What Do Employee Referral Programs Do? Measuring the Direct and Overall Effects of a Management Practice
47 Pages Posted: 11 Jun 2019
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What Do Employee Referral Programs Do? Measuring the Direct and Overall Effects of a Management Practice
What Do Employee Referral Programs Do?
Date Written: June 2019
Abstract
Employee referral programs (ERPs) are randomly introduced in a grocery chain. Larger referral bonuses increase referrals and decrease referral quality, though the increase in referrals from having an ERP is modest. However, the overall effect of having an ERP is substantial, reducing attrition by roughly 15% and decreasing firm labor costs by up to almost 3%. This occurs, partly, because referrals stay longer than nonreferrals, but, mainly, because all workers stay longer in treated than control stores, even among stores where no referrals are made. The most-supported mechanism for these indirect effects is that workers value being involved in hiring.
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IZA Institute of Labor Economics
P.O. Box 7240
Bonn, D-53072
Germany
Mitchell Hoffman
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada
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What Do Employee Referral Programs Do? Measuring the Direct and Overall Effects of a Management Practice
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