I had a great conversation with a hiring manager of a large Miami hotel earlier this week. One idea that we discussed was his company's success with an employee referral program for front-line workers -- current employees are compensated for referring a friend or acquaintance who they know would be a good fit.
This is the power of the 'vouch'. Why does this work? What does this mean for social networking and leveraging the social capital of front-line employees?
Employee-referred candidates are likely to have realistic expectations for what the job entails. They also may feel more incentive to 'stick with it' as they have a role model who has done it before them and who will be disappointed if they do not.
Employee-referred candidates have a built-in 'support system' in the employee who referred them. The questions and uncertainties endemic to a new position and new team can be addressed to their friend -- rather than managers or HR. This is particularly crucial when communication with direct managers is a challenge, as it often seems to be.
Front-line employees have social capital and knowledge that can be hugely valuable to HR and management. They often know more about the requirements of their positions and the types of personality that would excel than does management or HR. They may know how to communicate better with their co-workers to get the job done than does their manager. Finally, they're more likely to have the social networks that can attract good employees than do their managers or HR. The results -- reduced turnover, happier workforce, enhanced employee commitment, improved intra-team communication -- equal increased value for everyone. Let's tap it.
10.19.2008
Graph on Income, Work Supports, and Non-Bank Services
A graph on income that I put together. Discussion to follow. Please note that figures are estimates and need to be fine-tuned.
10.06.2008
Employment and Social Networks of Low-Wage Workers
I've become increasingly interested in the role that social networks play in low-wage workers' job searches. Specifically, are some groups, say recent immigrants, more likely to recognize and leverage their social networks than their American-born counterparts? Are certain demographics more accustomed to developing and using social networks to obtain employment? Are social networks utilized for education, training, and career development, or merely to get into any available job?
I was excited to recently come across a 2005 paper entitled “Getting Connected: Strategies for Expanding the Employment Networks of Low-Income People”, written by Shayne Spaulding and published by Public/Private Ventures.[1] This was a great primer on the importance of social networks to low-income job seekers. Spaulding cites research indicating that more than two-thirds of low-income job seekers find jobs through personal connections, compared to 40-50% of all job-seekers. Another study he cites reports that 88% of hiring managers for low-skilled positions rely on internal referrals from employees already working with them and that 64% use this as their primary recruitment method.
Spaulding then goes on to describe the challenges to effective utilization of social networks by low-wage workers. Among these challenges are; the small size of many job seekers’ networks; a reluctance to let peers or acquaintances know that they are looking for work; the homogeneity of employment situations among social networks (many unemployed or low-wage earners have social networks that include only other unemployed or low-wage earners); and a lack of awareness on how to take advantage of social networks in order to obtain employment. The paper then discusses a variety of programs implemented by workforce development agencies to train low-wage job seekers to use networks, most involving the development of an “elevator pitch” and business cards, and providing opportunities for job seekers to mingle with individuals in the jobs or careers they hope to obtain. The most novel solution was one by Street Tech in San Pablo, California, who worked with LinkedIn to develop an online networking application for low-wage workers. I plan to investigate this tool further, so more to come on that.
Spaulding also discusses the difference between ‘weak ties’ and ‘strong ties’ in employment networks, which he says is a concept put forth by Mark Granovetter in a 1973 work, “The Strength of Weak Ties”. Granovetter explains that information on available jobs often comes from ‘weak ties’, or individuals that do not know the job seeker well and who cannot necessarily vouch for the employability of the job seeker. Clearly, the value of employment networks would be greatly enhanced for both job seekers and employers if a trusted intermediary were able to vouch for the job seeker’s work ethic and reliability.
This concept of “vouching” in the job search is fascinating, as it ties in with the critical role that social capital (one’s reputation and social network of acquaintances, co-workers and friends) has played in microfinance. When low-income people do not have collateral for the loan they are taking out, their reputation and social network can be put on the line instead. This insight, that the risk of losing one’s reputation and social network can be a powerful motivator to repay obligations, is the foundation of Grameen and other microfinance and group lending models. Clearly, the importance of losing one’s social capital in an urban environment – where new friends and contacts are readily available – is less acute than it is in a small village where transgressors must live among, and be punished by, the transgressed for years to come. Yet, I still believe that tying “vouching” to an individual’s social capital in a meaningful way could be prove a powerful way to recruit quality employees.
Do employees who refer another employee feel a risk to their own credibility if the employee they referred does not perform well? How can employees be incentivized to only refer those employees that they know will perform well? How can we formalize this “vouching” in order to leverage its power on a larger scale?
