Referral and Job Performance: Evidence from the Ghana Colonial Army

Since Granovetter.s (1974) seminal work, it is widely recognized that job referral plays an important role in the way the labor market works. There are many di¤erent types of referrals .e.g., by relatives, teachers, or previous employers. One kind of referral that has attracted the attention of economists is referral by current employees. This form of referral is thought to play two possible roles: the transmission of information that is relevant to the hiring process; and the exchange of favors between employer, referee, and new recruit. In the latter case, referral is a source of inefficiency and inequity since it distorts the recruitment process to favour friends and relatives (Barr and Oduro 2002). In the former case, referral instead plays an efficiency enhancing role: it raises the quality of the match, either by providing employers with better information about workers (Saloner 1985), or by providing workers with better information about job characteristics (Simon and Warner 1992, Mortensen and Vishwanath 1994) .Montgomery (1991) provides an elegant formalization of employee referral. In his model, referral by employees is valuable because the unobserved quality of a new worker is positively correlated with the revealed quality of the current employee providing the reference. If the current employee has proved to be of high quality, anyone referred by this employee is also more likely to be of high quality. Underlying this assumption is the idea that social ties are characterized by homophyly, and hence that characteristics of socially proximate individuals are correlated (Jackson 2008). As Montgomery shows, this assumption is sufficient to induce employers to rely on referral from high quality employees. It does, however, supposes that referees truthfully report the information at their disposal. Whether this is the case in practice is unclear.

Work Stress

Work stress is defined as the harmful physical and emotional responses that occur when job requirements do not match the worker’s capabilities, resources, and needs (National Institute of Occupational Safety and Health 1999). It is recognized world-wide as a major challenge to individual mental and physical health, and organizational health (ILO 1986). Stressed workers are also more likely to be unhealthy, poorly motivated, less productive and less safe at work. And their organizations are less likely to succeed in a competitive market. By some estimates work-related stress costs the national economy a staggering amount in sick pay, lost productivity, health care and litigation costs (Palmer et al. 2004). Work stress can come from a variety of sources and affect people in different ways. Although the link between psycho-social aspects of the job and the health and well-being of workers has been well documented (Dollard and Metzer 1999), limited work has been done on the effects of distinct stressors on job performance. As well, various protective factors can prevent or reduce the effects of work stress, and little research has been done toward understanding these mitigating individual and organizational factors. One important source of work stress is job strain. According to the demand/control model (Karasek 1979), job strain is determined by the interactions between psychological demands and decision latitude (see Work stress). The first dimension, the psychological demands on the worker, relate to pace and intensity,skills required, and the ability to keep up with colleagues. The second dimension relates to the degree of creativity versus repetition, as well as the extent of freedom and responsibility to decide what to do and when to do it (Lindström 2005). Four work environments can then be derived: high-strain jobs, active jobs, low-strain (relaxed) jobs, and passive jobs (see Psychological demand/decision latitude model). Though simple identification of low- and high-strain jobs may be important, the distinction between job control and psychological demands must be retained because each category can have different effects on workers and their organizations. For instance, when job control is high and psychological demands are also high, learning and growth are the predicted behavioural outcomes. Much of the energy aroused by job challenges can be translated into direct action—effective problem solving—with little residual strain. The growth and learning stimuli are conducive to high productivity. On the other hand, low demand and low control lead to a very unmotivating job setting, which results in gradual loss of previously acquired skills (Karasek 1998).