals are your main source of hire or lucky enough to be at a big company where the referral machine is humming along watch your back.  There’s a % threshold of total hires where employee referrals may hurt more than they help.