Recruiting through advertising or employee referrals: Costs, yields, and the effects of geographical focus

Research on recruiting has generally considered the effects of recruiting source on employee tenure or performance, and has argued that formal employment ads are inferior to informal sources, notably employee referrals. We test two dimensions for evaluating the effects of recruiting sources on the recruiting process—cost per new hire and yield ratio. We also suggest a new dimension for distinguishing between different types of employment ads—geographical focus—which we define as the clarity and distinctiveness of the labour market that an ad is likely to reach. Geographically focused ads are shown to cost less and yield more appropriate applicants than unfocused ads. Considering the cost, yield, and focus of ads can promote the effectiveness of recruiting processes. The study therefore has both practical applications and implications for further research on recruiting sources.