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Or somebody who your colleague personally knows (whether its through a friendship, school, previous job) and would vouch for? With the former, you don't know for sure what kind of an employee you're getting, but that's not so much the case with the latter.
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Regardless of qualifications, I wouldn't expect anyone to accept me just because they knew me... it's an unfair advantage. The example you listed--that nearly all of the employees traced back to one person--strikes me more as a disgusting injustice than as any sort of justification for it.