Is Getting A Job Really About Who You Know?

When interviewing for a new job, having a shared experience with the hiring manager or team can be extremely valuable. Whether you went to the same college or used to work at the same company, this connection can make all the difference. This week, we employ several types of data analytics to try to understand this alumni effect.

Measuring the alumni effect is tricky. We’d like an indicator of whether a new hire has a shared experience with someone in their new company, but because large companies naturally have many more people with overlapping experiences, larger companies appear to hire many more employees with an alumni connection by coincidence. To construct a metric that is not dependent on company size, we take the following approach: for each new hire, we measure the percent of their new company that shares at least one common experience, which can be interpreted as the likelihood of sharing an experience with a single coworker.

By looking at the odds of having a shared experience with a coworker over time, we can see that the value of an alumni connection has fallen dramatically over the last 35 years:

In the eighties, new hires typically shared a background with 1 in every 5 people in a new company, whereas today, a new hire will only have a common background with 1 out of every 55 new coworkers. To put that into context, imagine a new hire joining a team of 10 people. In 1985, a new hire had an 88.6% chance of having a connection with at least one person on the team. Today, a new hire has a 16.5% chance of having a connection with at least one person on the team. This represents an extraordinary transformation in the way our labor markets operate.

Of course, this change has not affected all companies uniformly. Below we compare the alumni effect by company:

Takeaways:

• The value of a shared connection has fallen dramatically in the last 35 years, as a new generation of employers have found new ways of hiring employees, Revelio Labs data show.
• Companies like Halliburton, Tencent, and Facebook recruit heavily from alumni networks of their existing workforce, which may be a sign of nepotism.
• Companies like Berkshire Hathaway, DowDuPont, and Tesla are recruiting many new employees from networks that are new to their existing workforce, which could be a sign of hiring based more on merit than connection.

If you have any ideas of other types of data analytics or would like to hear more about Revelio Labs, please feel free to reach out. You can also check out our most recent newsletter, which looks at the labor market winners and losers of 2020.