Human Networks Colloquium WHAT: Roberto M. Fernandez (William F. Pounds Professor of Management, MIT Sloan School of Management): "Social Networks in the Hiring Process: Investment and Return to Social Capital" WHEN: Friday, March 4, 2005, 1:00 PM EST WHERE: Bartos Theatre, MIT Media Lab (E15) HOSTED BY: Judith Donath, Assistant Professor of Media Arts and Sciences, MIT Media Lab Alex (Sandy) Pentland, Toshiba Professor of Media Arts and Sciences, MIT Media Lab SUMMARY: If "social" capital is like "real" capital, then one should be able to concretely identify the value of the investment, the rates of return, and the means by which returns are realized. We argue that a common organizational practice—the hiring of new workers via employee referrals—provides key insights into this notion of social capital. We argue that employers who use employee referrals are quintessential "social capitalists," viewing workers' social connections as resources in which they can invest and gain returns in the form of improved hiring outcomes. The investment takes the form of a referral bonus paid to employees who refer workers who are subsequently hired; the returns are measured in real dollar impacts on hiring outcomes (savings on recruitment costs, and lower turnover for referred than non-referred hires). We estimate the return on investment to be 67.0 percent in the setting we study here. BIO: Roberto Fernandez is William F. Pounds Professor of Management at MIT's Sloan School of Management. His expertise lies in organizational process, social networks, hiring, turnover, and diversity. Fernandez's research and teaching focuses on economic sociology, organizational behavior, social stratification, race, and ethnic relations. Among his current projects are networks and hiring, and Internet-based recruitment. MIT Media Laboratory Home Page | Events Main Index