I was excited to recently come across a 2005 paper entitled “Getting Connected: Strategies for Expanding the Employment Networks of Low-Income People”, written by Shayne Spaulding and published by Public/Private Ventures.[1] This was a great primer on the importance of social networks to low-income job seekers. Spaulding cites research indicating that more than two-thirds of low-income job seekers find jobs through personal connections, compared to 40-50% of all job-seekers. Another study he cites reports that 88% of hiring managers for low-skilled positions rely on internal referrals from employees already working with them and that 64% use this as their primary recruitment method.
Spaulding then goes on to describe the challenges to effective utilization of social networks by low-wage workers. Among these challenges are; the small size of many job seekers’ networks; a reluctance to let peers or acquaintances know that they are looking for work; the homogeneity of employment situations among social networks (many unemployed or low-wage earners have social networks that include only other unemployed or low-wage earners); and a lack of awareness on how to take advantage of social networks in order to obtain employment. The paper then discusses a variety of programs implemented by workforce development agencies to train low-wage job seekers to use networks, most involving the development of an “elevator pitch” and business cards, and providing opportunities for job seekers to mingle with individuals in the jobs or careers they hope to obtain. The most novel solution was one by Street Tech in San Pablo, California, who worked with LinkedIn to develop an online networking application for low-wage workers. I plan to investigate this tool further, so more to come on that.
Spaulding also discusses the difference between ‘weak ties’ and ‘strong ties’ in employment networks, which he says is a concept put forth by Mark Granovetter in a 1973 work, “The Strength of Weak Ties”. Granovetter explains that information on available jobs often comes from ‘weak ties’, or individuals that do not know the job seeker well and who cannot necessarily vouch for the employability of the job seeker. Clearly, the value of employment networks would be greatly enhanced for both job seekers and employers if a trusted intermediary were able to vouch for the job seeker’s work ethic and reliability.
This concept of “vouching” in the job search is fascinating, as it ties in with the critical role that social capital (one’s reputation and social network of acquaintances, co-workers and friends) has played in microfinance. When low-income people do not have collateral for the loan they are taking out, their reputation and social network can be put on the line instead. This insight, that the risk of losing one’s reputation and social network can be a powerful motivator to repay obligations, is the foundation of Grameen and other microfinance and group lending models. Clearly, the importance of losing one’s social capital in an urban environment – where new friends and contacts are readily available – is less acute than it is in a small village where transgressors must live among, and be punished by, the transgressed for years to come. Yet, I still believe that tying “vouching” to an individual’s social capital in a meaningful way could be prove a powerful way to recruit quality employees.
Do employees who refer another employee feel a risk to their own credibility if the employee they referred does not perform well? How can employees be incentivized to only refer those employees that they know will perform well? How can we formalize this “vouching” in order to leverage its power on a larger scale?
[1] Spaulding, Shayne, “Getting Connected: Strategies for Expanding the Employment Networks of Low-Income People”, Field Report Series, Public/Private Ventures, November 2005.
9.22.2008
Income Inequality in Miami-Dade. Does it Matter?
As a collective, United States voters have traditionally felt more comfortable with the idea of income inequality than have our counterparts in other countries. Inequality is fine - most of us reason - because we are the land of opportunity where one's socioeconomic status is overwhelmingly determined by how hard and smart an individual chooses to work, and not by the social class that person was born into. Income inequality is socially acceptable because it is assumed that we have the tools to move between these classes at will. But what exactly are these 'tools' that enable social mobility? And what relevance does this conversation have for Miami-Dade?
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Our nation's historical narrative is rife with American Dream success stories, many of which continue to permeate the popular consciousness today. For generations, we Americans have been famous for getting ahead by aggressively taking advantage of a variety of tools that enable social mobility. These tools are the classically American institutions like quality public education available to all; companies with histories of CEOs who started in the mailroom; banks that lend for small businesses or first-time home ownership; public transportation that allow workers to access jobs beyond their neighborhoods; and social networks that allow those who are struggling to learn from those who have 'made it' or even just 'made it out'.
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Miami-Dade's high level of income inequality presents an interesting context in which to examine the quality of our tools of social mobility, given that our income inequality is well above that of the U.S.'s as a whole. The U.S. has seen its Gini coefficient rise steadily over the past forty years, from 0.39 in 1968 to 0.45 in 2007(See Note 1). Miami-Dade has a Gini coefficient of 0.49, as reported by the County's Department of Planning and Zoning in May 2007(2). Compare these figures with those of countries like Canada (0.32), Spain (0.32), United Kingdom (0.34), India (0.37), and Japan (0.38)(3). If our high income inequality means that Miami-Dade's social classes are separated by schisms, this means that residents must rely all the more heavily on these tools of social mobility if we expect them to be capable of jumping from one class to another.
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So, how do we stack up in Miami-Dade? Let's start with education. Americans generally acknowledge that a strong public education system, coupled with accessible financial assistance for higher education, has historically provided the backbone for economic mobility in our country. Yet in Florida, we spend the least of any state on state on per capita education, precluding our public schools from becoming the springboards that they ought to be, and instead, fostering demand for private schools that are inaccessible to the majority. Without the resources for a private education, even the most eager and talented young learners will struggle through our state's notoriously weak school systems. Current budget cuts for Miami-Dade schools make mitigation of this situation unlikely at best.
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So what role can companies play in allowing workers to move up the social ladder? Unfortunately for South Florida, jobs where employees can move from the mailroom to the boardroom are virtually non-existent. Our top industries - tourism, retail and other services - are dominated by low-wage hourly positions, making even a mailroom-to-mid-level manager paradigm improbable. Despite the efforts by a variety of South Florida advocates to attract large companies with mid-level jobs, our education system has proved sufficient to scare most of them away. And hard work, at minimum wage, yields a whopping $13,580 annually. If a worker can maintain a second job that provides another 20 hours weekly for a total of 60 hours each week, he can bring home an annual income of $20,370. This leaves him still wishfully far from middle class, and even wishfully far from being able to provide his children the education that would allow them to someday strive for CEO.
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Now for access to capital. Access to small business loans, mortgages, and even credit cards, has allowed many American entrepreneurs and first-time homeowners to bootstrap their way to the middle-class and beyond. However, many of Miami-Dade's low-income do not participate in the mainstream financial sector, using high-cost financial services like check cashers, bill payers, and pay-day loans, rather than relatively low-cost checking and savings accounts, credit cards, and ATMs. This means that much of Miami-Dade's low-income population lacks the financial history required for a home mortgage or to take out a small business loan. Without steering low-wage workers away from non-traditional financial services and into mainstream financial institutions through financial literacy education and business outreach, most of Miami-Dade's poorest will be unable to access the credit they would need to ever buy a home or start a business.
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As for public transportation and inter-class social networks, Miami-Dade leaves much to be desired here as well. A weak public transportation system, together with strong geographic segregation among socioeconomic lines, makes getting to work a challenge for most low-income residents. Add to this the recent hike in bus fares when many estimate that low-income residents already spend nearly 10% of income on transportation. Does inter-class socializing - imagine churches in days of yore - provide opportunity for exposure between different socioeconomic classes? Consider that Miami-Dade is home to one of the country's wealthiest zip codes and the nation's very poorest and that they're only miles from one another. Fisher Island (33109) has an estimated household annual median income ("AMI") of $228,679, which was nearly five times the AMI for the U.S., while Overtown (33136), has an AMI of $17,566, or approximately one-third of the U.S. AMI(4). Do residents of these zip codes work or socialize with one another? Not likely when not even Domino's Pizza will go to Overtown.
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In sum, Miami-Dade's income inequality becomes a much more critical issue when we lack the necessary quality and depth of underlying institutions that could otherwise allow low-income residents to move into a middle class and beyond. And we voters have allowed this to happen. Income inequality and social immobility are the logical conclusions of under-investment in education and regressive fiscal policies. It should be no surprise that companies capable of bolstering our middle class and tax base have no interest in relocating here. Miami-Dade has unwittingly become a testing ground for a new version of America where the divide between classes becomes more distinct, the institutions that enable social mobility are left to wither, and the American Dream can be hung out to dry. At a very minimum, we have an obligation to incorporate this reality into our local political dialogue.
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Notes:
(1) The Gini coefficient is the primary indicator of income inequality among a given population. Gini coefficients range from 0.00 to 1.00, with 0.00 reflecting a population where every household has exactly the same income, and a coefficient of 1.00 representing a situation where one household has all of the income and the rest have none. Source: U.S. Census Bureau, 2005 American Community Survey, http://www.census.gov/.
(2) "Overview of the Socioeconomic Condition of Miami-Dade County", Social and Economic Development Council, Miami-Dade County Planning and Zoning Department, May 2007, http://www.miamidade.gov/planzone/pdf/overview%20of%20the%20Socio-economic.pdf.
(3) CIA World Factbook, https://www.cia.gov/library/publications/the-world-factbook/fields/2172.html.
(4) U.S. Census Bureau, 2005 American Community Survey, http://www.census.gov/. Estimated from 1999 figures, assuming 1.5% compounded annual growth rate.
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